The recent hike in electricity tariffs has been clarified by the Public Utility Regulatory Commission (PURC), shedding light on the reasons behind the decision.
Dr. Ismael Ackah, the Executive Secretary of PURC, revealed that the tariff should have been raised by 27.51% to recover an estimated GH¢1.31492 billion.
However, the announced tariff will only recoup GH¢877.70 million, leaving an outstanding electricity debt of GH¢437.22 million.
Speaking at the PURC Media Fellowship Program held in Accra on May 27, 2023, Dr. Ackah explained that the electricity utilities, encompassing generation, transmission, and distribution, require GH¢1.3 billion for their financial viability and survival during the quarter.
The current tariff of 18.36% aims to recover 100% of the inflationary effects, 100% of the gas effect, and 50% of the exchange rate effect.
Emphasizing the commission’s responsibility to ensure the financial security of utility providers and enhance service quality for consumers, Dr. Ackah addressed the public criticisms regarding the tariff increase in light of the local currency’s appreciation against the US Dollar.
He clarified that while the exchange rate contributes significantly to the decision-making process, it is not the sole factor considered.
The PURC also takes into account the price of natural gas, the Hydro-Thermal mix, inflation, and other external factors that impact the utilities’ financial performance.
Dr. Ackah further elaborated on the exchange rate’s role in tariff determination, highlighting its fluctuating nature. During the quarterly review, changes in the exchange rate are assessed, and adjustments are made accordingly.
If the exchange rate improves, tariffs may be reduced, and if it worsens, tariffs may be increased. Ultimately, the exchange rate contributes 60% to the overall tariff calculation.