Did John Mahama increase electricity tariffs by 45% annually? And has Nana Akufo-Addo reduced electricity tariffs?
Claim: John Mahama increased electricity tariffs by 45% annually. Nana Akufo-Addo has reduced electricity tariffs.
Verdict: Mostly True
On Monday July 27, 2020 the National Democratic Congress held an outdooring ceremony for the party’s running mate to partner flagbearer and former President John Mahama as it readies for the 2020 General elections.
Less than 24 hours after the ceremony, the Vice President Dr. Mahamudu Bawumia wrote an article which sought to argue that the decision on who wins the 2020 elections will be based on the performance and track record of President Akufo Addo and former President Mahama.
Then he proceeded to catalogue 50 reasons why President Nana Akufo Addo must be chosen over John Mahama on December 7. Point 11 of the reasons reads ‘John Mahama increased electricity tariffs by 45% annually. Nana Akufo-Addo has reduced electricity tariffs’.
This claim by Dr. Bawumia seeks to make a case of who performed better at managing the effect of the energy sector on the pockets of Ghanaians.
The Public Utilities Regulatory Commission was set up as a multi sectorial regulator by the government in 1997 under the PURC Act 1997 (Act 538) as part of the utility sector reform process to regulate the provision of utility services in the electricity and water sectors.
In essence the PURC provides a guide for rates to be charged for the provision of electricity and water services in Ghana.
The Commission is also to examine and approve electricity rates while protecting the interest of consumers and providers of utility services.
To fully analyse the veracity or otherwise of the claim, the time period for the analysis is crucial. The time span is from July 2012 to July 2020.
This timespan covers two dispensations:
- January 2013 to December 2016 (When John Mahama was President)
- January 2017 till date (When Nana Akufo Addo is President)
With this time frame clearly identified, a year on year claim analysis is needed.
In 2013 the PURC announced one major tariff adjustment. This saw electricity tariff increase of between 65 and 78.9 percent that took effect in October of that year. Reasons given for the increment include but was not limited to ensuring financial viability of power producers, setting rate of return on investments for the national interconnected system and fair sharing of supply cost to all categories of consumers.
The application of the Automatic Adjustment Formula was fully implemented as changes in tariffs were made for all the 4 quarters of 2014.
The automatic adjustment formula is a tariff mechanism that seeks to track and take in to account movement in the factors, which determine the cost of electricity over a three-month period (a quarter).
The first quarter (January-March) saw an electricity tariff increase by 9.73 percent. The price of crude oil and natural gas coupled with inflation and the exchange rate were the 3 top reasons adduced to justify the increase.
The second quarter (April to June) saw the expected tariff adjustment deferred. Per the calculations Ghanaians were to pay 12.09 percent more for the electricity they consume. But that was placed on ice due to the load shedding situation at the time.
The third quarter (July to September) saw Ghanaians pay 31.56 percent more for the electricity they use for their homes and businesses. The principal reason for the increase was the Ghana cedi US dollar exchange rate.
The final quarter of 2014 (October to December) brought an electricity tariff increase of 6.54 percent in line with automatic adjustment formula. The main reason for the increase was the shift in the generation and fuel mix of a dependence on crude oil due to the challenges in getting reliable supply of gas from the West African Gas Pipeline plus the low water levels to power the Akosombo and Kpong hydroelectric dams. That meant more pressure on the currency to pay for the crude oil in dollars, which then affected the inflation of the Ghana cedi.
So in 2014 Ghanaians saw a cumulative electricity tariff increase of 47.83 percent.
Ghanaians saw an adjustment in their electricity bills by 31.73 percent in April with justification being on the grounds of preserving the load share situation by the ECG and save the power distribution company from collapsing its network. Exchange rate, inflation and the reliance on thermal fuel accounted for the level of increase.
The next electricity tariff increase came on the 14th of December, which was a 59.2 percent jump. This was less than a week to Christmas and the reasons adduced for the significant jump was the cost of buying crude oil, cedi dollar exchange rate and the cost for power we paid to Independent Power Producers.
So 2015 saw Ghanaians pay cumulatively 90.93 percent more for electricity.
Considering the jump in tariff for electricity in the last month of 2015, there was no adjustment of electricity tariffs in 2016, as the PURC announced no increase for the first quarter of the year.
Per the checks on the website of the regulator PURC, tariffs for electricity was not adjusted.
In the second year of the Akufo Addo presidency, the PURC reduced the electricity tariffs by 17.5 for residential customers, 30 percent for non-residential customers, 25 percent for special load tariff customers and 10 percent for mining companies. Reasons adduced for this reduction was the consideration of the then impending private sector participation concession within the power distribution sector and took effect in March of the year.
It is worth noting that the reduction was on the 2015 gazette tariffs and largely hinged on energy charges, which ranged from 10 to 30 percent.
Also an expected electricity tariff increase for the third quarter of the year did not materialize as the regulator noted that the cause of the adjustment (fluctuating exchange rate) were spikes which had to be monitored to establish a trend before a concrete decision was taken.
In February the PURC announced that after review of the factors for adjustment, the decision was to keep the tariffs the same till the end of June 2019. One of the principal reasons given for the freeze on adjustment was the critical emerging issues in the sector, which was deemed to have an impact of the final tariff setting. The emerging issue was the finalization of the concessionaire to run Ghana’s power distribution sector, which eventually became PDS.
Then in July the PURC announced an 11.17 percent increase in electricity tariffs.
Two months later the PURC announced a further 5.94 percent increase on electricity tariffs. This was hinged on the fluctuation of the cedi’s exchange rate, inflation and the price of crude oil on the world market.
So in 2019 Ghanaians had a cumulative 17.11 percent increase in their electricity bills.
It is important to note that there had been no electricity tariff adjustment from September 2019 till date.
Based on the findings year on year some facts must be pointed out.
Under the Mahama presidency there were 6 tariff increments and no reduction.
In 2013 the single upward tariff adjustment increase was between 65 and 78.9 percent.
In 2014 there were 3 upward tariff adjustments that led to a annual increase of 47.8 percent.
In 2015 there were 2 upward tariff adjustments that led to the annual increase of 90.93 percent.
Under Nana Akufo Addo’s presidency there has been one tariff reduction and two tariff increments.
However a look at the rate of reduction vis a vis the increments leads to an evening out of the reduction.
A 17.5 percent reduction for residential customers and a corresponding 17.11 percent increase leads to a 0.39 reduction balance.
For the non-residential customers who enjoyed a 30 percent reduction in electricity tariff have had that shaved off by 17.11 percent leaving a 12.89 percent reduction difference.
Dr. Bawumia’s claim of former President Mahama electricity bills increase by 45 percent annually is mostly true and under reported whereas the claim of Akufo Addo reducing tariffs is partly true with explanation.