Power Generators Warn Of Tariff Reduction Woes

The country’s power distributors risk contracting further debt of $1.8 billion to Independent Power Producers by the end of this year.

This follows the recent decision of the Public Utilities Regulatory Commission to further reduce electricity tariffs by 6.56%.

The Chamber of Independent Power Generators, which gave the prediction in a press statement, noted, “This prediction is based on Public Utilities Regulatory Commission’s (PURC) decision to further reduce electricity tariffs by 6.56% amidst escalating variable costs of electricity production such as fuel, maintenance, idle capacity charges, as a result of commissioned generation capacities coming on-grid and off-grid generations. Natural gas, for instance, sells currently at an average high price of 8.8 US Cents/mmscf, continuous depreciation of the Ghana cedi etc.”

The chamber noted that tariff reductions, though good for consumers, have not been matched with a decrease in production costs, leading to significant financial deficits.

“The sector is plagued by inefficiencies, including high transmission and distribution losses, which exacerbate the financial challenges. This situation mirrors the repercussions of similar tariff actions by the PURC in 2018 by 17.5% and 30% for both residential and non-residential customers, which significantly contributed to the financial gap faced by the Electricity Company of Ghana (ECG),” it mentioned.

It continued that despite ECG’s commitment to a fixed $43 million monthly sum to IPPs, it continued to stack about 70% of its monthly obligations to the Independent Power Producers alone, and therefore should the tariff reduction go on as planned, the government’s renegotiation appeals to IPPs may hit the rock, as the risk of default on obligations going forward would become high.

“Natural gas, for instance, sells currently at an average high price of 8.8 US Cents/mmscf, continuous depreciation of the GHS etc. Again, the generation tariffs are set an automatic upward adjustment necessitated by the increasing variable costs and other increased cost events,” the statement, signed by Dr. Elikplim Kwabla Apetorgbor, noted.

Source: B&FT

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