29th September 2024 8:30:38 AM
2 mins readConsumers of electricity and water in Ghana are set to experience further economic strain as the Public Utilities Regulatory Commission (PURC) announces tariff hikes of 3.02% for electricity and 1.86% for water, effective October 1, 2024.
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This increment comes after the Commission's quarterly review, designed to account for fluctuations in critical economic indicators such as the exchange rate, inflation, and the cost of natural gas.
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The PURC emphasized that these adjustments are necessary to maintain the "financial viability and ability of utility service providers to deliver on their mandate," ensuring uninterrupted utility services. Specifically, the depreciation of the Ghana Cedi against the US Dollar by 4.96% between the second and third quarters of 2024 contributed significantly to the rise in electricity tariffs.
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The exchange rate effect, combined with the Weighted Average Cost of Gas (WACOG), which declined slightly from US$/MMBtu 8.0422 to US$/MMBtu 7.8368, resulted in a total under-recovery of GHS 173.98 million in the electricity sector.
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In its statement, the PURC detailed that the "projected inflation rate for the period declined marginally from 24.38% to 22.27%," but this was not enough to counterbalance other cost-driving factors. The hydro-thermal generation mix, with hydro sources contributing 34.81% and thermal sources 65.19%, remained unchanged for the period under review.
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On the water side, a revenue gap of GHS 12.01 million led to the 1.86% increment in tariffs. The PURC expressed that the new rates are essential for "cost recovery for the provision of utility services" and to reduce the government’s fiscal burden in subsidizing the electricity and natural gas sectors.
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Utility companies, including the Electricity Company of Ghana (ECG), Ghana Water Limited (GWL), and Northern Electricity Distribution Company (NEDCo), are expected to meet the PURC's regulatory benchmark of 98% for revenue collection. Failure to do so, the Commission warned, could jeopardize the sustainability of both the energy and water sectors.
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In approving these tariffs, the PURC projected monthly revenues for the third quarter as follows: "GHS 2,024.5 million for ECG, GHS 243.20 million for NEDCo, and GHS 227.40 million for GWL."
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The Commission stressed that these increases in revenue requirements must correspond with improved revenue collection in line with the 98% benchmark to ensure the utility providers' financial health and service delivery.
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