ECG in its multi-year tariff review proposal for the period from 2022-to 2026, asserts the high tariff increase is attributable to the cost of investment projects, the existing gap between actual cost recovery tariff and PURC approved tariffs, and the effect of macroeconomic factors such as inflation and exchange rate.
According to ECG, the current DSC of GHS 16.10/kWh is inadequate and has eroded the financial viability of the ECG which has had an adverse impact on the entire distribution sector.
It believes that with a DSC charge of GHS 39.95/kWh – that is the 148% increment – it will be able to recover the actual cost of electricity distribution and remain financially viable.
It said: “The result of ECG’s tariff proposal for the next five years shows an approximately 148% increase on the current DSC1 in 2022 and an average increase of 7.6% year on year from 2023 to 2026. The high increase in the DSC1 for the year 2022 could be attributed to the gap that has developed over the years between the actual cost recovery tariff and the PURC approved tariffs as well as the cost of completed projects”.
“Similarly, ECG’s proposed DSC2 shows a higher increase of 28.4% in the first year (2022) while that of the subsequent years increases by an average of 2% from 2022 to 2026.”
The power distributor again pointed out that its financial sustainability is important as it impacts the entire energy sector.
It added: “The financial sustainability of the Electricity Company of Ghana is important as it impacts the entire energy sector. With the huge investment needs facing the distribution industry over the next five years, it is expected that the proposed tariff increases would inevitably be approved to sustain efficient and reliable electricity service.
“Over the next five years, the DSC will need to increase consistently (average of 7.6%) to cover distribution cost. It is expected that the approved BGC would correspond with the commercial terms of PPAs (Power Plant Agreements).”
