The Africa Centre for Energy Policy (ACEP) has described the government’s decision to reduce electricity tariffs as refreshing.
Finance Minister Ken Ofori-Atta announced on November 15. 2017 during the presentation of the 2018 Budget Statement that categories to see drops in tariffs are special load tariff (low voltage) 13%, special load tariff (medium voltage) 11%, special load tariff (high voltage) 14% and high voltage mines 21%.
In its analysis of the 2018 Budget and Economic Policy of the NPP government, ACEP admitted that “electricity tariff in Ghana is too high for businesses and domestic consumers; this is recognized by industry watchers as impeding growth and investment in the real sector of the economy.”
“It is refreshing to see government taking steps to reduce tariffs to bring relief to consumers. This effort is timely given the following realities,” it noted.
“The government should focus on shaping the fundamental variables that contribute to cost.
“These include fuel cost, competitive tendering of plant procurement to reduce the cost, bureaucracies in the sector, etc. Consideration of these variables will go a long way to reduce inefficiencies in the sector and allow the regulator to do independent adjustments and announcement of the tariff,” it said.
The think-tank said that there is currently more generation than needed, insisting “Ghana has moved from generation inadequacy to oversupply of electricity.”
“The excess supply of more than 500 MW, which is set to increase in 2018 by the addition of CENPOWER (350 MW) and Early Power (142 MW) (initial)) plants, will have to be paid invariably by the consumer because of the nature of agreements that have been signed with IPPs with repulsive capacity charges,” it argued, adding “therefore, the need to grow consumption to absorb excess electricity supply is non-negotiable to lessen the economic burden on consumers and ultimately on government.”
“The entire sustainability of the sector will be impacted negatively if the demand is not balanced adequately with supply.”
“The debt will continue to pile because the higher the tariff, the lower the consumption and the more the debt accumulated through capacity charges,” it disclosed.
ACEP also talked about what it called ‘Self-generation’ saying “owing to the high tariffs, many businesses are opting to generate their own electricity during their peak consumption.”
“The purpose of the grid is defeated if electricity on the grid becomes more expensive than self-generation. Urgent realignment is therefore required to reverse the situation,” the think-tank said.
“The 13% proposed reduction will be about 25% on the dollar rate at the time the tariff was last reviewed in 2015. It is however challenging to see the budget prompting the level of reduction before PURC does its job of reviewing the tariff.”
It added “this puts PURC at war with public expectation of what government thinks is the reductions that should happen. It further weakens the independence of the institution whose Acting Executive Secretary is waiting on government for confirmation.”
By William Yaw Owusu