Businesses will pass on increased cost of production from high utility tariffs – GNCCI – Citi Business News

The Ghana National Chamber of Commerce and Industry (GNCCI) is cautioning that its members would have no choice but to pass on any increases in their cost of production that will arise, as a result of high utility tariffs.

The remark follows the recent proposals for tariff increases by the Electricity Company of Ghana (ECG) and the Ghana Water Company Limited.

The two companies, as part of their tariff proposals presented to the Public Utilities Regulatory Commission (PURC), want power and water tariffs to be increased by 148% and 334% respectively.

In an interview with Citi Business News, the CEO of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu Aboagye warned that inflation would further rise, as businesses would increase the prices of their goods if the high tariff proposals are approved.

“I mean the cost of doing business currently is high in Ghana, and inflation is also high at 23.6%. Anytime the consumer price index goes up, the producer price index also goes up. It means that those who are sourcing their raw materials from Ghana are now going to pay more. Those who also import their raw materials are also paying more as seen by the recent inflation data released by the Ghana Statistical Service. As businesses we also have to survive, so what we would do is to increase the prices of the goods and services that we provide, and that will further increase the inflation rate.”

ECG justifies 148% tariff increase proposal; says it’s operating at a high loss

The Electricity Company of Ghana (ECG) has assured that if the proposed 148% increment in tariff is approved, the company will not adjust tariffs above 10 percent year-on-year for five years.

ECG has been heavily criticised for requesting a 148% increment for the year 2022, but the company says it will help to drastically reduce losses in its operations.

“We are not faulting the Public Utilities Regulatory Commission [for not allowing us to increase tariffs over the years], but as a utility service provider, it is having a negative impact on our operations. Over the period, if you put these minimal increases together, you are getting a very wide gap between the prevailing tariffs and what we will call a cost recovery tariff. The tariff has reduced considerably”, says General Manager for Regulatory Management at ECG, Sylvia Noshie.

She was speaking at a stakeholders’ consultative meeting for the multi-year major tariffs review under the auspices of the PURC.

The company says it will only be able to recover from its losses if its upward adjustment proposal is approved.

“In the last few years, the only quarter adjustments we had was on October 1, 2019, and it was just 0.47 percent. Unfortunately for us, the last tariff approved by the regulator saw a 14% reduction on the previous tariff of March 2018. This has been the pattern over the years. Usually, we will come up with our distribution cost and proposal, but what you get the Commission to approve is very minimal”, Slyvia Noshie explained.

Apart from asking for a 148% increment in tariff for 2022, the Electricity Company of Ghana is also proposing that the PURC gives it clearance to charge consumers street light tariff.

“The ECG is also proposing to the PURC to introduce a street light tariff. Studies by the Ministry of Energy estimate the cost of street lights to be 108.65 million dollars a year. Currently, on the bill, we all see the public light levy and that’s 30 percent of the actual cost.”