Utilities price hikes won’t solve power and water problems

The proposed steep increases in utility tariffs have been dominating the headlines in Ghana as the Public Utilities Regulatory Commission (PURC) recently concluded its consultations with stakeholders, including the Trades Unions Congress and the Association of Ghana Industries. Its final consultation was with political parties.

Curiously, neither the ruling National Democratic Congress (NDC) party nor the main opposition New Patriotic Party attended the final meeting chaired by PURC. And it was left to the smaller parties dominated by the Convention People’s Party (CPP)—which sent five representatives against one representative each from the People’s National Convention and the Progressive People’s Party—to shoot down the arguments for the steep increases presented in turn by the four utilities companies.

Arguments for the proposed price hikes were presented in turn by managers of four utilities companies, the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), the Electricity Company of Ghana (ECG) and the Ghana Water Company.

VRA said it currently cost between GH¢0.45 and GH¢0.60 to generate one kilowatt hour (kW/h) unit of electricity, which it sold to the ECG at just under GH¢0.15 per kW/h. It now wanted to charge GH¢0.37, about 150% more. It said that the fuel alone to generate that unit of electricity cost GH¢0.27 and that the difference had to be borrowed from the bank.

Similarly, GRIDCo, whose job it is to transmit the power from VRA to transmission stations around the country, said it spent 80% of its revenues on fuel. GRIDCo currently receives 4.05 pesewas per kW/h unit and wants an increase to 5.31 pesewas, representing a 31.1% increase.

The ECG said although its customer population was increasing, sales were going down due to technical losses, theft of equipment and illegal connections. Although an aggressive revenue collection drive had seen even schools disconnected, the Government of Ghana was still not paying its bills, which press reports have put at not less than GH¢400 million (about US$ 104 million). The ECG said it was currently charging 16.15 pesewas per kW/h unit and wanted this increased to 35.5 pesewas, representing a whopping 119.8% increase in electricity charges.

Ghana Water said that 80% of its customers enjoy what it called a “lifeline tariff” of Gh¢1.78 for 220 gallons or 5 barrels of water. The company said it was losing Gh¢6.20 on every cubic metre of water, in part due to the cost of imported chemicals used to clean river water polluted by illegal galamsey mining activities. It wanted to increase the Gh¢1.78 tariff to Gh¢4, an even larger 124.7% hike.

If approved, these increases would see customers paying close to 250% more for water and electricity combined.

Besides vandalism, theft of equipment and illegal connections, the companies emphasised the cedi depreciation. Dollars were needed to purchase fuel and install equipment for the expansion of services, including power plants, generators, transformers and solar panels at substations, the utility companies said.

Of the four companies, VRA made the most forceful arguments to justify tariff increases. Its representative said that the energy problem was “not an NDC problem and not a political party problem”, but a “money problem”. He also claimed that customers who were reluctant to pay more than 14 pesewas for a unit of electricity routinely paid 49 pesewas to speak for 5 minutes on a mobile phone.

But this brings to mind the very reason why the public should resist any move by government to sell or lease out essential state services. Mobile phone operators everywhere make billions in profits from high charges to customers responding to a basic human urge to communicate. But even without much money in their pocket a person can still use their phone to receive calls, flash others to call back, or text messages.

By contrast electricity and water provision are essential social services, for which anyone seeking to govern the country must accept responsibility. The fact that working people cannot afford to pay more for water and electricity than is in their wage packet should not mean that they go without these essentials. These are the people whose taxes put money in government coffers. In return, they expect that government will cater for their needs.

In some industrially advanced countries where utilities have been farmed out to the private sector, it is still the responsibility of governments to ensure that poor and infirm or aged people don’t die of cold each winter because they lack earnings to slot into their electricity metres.

And in Ghana’s emerging model of electoral democracy, voters are beginning to demand that services and amenities be brought to their doorsteps as a condition for them to vote. It is therefore not quite true to say that the supply problems are a problem of money and not of political parties.

But to afford social services, it is fair to say that countries have to produce more and add value to what they produce at home rather than to export raw materials.

The problems facing the utility companies will only end when the economic problems underpinning the cedi slide are addressed. And these go beyond macro-economic stabilisation policies, such as those prescribed by the IMF/World Bank and embraced by the Government, which has been intervening in money markets since the start of the year to shore up the cedi.

For a very different kind of state intervention is required if Ghana is to grow sufficiently rich to meet the current cost of water and energy generation and to install sufficient capacity for the tens of millions of new Ghanaians who will be born in the next three decades.

Besides the critical need for government to pay its huge debts to the utilities companies, which was emphasised at the meeting by the CPP, the kind of intervention needed is one that will transform Ghana’s relatively low-value agricultural produce into high-value manufacturing activity.

Without such activity, Ghana will remain poor and the utilities companies will face an enduring problem of how to chase strong dollars with their weak cedi reserves.

* Dede Amanor-Wilks is a journalist, development specialist and member of the CPP.

* THE VIEWS OF THE ABOVE ARTICLE ARE THOSE OF THE AUTHOR AND DO NOT NECESSARILY REFLECT THE VIEWS OF THE PAMBAZUKA NEWS EDITORIAL TEAM

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