By Kofi Ahovi
The Public Utility Regulatory Commission (PURC) would from January next year begin the re-introduction of the Automatic Adjustment Formula (AAF) to address any adverse movement of external factors that affect tariffs.
The introduction of the mechanism should have started in October this year but was re-scheduled to enable the PURC embark on an educational campaign. Currently, PURC is engaging with utility providers to educate them on the formula and its technicalities. It will later also meet with consumers across the country for the same purpose.
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 formula was reviewed by the commission to take into account the current trend of crude oil prices on the international market, the cost of generating and producing electricity and water, among other things.
The mechanism was used in the country between 2002 and 2006, however the mechanism was put on hold even though it proved useful.
PURC, in June this year, 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.
It was 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.
The Public Utility Regulatory Commission (PURC) would from January next year begin the re-introduction of the Automatic Adjustment Formula (AAF) to address any adverse movement of external factors that affect tariffs.
The introduction of the mechanism should have started in October this year but was re-scheduled to enable the PURC embark on an educational campaign. Currently, PURC is engaging with utility providers to educate them on the formula and its technicalities. It will later also meet with consumers across the country for the same purpose.
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 formula was reviewed by the commission to take into account the current trend of crude oil prices on the international market, the cost of generating and producing electricity and water, among other things.
The mechanism was used in the country between 2002 and 2006, however the mechanism was put on hold even though it proved useful.
PURC, in June this year, 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.
It was 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.
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