Mounting Pressure on PURC: Civil Society Organizations Demand Reversal of Electricity Tariff Hike
The Public Utilities Regulatory Commission (PURC) in Ghana is facing increasing scrutiny following its announcement of a 2.43 percent increase in electricity tariffs, slated to take effect on July 1, 2025. Two prominent civil society organizations (CSOs), CUTS International Accra and the Centre for Environmental Management and Sustainable Energy (CEMSE), have voiced strong opposition to the adjustment, citing concerns about transparency, fairness, and the disregard of crucial macroeconomic indicators. Their joint call for a suspension of the tariff hike highlights a growing debate over the affordability and accessibility of electricity, a critical resource for both households and businesses in Ghana. The controversy also brings into focus the role of regulatory bodies in balancing the interests of utility providers with the needs of consumers in a dynamic economic environment.
The CSOs’ challenge raises significant questions about the methodology and rationale behind the PURC’s decision. As Ghana navigates fluctuating economic conditions, the debate underscores the importance of ensuring that tariff adjustments are based on sound economic principles and reflect the realities faced by ordinary Ghanaians. The implications of this tariff increase extend beyond individual consumers, potentially impacting the competitiveness of businesses, particularly small and medium-sized enterprises (SMEs) that are vital to the country’s economic growth. Therefore, a thorough reassessment of the tariff adjustment is essential to ensure that it aligns with the broader goals of promoting economic stability and sustainable development.
Concerns Over Transparency and Fairness in Tariff Setting
CUTS International Accra and CEMSE have explicitly criticized the PURC’s process for lacking transparency and fairness, arguing that the decision to increase tariffs appears to contradict prevailing economic trends. The organizations emphasize that recent macroeconomic improvements, particularly the strengthening of the Ghanaian cedi against the US dollar and the decline in inflation rates, should have warranted a decrease in electricity tariffs, not an increase. This discrepancy raises concerns about the data and assumptions used by the PURC in its tariff review process, prompting calls for greater accountability and openness in its decision-making.
The CSOs also invoke Section 3(c) of the PURC Act 538 of 1997, which mandates that electricity pricing must be fair to all stakeholders, including the government, producers, and consumers. By this standard, they contend that the current tariff adjustment fails to adequately consider the interests of consumers, especially given the positive economic indicators. This legal argument adds weight to their demand for a suspension of the tariff increase and a comprehensive review of the PURC’s methodology. The question of fairness also extends to ensuring that the benefits of economic gains are passed on to consumers, rather than being retained solely by utility providers.
Impact of Cedi Appreciation and Inflation Discrepancies
A key argument presented by the CSOs revolves around the significant appreciation of the Ghanaian cedi against the US dollar during the first and second quarters of 2025. According to their analysis, the cedi strengthened by over 30 percent, moving from GH¢15.70 to GH¢10.31 per US dollar. This appreciation would have resulted in lower costs for electricity generation, particularly for inputs that are priced in US dollars, such as fuel. The CSOs argue that the cost savings should have been reflected in lower tariffs for consumers. They further suggest that excess payments made by consumers in previous quarters, due to the weaker cedi, created a financial buffer that could have been utilized to offset outstanding arrears or fund fuel procurement.
Furthermore, the CSOs highlight discrepancies in the inflation data used by the PURC. They point out that while national inflation had declined to 18.4 percent, the PURC reportedly applied a higher rate of 20.67 percent in its tariff calculation. This apparent inconsistency raises questions about the accuracy and reliability of the data used in the tariff review process. Using a higher inflation rate would artificially inflate the costs of electricity generation, justifying a higher tariff increase. The CSOs argue that this practice is not only inconsistent with the declining trend of inflation but also unfair to consumers, who are ultimately bearing the burden of inflated costs.
Implications for Businesses and Consumers in Ghana
The proposed electricity tariff increase has significant implications for both businesses and individual consumers in Ghana. For businesses, particularly SMEs, electricity costs represent a significant portion of their operating expenses. An increase in tariffs can erode their competitiveness, potentially leading to higher prices for goods and services or reduced profitability. This can hinder economic growth and job creation, especially in a country striving to attract investment and expand its industrial base. The rising cost of energy can also disproportionately affect manufacturing and agricultural sectors, impacting Ghana’s export capabilities and food security.
For individual consumers, an increase in electricity tariffs adds to the burden of household expenses, particularly for low-income families. It can reduce their disposable income, limiting their ability to afford essential goods and services. The affordability of electricity is also critical for access to education, healthcare, and other essential services that rely on a stable and affordable power supply. In a context where Ghana is striving to improve living standards and reduce poverty, ensuring affordable access to electricity is paramount. The CSOs’ intervention underscores the need for a balanced approach that considers the needs of both utility providers and consumers in the tariff-setting process.
In conclusion, the call by CUTS International Accra and CEMSE for a withdrawal of the PURC’s July tariff adjustment reflects growing concerns about transparency, fairness, and the impact of electricity costs on businesses and consumers in Ghana. Their arguments highlight the need for a comprehensive review of the tariff-setting process, ensuring that it is based on sound economic principles, accurate data, and a balanced consideration of the interests of all stakeholders. The outcome of this debate will have significant implications for the affordability and accessibility of electricity, a critical resource for Ghana’s economic development and the well-being of its citizens.
Keywords
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