End User Electricity Tariff across the sub region has been a major concern and one of the capital reasons for the stagnated industry growth. This subject requires an objective and apolitical study of the cost of electricity generation, transmission and distribution in particular, by conducting an analysis of variance, and benchmarking the most competitive economies in the sub region or the world.
Elikplim Kwabla Apetorgbor (CEO, CIPDIB)
Power distribution companies (ECG, NEDCo & EPC) procure power in bulk from generators (IPPS & VRA) through transmission service providers (GRIDCo) and deliver it to the consumers. Power is in most cases delivered to end users at the voltage at which it is usable, hence the Distribution Value Added. The power distributor provides metering, billing and information services to the consumers.
Therefore, the End User Tariff = BGC + TSC + DSC or DAV.
- Bulk Generation Charge is the sum of capacity charge and average cost recovery price of power purchased by the Distribution Companies from the generators.
- Transmission Service Charge is the price charged by GRIDCo for use of the transmission network by the Distribution companies (Discos) and Bulk Customers.
- Distribution Service Charge is the price paid by consumers to the distributor (distribution value added) for the supply of electrical power.
Presently, however, is the addition of about 22.5% statutory levies and charges to the End User Tariff. This add-ons contribute significantly to the expensive electricity tariff consumers’ talk about. These levies and charges do not only create inconvenience and burden to consumers, but it also weakens our capacity for growth as a nation and renders our distribution companies uncompetitive. These inessential taxes include GETFUND (2.5%), NHIL (2.5%), Value Added Tax (12.5%), Public Lighting – Street Lighting (3%) and National Electrification (2%). Complete removal of these taxes and a reduction in gas price will make Ghana’s position as one of the benchmarks in the sub-region and bring visible economic relief to the country.
For us to see an evidence based industry growth, we must, as a necessity, remove the Maximum Demand Charge and Power Factor Surcharges from the tariff applicable to industries and bulk consumers. The effect should translate into drastic reduction in the cost of production, prices of goods and services and eventually trigger the utilization of any “idle capacity”.
When by the Grace of God the country is out of the clutches of Covid-19 and begins efforts at revitalizing the economy, we must do so on the premise that industries require cheaper power for growth and job creation all of which translate into tax earnings for the country.
A Covid-19, the country will require very strategic interventions and workable solutions to quickly bring the economy to a sound footing. It must not be business as usual. We cannot tax ourselves out of the downturn. We must rather engineer deliberate growth at a faster pace to quickly bring relief to our people. The actions we take will inform the volume of foreign direct investments we are able to attract. Our policies especially in the energy sector will determine how quickly we recover from this shock.