Tariff hikes untenable, utility companies having a laugh – Bright Simons

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Policy Analyst, Bright Simons, has described as untenable the demands being made by regulated utility companies for hikes in their tariffs.

According to him, their demands are akin to the utility companies “having a laugh” at the expense of Ghanaians, and he has thus called on the Public Utilities Regulation Committee (PURC) to take an active role in assessing the viability of their integrated resource plans.

“They cannot justify the demands that they’re making, and we believe the PURC has every basis to begin active regulation,” he said.

“This tendency where it just sits there and requests for quality KPI data as opposed to probing the integrated resource plan of the utilities to establish whether or not the return on equity analysis that they’re making is sound is no longer viable,” he added.

He made these comments on JoyNews’ Newsfile on Saturday in reaction to the proposal by the regulated utilities companies’ proposal to the PURC to hike tariffs by more than 100%.

According to the utilities companies, their current tariffs are not enough to fully support their operations thus contributing to their operational inefficiencies.

The Communications Director at the Ghana Water Company Limited, Stanley Martey, had earlier this week warned that should the tariffs continue to remain low, the GWCL may be forced to fold up.

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On his part, the Communications Manager of the Electricity Company of Ghana, William Boateng had also stated that the ECG was broke and would need the tariffs to go up as soon as possible.

However, reacting to their statements, Bright Simons noted that particularly in the case of ECG, the percentage they receive from the tariffs currently being paid to them is much higher than the percentage most regulated utility companies across the world receive.

According to him, if ECG is complaining about receiving low tariffs it is most likely due to the inefficient use of the tariffs, and not how low they are.

He explained, “So we have to just look at the numbers. I mean, ECG has a distribution service charge as a percentage of the end user tariff. So what you pay at the end is an aggregated number that comes from charging you for the generation of the power.

“So Akosombo is owned by VRA, they have a certain cost for producing the power; then GRIDCo is owned by the government, they transmit the power to ECG; ECG is more or less owned by the government, and they send the power to your house as distributors.

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“And each of them take a piece of the amount of money that you pay. So if you look at ECG alone, they’re getting like two point something cents per kilowatt hour that they give to you. Two point something cents is really good. I mean you look at utilities of the same size as ECG in many parts of the world, in Asia and US and the rest, and they’re making do with one cent or 1.5 cent etc.

“So if you’re getting 2 cents per kilowatt hour you have to be quite inefficient to claim that that amount is much too low.”

He noted that even though he does not disagree that there may be exogenous factors that contribute to the problem these regulated utility companies are facing, “we still have to look at the numbers.”

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