Almost half way through this year, the new power tariffs supposed to be applicable all through 2019, are yet to be announced. This is leaving industrial consumers of power in particular increasingly flustered. Simply put, the more of a business enterprise’s running costs derive from the purchase and use of power, the harder it is to make business forecasts and budgets, with any degree of credibility and accuracy, both of which are crucial for managerial efficiency.
Usually, new tariffs are announced at the turn of the year and even in extraordinary circumstances, delays do not extend beyond the end of the first quarter of the year for which the new tariffs are to be applicable. This year’s delay is therefore most unusual.
To be sure there is one obvious reason for the delay – the commencement of the concession arrangement with Power Distribution Services, which has taken over the assets and activities of Electricity Company of Ghana for the next two decades. It is understandable that the Public Utilities Regulatory Commission, which has responsibility for determining new tariffs, would wait for PDS to start its mandate and have a major say in where the tariffs should be set, and this only happened in February.
However, it should be noted that the tariff levels applicable for 2019 was one of several issues that were supposed to have been agreed upon pre-commencement of the concession, but which were moved forward to become post-commencement issues.
But just as instrumental as a cause of the delay in deciding the new tariffs for 2019 has been the tariff levels set or last year, which were un-customarily slashed from the previous year’s levels, in controversial circumstances. At the time government’s critics accused it of usurping the mandate of the PURC in order to curry the favour of the electorate.
Government vehemently denied this but subsequent trends seem to have borne out the critics. Indeed, it has since emerged that the tariff cuts have left the state-owned corporations along the energy generation, transmission and and distribution chain with significant financial losses. Resultantly, they are now not only demanding higher tariffs that will eliminate their losses; they want them high enough to recoup the losses made last year to repay their debts.
However, government is loath to allow this and the PURC is having to struggle to satisfy those who appointed them while at the same time allowing for economically viable tariffs.
Government’s position is predicated on two things. One is that allowing tariffs that would reverse the losses made by the power sector corporations since the 2018 tariff cut would amount to an admission of a mistake, at least as far as the unforgiving political opposition would be concerned.
But just as importantly, the incumbent government genuinely sees lower power tariffs as essential for the successful implementation of its supply side driven expansionary economic policy stance, which requires internationally competitive power costs for local industry.
With regards to the latter, this newspaper holds the view that the timing of policy implementation is as important as the policy itself; which means that lower power costs, while a crucially good objective, should only be implemented when the economics of power generation, transmission and distribution allow for it.
With regards to the former we can only lament the politicization of virtually every economic policy issue in Ghana.
However, the incumbent government will now have to cope with a problem that its political opponents can claim is of its own making.