The Public Utilities Regulatory Commission (PURC_) last week began a road-show of regional public hearings on proposals made by the utility companies increase electricity and water tariffs. When my view was sought of the exercise, my immediate response to the question as to the “relevance and impact of the ongoing public consultation by the utility providers, under the auspices of the PURC” was to suggest the exercise would have little or no impact whatsoever on what tariffs are eventually imposed on the people of Ghana. Let me share with you why I am dismissive of the ongoing public hearings and have indeed labeled it as a charade.
Let me state my position from the outset. Like any commodity that we consume, we must pay an economic price or in this case, tariff for the service. Economic, as in covering all the costs associated with providing that service must be recouped, plus a rate of return which is in consonance with the opportunity cost for the funds invested in providing us with that service.
In constructing my case, my first point of reference was Act 538, the THE PUBLIC UTILITIES REGULATORY COMMISSIONACT, 1997, assented to on 16 October 1997. Act 538 is silent on the role and purpose of public hearings in the tariff setting process. However, section 16 of the same act lays down “Guidelines for fixing rates.
Section 16 states as follows (1) No public utility shall fix any rate to be charged for any service provided by it unless the rate is in accordance with guidelines provided by the Commission. (2). The Commission shall prepare and provide to public utilities guidelines on levels of rates that may be charged by the public utilities for the services provided. (3) In preparing the guidelines the Commission shall take into account (a) consumer interest; (b) investor interest;(c)the cost of production of the service; and d) assurance of the financial integrity of the public utility.
From the above, the PURC is to prepare and provide guidelines which the utility providers would use to set their tariffs. We can and must therefore assume that the PURC did indeed provide such guidelines and that the proposals made by the utilities have indeed followed these guidelines. If this indeed so, then why is the PURC conducting the current public hearings without sharing with us either the guidelines it prescribed and/or whether they regard the proposals as in compliance with the guidelines they gave?
Though not prescribed in it’s enabling Act the PURC has nonetheless developed a methodology called “PURC Tariff Setting”, which outlines the essential considerations and steps taken to set utility tariffs in Ghana. Apart from confirming that the process begins with giving guidelines to the utilities, it also states that the commission would also “examine and approve the rates to be charged by utilities for services provided.
My difficulty right now is how to locate where the ongoing public consultation sits in the tariff setting process? Is it designed to meet the commitment to make tariff policy public and subject to public scrutiny; to ensure that policy enjoys general support by all the stakeholders; shows that the mechanism is fair and predictable; or ensure transparency in the tariff making process?”
The fundamental question to answer is that “Are the ongoing public hearings meeting any of the above criteria? or is it just an exercise of grand deception where the utilities are simply pretending to be consulting the public on the proposals they have already submitted to the PURC ?.
Why do I say so? First of all, as someone who is supposed to know something about the subject, I have not set eyes on the guidelines provided by PURC to the utilities. And I will not be putting my money in any danger if I was to bet that any of the participants in the public consultation has seen them either. So how are we to judge whether the utilities followed the guidelines, let alone form an opinion as to whether their proposed tariffs are in order and can be subjected to public scrutiny to be fair and predictable. Therefore, if the intent is to “ensure transparency”, the process scores zero marks.
The PURC has developed a convention for the tariff decision process. It outlines a five point process as follows: 1) submission of tariff proposals by utilities to PURC; 2) submission of tariffs to key stakeholders; 3)publicized proposals through electronic & print media; 4) organize Public hearings; 5) consultation with key stakeholders-utilities, consumers- all major classes; government. Unless I have been in a comatose sleep, ala the Sleeping Beauty, I think we have jumped steps 2 & 3 and gone straight from (1 ) to (4) . As I said, this is not law but convention so we cannot go to court but I am still free to suggest that by not publishing the tariffs before the hearings, the PURC has short-changed the good people of Ghana, who must bear the burden of the increased tariffs. the public on its side.
Whilst key stakeholders are defined in step (5), we do not know those in step (2). As the tariffs proposed are supposed to take effect within 60 days of filing, we need to know when they were filed and why PURC have skipped the very important steps 2 & 3 of consulting stakeholders and more importantly publicizing them in the electronic and print media? Pardon me, as I now only read electronic versions of publications, which are devoid of funeral and other social adverts, please forgive me if I am maligning PURC unfairly.
However, if as I suspect, the tariff proposals were not published ahead of the public hearings, then these hearings have very little meaning nor relevance beyond a public relations debacle and charade. If the likes of me cannot make any rhyme or reason of the merits and demerits of the proposals in a 1-2 hour engagement, how foes anyone realistically expect the good people of Ghana to judge the proposals in any sensible manner except to reject them outright.
Be as it may, since this is supposed to be a major tariff review and not just tinkering with minor adjustments, we need to know what has happened since the last major review in 2011. I will share with fellow citizens my perspectives on what we should be concerned with in judging the proposals from the utilities.
My first and non-negotiable issue is that the exercise should be looking forward to make adjustments to the major cost centres since the large major review in 2011. It should not seek to inject future costs of plant and fuel which though contracted are not yet part of current operations. In other words, whilst it may be legitimate to include the costs of plant and fuel which have become part of the operating supply chain, we should not seek to add costs of proposed but as yet underplayed plants. After all, we still have a 90 –day adjustment review, and this will be a better opportunity to adjust and revise costs to include those planned plants which have become operational during the period under review.
The three most important considerations are; 1) the expected generation profile between thermal and hydro generation over the next three years; 2) the foreign exchange behaviour of our cedi against the US$ dollar, the currency of transaction; 3) projections of crude oil and gas prices. , the main fuels for thermal generation.
For now the cedi rate is behaving like a yo-yo, bouncing between 3.5 and 4.5 Ghc to the US$. We need to know what rate the utilities have used for their calculations. Likewise global oil prices have collapsed since the last major review, which downward trend is expected to continue in the foreseeable future. At a minimum, I will suggest that the utilities tariff proposals should be subjected to critical sensitivity tests on the cedi exchange rates and oil price assumptions.
As part of my post-retirement public service, I will seek a copy of the guidelines the PURC gave to the utilities to make their tariff proposals. I would also seek copies of the proposals that the utilities have actually presented to the Commission which are now being supposedly being subjected to public hearings. I will review the proposals and share my conclusions with the good people of Ghana. I will also participate in the consultation process as a consumer and a key stakeholder representing all classes of consumers.
In the meantime I will urge the PURC to suspend the current public consultation process, publish the proposals in the printed media and online for public information, and then resume the public consultation two weeks after publication. That way the public will be much better informed to judge the proposed tariffs.
You never know, Ghanaians may even suggest that the proposed tariffs are unrealistically low and need to be made more economic so that we can avoid future DUMSORs. An informed and discerning public could turn out to be the biggest allies for the utilities as they seek economic or realistic tariffs
By: Charles WEREKO-BROBBY (Dr)
Chief Policy Analyst. GIPPO
Ghana
Email: [email protected]