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The Public Utilities Regulatory Commission (PURC) has decided to increase electricity and water tariffs by 4.22% and 1.18% respectively, starting September 1, 2023. This adjustment, which is part of the commission’s regular quarterly tariff review mechanism, is poised to impact both businesses and households.
The primary objective of this quarterly tariff review is to meticulously track and integrate shifts in essential factors that influence the determination of tariffs for natural gas, electricity, and water. Key determinants include the Cedi exchange rate, inflation rate, the blend of electricity generation sources, and the weighted average cost of natural gas.
A statement issued by the PURC on August 22, 2023, explained the rationale behind the tariff adjustments. The statement indicated that the commission’s decision was a balanced effort to maintain the financial viability of utilities while lessening the burden on consumers, particularly those classified as lifeline customers. Additionally, the adjustments aim to mitigate the cross-subsidization between industrial and residential customers, thereby addressing the long-standing issue of high electricity costs for industries.
The decision-making process for these adjustments involved extensive deliberations and thorough analysis of several variables.
Hydro-Thermal Generation
The projected mix of hydro and thermal electricity generation for the quarter remained consistent with the 29.01% hydro and 70.99% thermal distribution used in the previous quarter’s tariff decision.
Ghana Cedi-US Dollar Exchange Rate
For the third quarter of 2023, the commission applied a weighted average Ghana Cedi-US Dollar exchange rate of GHS 11.4929/USD 1.0000. This calculation incorporated an exchange rate projection of GHS 11.0087/USD 1.0000 for the quarter, along with an under-recovery of 0.4842/USD 1.0000 from prior quarters.
Inflation Rate
The projected inflation rate for the quarter was estimated at 10.49%, marking a decrease compared to the 12.62% used in the previous quarter. This adjustment reflects an average projected inflation rate variance of -2.13%.
Fuel Price
In the determination of the fuel recovery charge for gas-fired power plants during the quarter, a projected Weighted Average Cost of Gas (WACOG) of USD 8.1221/MMBtu was utilized. This figure indicated a significant 24.64% increase from the previous quarter’s WACOG of USD 6.5165.
The PURC expressed gratitude to all stakeholders for their support throughout the tariff review process. The commission emphasized that it would persistently monitor the activities of utility service providers to ensure the delivery of high-quality services, all while striking a balance between the interests of consumers and the operational sustainability of the utilities.
As the implementation of the adjusted tariffs approaches, the impact on various sectors of the Ghanaian economy is a subject of interest. Industries, particularly those grappling with high electricity costs, are expected to find relief through the reduction in cross subsidization. This strategic reduction is anticipated to enhance industrial competitiveness, support the country’s industrialization agenda, and foster job creation opportunities.
For consumers, the minor increment in electricity and water tariffs should be viewed in light of the commission’s effort to maintain a delicate equilibrium between utility affordability and financial sustainability. Lifeline customers, in particular, will not experience any changes in their tariffs, ensuring that essential services remain accessible to those who need them most.
