Reduction in electricity tariff has brought some relief – Energy Minister
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.”
Source: GNA