The Public Utilities and Regulatory Commission (PURC) has directed the Ghana Water Company Limited (GWCL) to reduce water tariff by 10.08 percent.
A release issued by the Executive Secretary to the Commission, Mami Dufie Ofori, said GWCL was in breach of Section 11 of the PURC Law (Act 538, 1997).
According to the release, the water company has recently been notified of its non-compliance to tariff decision and regulatory directives in relation to the Teshie Desalination Plant operated by Befesa Desalination Developments Ghana Limited.
The release indicated that the order is based on some facts.
In 2011, GWCL entered into a 25-year Build, Own, Operate, Transfer (BOOT) Water Purchase Agreement (WPA) with Befesa Desalination Development Ghana Limited.
By the agreement, it said GWCL agreed to buy all water produced from the 60,000m3 Befesa Seawater Desalination Plant to supply to Teshie, Nungua and surrounding areas.
“The desalination plant commenced production in February 2015. Since the major tariff review of December 2015, water tariffs approved by the Public Utilities Regulatory Commission have included the contracted cost of the plant,” it added.
It said between January and July 2018, the Commission took steps to give GWCL a hearing and clarified the tariff implications associated with its operational decisions in respect of the desalination plant.
The Commission, it said, subsequently issued an enforcement notification which the GWCL failed to comply with.
It said in July, this year, the Commission published new water tariffs effective July 15, 2018, which maintained costs related to the desalination plant.
“In the weighted average water production tariff, the Commission’s decision to maintain costs relating to the plant in the tariff was informed by GWCL’s own decision to operate the desalination plant, which the company communicated to the Commission in their letter dated 16th May 2018,” according to the release.
It revealed that monitoring exercises undertaken by the Commission, including its recent one on August 23, 2018, established that to date GWCL has failed to allow the desalination plant to operate contrary to the Commission’s decision.
The Commission said it made the determinations under Section 12 of Act 538 that with effect from 16th September 2018, the water tariff chargeable by GWCL shall be reduced by 8.64 percent.
“This reduction represents the component of costs related to the desalination plant approved as part of the July 2018 water tariff decision.”
It said that the GWCL shall refund a total amount of GH¢14,097,146.00 to all its customers, noting that the amount represents five months’ tariffs income unfairly over-recovered by GWCL between March 15, 2018 and September 15, 2018.
“This refund results in a further 1.41% tariff reduction which shall be applied from 16th September 2018 to December 31, 2018,” it added.
In addition to the refund, GWCL shall pay a total amount of GH¢542,938.48 as compensation to all its customers.
“This compensation represents 8.627% of the annual capacity charge of the desalination plant, pro-rated for one month. In tariff revenue terms the compensation amounts to 0.03% and is imposed on GWCL as a result of the company’s non-compliance with regulatory directives,” it said.
“The tariff forfeiture in item (i), refund in item (ii) and compensation in item (iii) shall be summed up, culminating in a 10.08% tariff reduction on the prevailing water tariff rates for all customers of GWCL.”
By Melvin Tarlue