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AGI Press Conference on Increase in Utility Tariff

14 July 2010
Following the recent increase in Utility Tariff by the PURC, the Association of Ghana Industries organised a Press Conference to restate industry's position on the issue.
STATEMENT BY NANA OWUSU-AFARI, PRESIDENT OF AGI
At a Press Briefing on Wednesday, 14TH July 2010
Increase in Utility Tariff
Distinguished Ladies and gentlemen of the media,
Members of AGI Council present
Members of the Association of Ghana Industries,
On behalf of AGI National Council, I welcome you to this press briefing by the Association of Ghana Industries. We have organized this press conference in connection with the recent increases in electricity tariffs and its effect on industry, and to reiterate industry’s position on the subject matter.
Let me start by commending the Government for the positive intervention by requesting the PURC to review its position and discuss these issues further with key stakeholders such as the AGI and the TUC. We believe that is the right approach and the best way for resolving this issue.
Ladies and Gentlemen of the media, AGI’s position has been quite clear right from the onset of discussions on this issue. AGI has met with the PURC two times (before the increases and after the increases). Following the first meeting, AGI issued a press statement expressing grave concern about the proposed 155% hike, which we considered too high for industry. At the end of their consultations and technical analysis, the PURC eventually announced, on 31st May 2010, 89% and 36% increase for electricity and water, respectively. This announcement prompted the AGI to request another meeting with the PURC to discuss these issues further. Subsequently, two letters (Memos) have been written to them regarding this issue; and in all these discussions we have been very consistent with our views about this development.
I wish to take this opportunity to restate industry’s position, and wish that the PURC would take into account these views in re-considering the tariff adjustments, as directed by Government;
1.   Industry is not against the tariff adjustments, it is natural that as price levels change, there will be adjustments in utility tariffs to enable utility service providers to recover cost and provide good service to consumers of the services. We accept that the utility companies, who are also our members, need an increase since the last increase was in November 2007.
 
2.   A review of the tariffs by our industrial enterprises indicates that the tariffs as announced by the PURC do not reflect the situation on the ground. In the case of industry, the adjustments culminate in increases of 131% for the lower voltage consumers to as high as 300% in the high voltage consumer class.
 
3.   We have received input-output cost analysis of electricity consumption from our members, and the information provided supports our position that tariff increases ranges between 131% and over 300%, which is very astronomical.
 
Let me give you just two examples
ACTUAL PERCENTAGE CHANGE IN ELECTRICITY TARIFF  
Sector
Monthly (May 2010) Tariff Increase (GH¢)
Monthly (June 2010) Tariff Increase
(GH¢)
Percentage Increase
Wood Processing
43,478.92
129,718.10
298.34
Rubber & Plastics
8,976.69
26,781.30
298.34
Food Processing
111,121
297,205
300.00
 
 
From the foregoing analysis, clearly the increment, in the case of industry is way above the average of 89% declared by the PURC.
4.   The maximum demand surcharge has increased by 1,300%.
5.   There is no doubt that the effect of these increases will not only result in the loss of market share, loss of jobs, increases in prices of finished goods but also fuel inflation. These increases would lead to closure of high energy intensive industries such as the textiles, plastics, steel and cement industries, among others. Already, cost of doing business in Ghana in respect of interest rates, multiplicity of taxes, level of taxation is very high and these steep increases in electricity tariffs will exacerbate the situation rendering industries in Ghana less competitive.
6.   The implementation of these increases will also have serious consequences on the operations of SMEs, and here, AGI wishes to associate itself with the government statement that the review should give particular consideration to non-residential and small-scale commercial consumers, because ‘ the increases applied to these categories can have adverse effect of derailing government’s efforts of strengthening and growing the small and medium enterprises (SME) sector.
 
 
Recommendations
Following from the above, we wish to recommend the following;
1. There is the need for reclassification of the non-residential and commercial class in order to separate SMEs from the large-scale commercial and service enterprises.
2. The PURC should consider the re-instatement of the tariff adjustment mechanism that has been suspended for the past three years. This mechanism ensures regular increment on gradual basis instead of leaving a long gap and suddenly imposing high utility rates on consumers.
3. The PURC should consider adopting our recommendation of the two step increase for 2010 and 2011, i.e. 40% immediate increase effective 1st July 2010 and 20% increase in January 2011 and thereafter apply the tariff adjustment mechanism.
4. The utility service providers must institute measures to improve upon operational lapses such as illegal connections, recovery of public institutions’ unpaid bills, reduce corruption and improve quality of power supply.
5. Finally, we wish to call for suspension of the implementation of the adjusted tariffs until the review has been completed, and the ECG should credit customers with any overpayment based on the revised tariffs,
We wish to assure the PURC that the AGI is always available for further discussions on these issues.  
Thank you for coming, and we are ready to take your questions and comments.  
Thank you very much for your kind attention.
AGI - Association of Ghana Industries