By: Sani Abdul-Rahman
The Electricity Company of Ghana (ECG) has warned that failure to approve its proposed tariff hike would result in significant tariff increment in the next few years.
In a proposal to the Public Utility Regulatory Commission (PURC), the state power distributor wants its distribution service charge increased by 144% and the adjustment to cover the period 2019 and 2022.
The DSC is the margin for power distributors to recover the cost of distribution network operations.
ECG warned that failure to grant its request would undermine its financial sustainability and ability to address the company’s inefficiencies.
“I can assure you that in the next three years, if we are asked to propose tariffs, it will contain this 148% plus other factors. So, we will be looking at something much higher”.
ECG’s General Manager for Regulatory Management, Sylvia Norshie said in a presentation at a Multi-Stakeholder Meeting on Tariff Review in Accra.
The power company argued that tariffs approved since 2019 were not cost-reflective and have led to an increase in its debt levels.
But once granted, the proposed 144% increase annual tariff hikes would not exceed 10% in the medium term, according to ECG’s proposal.
Basis for proposed tariffs hikes
The power distributor argues that the prevailing tariff (14% lower) has exceeded its stipulated regulatory timeframe thus affecting its revenue drive.
Macroeconomic factors such as inflation (23.6% for April 2022) and exchange rate volatilities have compounded the challenges facing ECG. The cedi has lost more than 15% against the dollar this year.
The utility provider targets to achieve full cost recovery as well as the cost of projects completed.
“There is a wide gap between the prevailing tariff and the actual full cost recovery tariff. We need to bridge this gap,” Sylvia Norshie told the gathering.
ECG targets efficiency
The company projects to achieve 98% of its revenue target and a 10% increase from non-tariff sources.
Regarding debt-to-sales ratio, which measures how much a business owes against its revenue, ECG targets to reduce it by 20% if its proposed tariff hike is approved.
