The Trades Union Congress (TUC) has proposed reduction in electricity and water tariffs by 15 per cent and 12 per cent respectively.
TUC, which made an input to the 2019 Budget to be presented to Parliament in Accra today, said: “We strongly believe that a further reduction in tariffs will stimulate economic growth that could lead to increased job creation.”
“We expect the price of fuel and natural gas to go down and inflation is also expected to decline to a single digit as the value of the Ghana cedi is also expected to be stable.”
According to TUC, there were still inefficiencies in the utility sector, which were being passed on to consumers.
“We expect PURC to provide consumers with its regulatory benchmarks for efficiency to convince us that the operational costs of utility companies are in line with the standards of best practice.”
Excess Capacity of IPPs
In its previous submission, the TUC raised issues about the excess capacity of the Independent Power Producers (IPPs).
It said the consumer should not be burdened with the payment for excess capacity.
“It is very unfair to pass on the cost of excess capacity to consumers, especially working people, whose wages and salaries do not match the rate of increase of electricity tariffs.
“Government has promised to review the Power Purchase Agreements (PPAs). But we are not aware of any practical steps toward the review of the PPAs, most of which were signed under emergency conditions that can hardly pass the transparency and ‘value for money’ tests. Consumers, especially working people, should not be forced to pay for the cost of electricity that result from bad policies in the power sector.”
Lifeline and Cross Subsidies
Indicating its knowledge of a tariff study conducted by Fitchner Management Consulting, which was funded by the Millennium Challenge Cooperation and Millennium Development Authority, it said the main recommendation of the study was that the four consumption blocks of the residential customers should be reduced to two consumption blocks of 0-50kWh and 51kWh+.
“A review of the tariff structure to levels that can be considered “cost reflective,” as recommended by the Fitchner Report, can lead to over 400 per cent increase in tariffs for small residential customers from GH¢0.39 /kWh to GH¢1.97 /kWh, as a result of the removal of cross-subsidies.
“We would like to advise PURC to ignore this recommendation because if tariffs are increased to such levels it could lead to social unrest.”
ECG Concession
Touching on the ECG concession, it said government, Power Distribution Services of Ghana Limited and ECG had signed transaction agreements, which have been ratified by Parliament.
“The status of ECG as an electricity distribution company would, therefore, change to asset owner and a bulk energy trader from 1st February 2019. Consumers are yet to be informed of the effects of such major policy change in the electricity distribution on electricity tariff. We urge PURC to ensure that this arrangement will not lead to higher tariffs.”
Befesa Desalination Plant
The Befesa Desalination plant, which was commissioned in 2015 on the basis of a Build, Own, Operate, Transfer (BOOT) Water Purchase Agreement between the Ghana Water Company Limited and Befesa Desalination Development Ghana Limited, has become a big financial drain on Ghana Water Company Limited (GWCL).
According to TUC, the plant cost GWCL $1.42 million every month in capacity charge alone and “the cost of operating the Befesa Desalination Plant must not be passed on to consumers.”
By Samuel Boadi