The Minister of Energy Hon. John Peter Amewu, has stated that the reduction in electricity tariffs has brought a lot of relief to electricity customers, particularly industry and commercial customers.
At a press conference on thursday, he disclosed 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.
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).
The Minister explained 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. Adding that, the high cost of power, particularly, for industrial customers, had serious implications leading to the shutdown of businesses, and laying off of workers.
Thus he said Many electricity customers were also resorting to self-generation, which was resulting in artificial reduction in demand for electricity.
Mr. John Amewu, pointed out that the situation threatened the reduction in volume and sales of power by the Electricity Company of Ghana (ECG) and its financial sustainability. To him, this was due to the fact that after 600kWh, the tariffs were more than $ 40 cent/kWh.
According to the Minister, 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. On financial and legal burdens arising from over contracting of excess capacity, the Minister 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 stated that 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 continued that the over-contracting of capacity had imposed serious financial and legal obligation on government and power consumers. To address these, he says 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. the other 4 were not reviewed because they were already operational. The combined generational capacity of the 26 PPAs reviewed amounted to 7,838MW.
Mr Peter Amewu, 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. And would result in the payment of capacity charges for the dispatched plants.
Report by Bernard k Dadzie