The Association of Ghana Industries (AGI) has criticised the timing of the latest electricity tariff adjustment, arguing that the increase comes despite improving macroeconomic conditions and declining global fuel prices.
Speaking on Joy News’ PM Express on Tuesday, Chairman of AGI’s Economic Affairs Committee, Eric Defoe, said the impact of the tariff adjustment on manufacturers could be significantly greater than the announced increase of just over three per cent.
“It would appear so nominally, but the effect may not be 3.5% on pricing; it may go higher,” he said.
Mr. Defoe explained that electricity is only one component of production costs and that higher utility tariffs often trigger additional increases across the manufacturing value chain.
“Like I tried to explain that the other factors in the basket of production may be affected, and cumulatively it may go to five to 10% or anywhere in that band, so if we are not careful, we don’t know what’s going to happen,” he stated.
He argued that regulators should have postponed the tariff review because one of the key variables used in determining electricity prices—fuel costs—is already declining.
“Petroleum prices went up; therefore, there was some adjustment in the market, but they’re coming down now because the US-Iran war has ended, and prices are falling back,” he said.
According to Mr. Defoe, since fuel prices are a major component of the tariff adjustment formula, authorities should have waited to assess the full impact of falling global oil prices before implementing higher electricity charges.
“So, at this time, that is also one of the components in the tariff adjustment structure. So, if that’s going to go down, and at this time we are increasing tariffs, maybe they should wait a little bit more and see what happens,” he added.
Mr. Defoe maintained that quarterly tariff reviews should not automatically result in higher prices.
“They don’t have to increase the tariff just because there’s a quarterly review, but they should look at the general market and determine whether it is suitable to do that,” he said.
He further questioned why consumers should bear additional costs after the introduction of fuel levies intended to support the energy sector.
“Now we’re already providing a lot of resources to mitigate some of the production costs by paying these levies on fuel. It makes money available for generation and legacy debts, so why are we going to have to pay more again? Because it doesn’t make sense to us,” he stated.
Describing the adjustment as poorly timed, Mr. Defoe argued that the current macroeconomic environment does not justify an increase in electricity tariffs.
“This is the timing that is wrong. You should have waited, looked at the global picture, and seen whether the effect of the war had worn off, and then I don’t know what really the reason for the adjustment is, other than for fuel, because interest rates have gone down, the exchange rate is stable, inflation is down, so what else could it have been the factor,” he said.
