Why GWCL customers will pay 18.1% more for water

• Posted on June 25, 2019June 25, 2019
• by Nana Kwesi Coomson
• Comment

Customers of the Ghana Water Company Limited (GWCL) will see an 18.1 per cent increment on their bills from July 1, this year.

This follows an 8.1 per cent increment in water tariff and the restoration of a 10 per cent levy to run the Teshie Water Desalination Plant.

That levy was waived when the plant shut down its operations last year.

The depreciation of the Ghana cedi and inflation have been cited as the factors that necessitated the tariff increment.

In arriving at the new tariff, the Public Utilities Regulatory Commission (PURC), the regulatory body that sets utility tariffs, restored the 10 per cent line item charged to run the Teshie Water Desalination Plant, before slapping the substantive increment necessitated by inflation and exchange rate losses.

The upward adjustment in water tariffs on Monday comes barely four days after the PURC approved an 11.17 per cent increase in electricity tariffs.

The Executive Secretary of the PURC, Mami Dufie Ofori, who announced the increment at a press briefing, said the commission had restored the 10 per cent component of water tariffs that was taken off last year because of the GWCL’s failure to operate the Teshie Desalination Plant.

“Due to the compliance by the GWCL with the PURC’s regulatory order number GWCL012018 dated September 6, 2018, the commission has restored water tariffs to the July 15, 2018 rate, which is the basis for this current increase in tariffs,” she said.

The press briefing by the PURC was meant to explain what went into the increment, which will subsist for two years, barring any significant changes in the environment.

She added that the decision to increase water tariffs was because of the negative impact of the high cost of electricity, the high cost of chemicals for the treatment of water and the effect of the increase in the exchange rate on the water sector.

Reasons

Mami Ofori stressed that the upward adjustment in the tariffs was done after extensive consultations with key stakeholders to ensure that no party lost out.

She explained that in arriving at a decision to increase electricity and water tariffs by 11.17 and 8.01 per cent, respectively, the PURC took into consideration a mix of factors, which included the 2019/2020 electricity plan, the projected inflation rate,  projected increases in fuel prices, the prevailing exchange rate of the cedi to the dollar, prudent cost of operation of utility companies and projected electricity and water demands for the 2019 and 2020 tariff periods.

Additionally, she said, the commission fixed the tariffs on the assumption of an expected increase in electricity demand, transmission system losses of 4.1 per cent, expected increase in volumes of electricity to be transported of about 8.6 per cent, base distribution aggregate, technical and commercial loss rate of 22.6 per cent and provision for uncollectible revenue of two per cent.

Commercial consumers

Responding to a question on the concerns of the Africa Centre for Energy Policy (ACEP) that the blanket increase of 11.17 per cent for electricity was not favourable to businesses, Mama Ofori said the PURC had taken measures to mitigate the increase in electricity tariffs on businesses.

“As a major policy shift aimed at enhancing the competitiveness of Ghanaian industries, the PURC has eliminated the maximum demand charges on industrial consumers (special local tariff (SLT) customers).

“It is expected that this policy will result in SLT customers experiencing savings in their overall electricity bills as the commission continues to monitor the impact of this policy change on the utilities and customers,” she said.

Diligence

The Chairman of the Technical Committee at the PURC, Mr Ishmael Agyekumhene, added that if the PURC had decided to vary the tariff regime for commercial and residential consumers, the latter could have ended up paying about 30 or 40 per cent more for power.

“We do recognise that SLT customers are actually paying more than the cost of their services. This is something that has historical antecedent and can be addressed through the gradual process of restructuring. The imbalance is not the practice in other jurisdictions but that is what we have chosen to start with as a country, where residential consumers are being subsidised by industrial and other non-residential customers. That will have to change, but it will not be sudden,” he stressed.

Mr Agyekumhene also cleared the air that the adjustment in utility tariffs was the sole responsibility of the PURC, stressing that “not even the President can announce tariff adjustment”.

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