Electricity consumers shortchanged – Research

By | May 20, 2016

General News of Friday, 20 May 2016

Source: B&FT


Electricitywater Tariff File photo

Electricity consumers in Accra have been found to be paying more than twice the approved tariffs set by the Public Utilities Regulatory Commission.

A recent survey by GN Research, a member of Groupe Nduom indicates that most firms in the hospitality industry for which Coconut Groove Hotels- a chain of hotels run by Groupe Nduom- are currently paying about 140% more instead of the approved 59.2% by PURC in December 2015.

The survey findings also showed that residential consumers are currently paying a little over 130% more for the same or less electricity consumed despite the penetration of energy conservation practices among consumers.

“Even so, a little over two-thirds of respondents have not made any formal complaint to the ECG.

“Five out of every 10 people interviewed was aware of an increase in electricity tariffs but only 10% of them could quote the recent rate increment in December 2015. About 29% of respondents buy prepaid units twice every month, followed by weekly (26%), and then, monthly (20%),” the survey report said.

It said a technical analysis of the latest service charges published by ECG indicates that, electricity tariffs were again increased by some 10% in February 2016 without any clear justification and that the announcement of these new charges has been very low to avoid any public outcry.

In 2012, electricity tariff was marginally increased by 7.42% for residents after the first quarter whilst that for non-residents was reduced by an average of 5.26% to shore up private sector growth. These rates were maintained for the most part of 2013, before the astronomical increase by 78.9% (averagely) across board in October 2013.

The rates were further deepened in 2014 by an average of 28.35% across board with the basic reason of shielding the existing electricity tariffs against intense depreciation of the cedi. Specifically, electricity tariffs were increased by 9.73%, 12.09% and 6.53% in the first, second and fourth quarter respectively.

“In the midst of persistent unreliable power supply, rising inflation and interest rates as well as fast depreciating cedi, the Public Utilities Regulatory Commission (PURC) thought it wise to increase electricity tariffs by 2.63% in the second quarter of 2015 with the basic excuse of assisting service providers to raise funds for maintenance works and avoid an immediate collapse of the distribution network,” the report added.

According to the survey, most hotels spend about GHC120 daily on electricity, marking an increase from GHC 50 spent daily last year. Coupled with exploded water tariffs, high maintenance costs and the latest terrorist attack alerts which has slithered occupancy rate drastically, many hotel managers are considering reduction in work force to stay afloat.

The report argued that on the average, the new tariffs consume over 45% of total sales revenue, leaving very low fiscal space for expansion and upgrading to meet global standards. This has compelled many hotel owners to reduce the number of air conditioner rooms and shut down in-house laundering services to cut down operational costs.

“Nevertheless, only 40% of respondents (hotel managers) have logged complains with the Electricity Company of Ghana (ECG) whereas the remaining 60% considers it a waste of time.

“The situation for manufacturing companies in Accra that use the Special Levy Tariff (SLT) meter is no different. The research revealed that some pharmaceutical companies that were paying electricity tariffs within the ranges of GHC73,000-80,000 are now paying between GHC110,000-125,000 (representing an increase of 52.60%) with just one-third of last year’s production capacity.

“Some food processing companies that were paying between GHC 140, 000-160,000 in 2015 are now paying between GHC200,000- 210,000 (equivalent to a rise of 51.43%) at a reduced production rate. This has increased the accumulation of ECG bills and left many managers bemused about the future prospects of their businesses.

“Interestingly, some rubber product manufacturing companies in Accra have been compelled to reduce production and lay-off contract staff this year to avoid further accumulation of ECG bills. A cursory look at their bills reveals that most companies are paying in excess of 13% as VAT and NHIL, 3.08% as power factor surcharge and 2.73% each as government levy and street light charges.

“Given a relatively stable crude oil prices, steady domestic currency and upcoming elections in November, we do not see any further increment in electricity tariffs this year. However, we anticipated in adjustment of utility rates early next year,” it said.

The survey report recommended that the PURC fast tracked investigation into the overbilling by ECG and strictly enforces Rule 15 of the Electricity Supply and Distribution Regulations (2008) (where applicable).

“Alternatively, the PURC should consider reviewing the current End User Tariff Categories for consumers and businesses to ease the pressure on household disposable incomes and business profits respectively,” it added.