By Kofi Ahovi
The Public Utility Regulatory Commission (PURC) is considering the re-introduction of the Automatic Adjustment Formula (AAF) to address any adverse movement of external factors that affect tariffs.
The mechanism allows the tariff to be adjusted periodically taking into account the foreign exchange rate and other factors that affect tariff adjustments.
AAF would reduce the financial burden on consumers associated with one-time tariff adjustments whilst at the same time ensuring the financial viability of the utilities.
The executive secretary of PURC, Steven Adu, told BusinessWeek that, the mechanism would be introduced in the course of this year or early next year after the commission has finished reviewing the formula.
The mechanism was used in the country between 2002 and 2006. According to Adu, even though the mechanism proved useful it was put on hold.
PURC last week approved an average increase of 89% in electricity and water tariffs, first time in three years.
According to PURC, the increase is partly to restore the value of the tariff in dollar terms, which dropped from 13 cents/kwh in November 2007 to eight cents/kwh in November 2009 as a result of exchange rate depreciation, so as to ensure the financial viability of the utility service providers.
The managements of Volta River Authority (VRA), Ghana Grid Company (GRIDCo) and Electricity Company of Ghana (ECG) have together requested an average of 154% increase over existing rates.
However, the increases fell substantially below the level requested by the utility companies and left a financial gap of about GH¢49 million.
Dr. Emmanuel Annan, Chairman of the Commission, who announced the approved tariffs said in making the adjustments, the Commission did not lose sight of the social impact and fairness to customers.
With the adjustments, lifeline tariff for electricity consumers between 0-50 units remained unchanged at the rate of 9.5 Ghana pesewas per kilowatt-hour from the 2007 tariff adjustment.
However, consumers in the residential category of between 51-300 units have an increase of 42% per kilowatt-hour, which translated into 17 pesewas, up from the existing 12 pesewas/kwh.
Dr. Annan emphasized that the increase in tariffs must be matched by significant improvements in the quality of service, saying targets for achieving quality of service will be monitored, enforced and sanctioned.
Some of the improvements expected include minimization of customer hours lost per year due to power outages, reduction in both technical and commercial losses, control operational cost within regulated targets to ensure a fair return on investment and publication of customer charter.
On water tariffs, Dr. Annan said the current adjustment is meant to assist the management of Ghana Water Company Limited and Aqua Vitens Rand Limited (AVRL) to meet key operational costs such as the cost of chemicals for the treatment of water, replacement of obsolete equipment as well as maintenance of the system.
The approved tariffs for various customers range from 21% to 135% for residential and special commercial users.
"The increases in tariffs are part of a holistic approach to achieving a balance between the demand and supply of power and water and achieving planned and steady improvements in the delivery of quality service to consumers. Nonetheless, the Commission is gravely concerned about the lapses in the quality of service currently being provided by the utilities and as indicated would not hesitate to apply the necessary sanctions and penalties if quality of service benchmarks are not adhered to," he said.
The Public Utility Regulatory Commission (PURC) is considering the re-introduction of the Automatic Adjustment Formula (AAF) to address any adverse movement of external factors that affect tariffs.
The mechanism allows the tariff to be adjusted periodically taking into account the foreign exchange rate and other factors that affect tariff adjustments.
AAF would reduce the financial burden on consumers associated with one-time tariff adjustments whilst at the same time ensuring the financial viability of the utilities.
The executive secretary of PURC, Steven Adu, told BusinessWeek that, the mechanism would be introduced in the course of this year or early next year after the commission has finished reviewing the formula.
The mechanism was used in the country between 2002 and 2006. According to Adu, even though the mechanism proved useful it was put on hold.
PURC last week approved an average increase of 89% in electricity and water tariffs, first time in three years.
According to PURC, the increase is partly to restore the value of the tariff in dollar terms, which dropped from 13 cents/kwh in November 2007 to eight cents/kwh in November 2009 as a result of exchange rate depreciation, so as to ensure the financial viability of the utility service providers.
The managements of Volta River Authority (VRA), Ghana Grid Company (GRIDCo) and Electricity Company of Ghana (ECG) have together requested an average of 154% increase over existing rates.
However, the increases fell substantially below the level requested by the utility companies and left a financial gap of about GH¢49 million.
Dr. Emmanuel Annan, Chairman of the Commission, who announced the approved tariffs said in making the adjustments, the Commission did not lose sight of the social impact and fairness to customers.
With the adjustments, lifeline tariff for electricity consumers between 0-50 units remained unchanged at the rate of 9.5 Ghana pesewas per kilowatt-hour from the 2007 tariff adjustment.
However, consumers in the residential category of between 51-300 units have an increase of 42% per kilowatt-hour, which translated into 17 pesewas, up from the existing 12 pesewas/kwh.
Dr. Annan emphasized that the increase in tariffs must be matched by significant improvements in the quality of service, saying targets for achieving quality of service will be monitored, enforced and sanctioned.
Some of the improvements expected include minimization of customer hours lost per year due to power outages, reduction in both technical and commercial losses, control operational cost within regulated targets to ensure a fair return on investment and publication of customer charter.
On water tariffs, Dr. Annan said the current adjustment is meant to assist the management of Ghana Water Company Limited and Aqua Vitens Rand Limited (AVRL) to meet key operational costs such as the cost of chemicals for the treatment of water, replacement of obsolete equipment as well as maintenance of the system.
The approved tariffs for various customers range from 21% to 135% for residential and special commercial users.
"The increases in tariffs are part of a holistic approach to achieving a balance between the demand and supply of power and water and achieving planned and steady improvements in the delivery of quality service to consumers. Nonetheless, the Commission is gravely concerned about the lapses in the quality of service currently being provided by the utilities and as indicated would not hesitate to apply the necessary sanctions and penalties if quality of service benchmarks are not adhered to," he said.
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