Reduction in electricity tariff has brought some relief – Energy Minister

By Iddi
Yire, GNA

Accra, Sept 20, GNA – The reduction in
electricity tariffs has brought significant relief to electricity customers,
particularly industry and commercial customers, Mr John-Peter Amewu, the
Minister of Energy, stated on Thursday.

He said this was expected also to spur
economic growth, create and save jobs, which would have otherwise been lost.

He explained that the reduction in tariffs
were influenced by a number of interventions by the Government in the energy
sector, including renegotiations of Power Purchase Agreements (PPAs) on cost of
generation; recalibration of domestic gas prices; and revenue requirement of
utilities based on updated customer population.

Mr Amewu said these at the Ministry of
Energy’s Media Briefing in Accra, which was attended by Mr Kojo Oppong Nkrumah,
the nominated Minster of Information.

Some deputy ministers and heads of Departments
and Agencies under the Energy Ministry attended the event.

The press conference was to throw more light
on the happenings in the energy sector, particularly, issues relating to stable
power supply, power purchase agreement, electricity tariff reduction, emergency
power plants, natural gas, petroleum product prices and Bulk Oil Storage and
Transportation Company Ltd (BOST).

Mr Amewu stated that upon assuming office in
2017, the Government was confronted with an unfriendly investment climate
arising from high cost of energy to industry and residential consumers.

He said the high cost of power, particularly,
for industrial customers, had serious implications leading to the shutdown of
businesses, and laying off of workers.

Many electricity customers, he said, were also
resorting to self-generation, which was resulting in artificial reduction in
demand for electricity.

The situation threatened the reduction in
volume and sales of   power by the
Electricity Company of Ghana (ECG) and its financial sustainability.

He explained that this was due to the fact
that after 600kWh, the tariffs were more than $ 40 cent/kWh.

He said in fulfilment of the New Patriotic
Party’s (NPP) manifesto promise to reduce electricity tariffs drastically, the
Government made submission to the Public Utilities Regulatory Commission (PURC)
for tariff review based on the various interventions made in the energy sector.

He said that the objectives of the tariff
reduction were, therefore, to provide relief to electricity customers,
stimulate demand and spur economic growth and create jobs.

The PURC, consequently, announced significant
reduction in electricity tariffs effective March 15, 2018.

The rates were as follow: Industrial customers
– 30 per cent; Residential customers – 17.5 per cent; Mining sector – 10 per
cent; and Special load tariff customers – 25 per cent.

On financial and legal burdens arising from
over contracting of excess capacity, Mr Amewu said as at the end of 2016, ECG
had signed 14 Power Purchase Agreements (PPA) ,which were operation with a
combined capacity of 1104MW.

He said another 18 PPAs signed by ECG with a
combined capacity of 6,000MW and eight PPAs were under discussion with a total
capacity of 2116MW.

He said, this in addition to the existing
generation capacity from hydro, the Volta River Authority’s (VRA) plants at
Aboadze and Tema and the TICO plant, would result in a total installed capacity
of about 11,000MW if the committed capacity were all deployed.

He explained that this would by far be more
than the current peak demand of 2400MW.

“Even at an annual growth in demand of 10 per
cent, the country would not be able to utilise this capacity in two decades,”
he stated, explaining that the over-contracting of capacity had imposed serious
financial and legal obligation on government and power consumers.

To address these, he said, the Ministry of
Energy tasked a Committee led by the Energy Commission to review all PPAs
signed by the ECG for conventional thermal power projects.

The Committee reviewed 26 out of the 30 PPAs
the ECG had initiated; with the other four not being reviewed because they were
already operational.

The combined generational capacity of the 26
PPAs reviewed amounted to 7,838MW.

Mr Amewu said the review revealed that the
projected capacity additions from the PPAs were far in excess of the required
additions, inclusive of a 20 per cent system reserve margin from 2018 to 2030.

This would result in the payment of capacity
charges for the dispatched plants.

“Pursuant to the review exercise, Government
stands to make significant savings from the deferment and/or termination of the
reviewed PPAs,” he said.

“The estimated cost for the termination is $
402.39 million, compared to an average annual capacity cost of $ 586 million
each year or a cumulative cost of $ 7.217 billion from 2018 to 2030.

“This yields an estimated savings of $ 6.8
billion over the 13 year period.”


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