I am coming to the end of my 23rd year of commenting on the 4th Republic of Ghana; and this is only the 2nd article to have a title expressed as an arithmetic equation. The other was plagiarized by an unscrupulous white man who used the piece in whole in a book about the 1st President of the 4th Republic without acknowledging its source, let alone offer a ‘nokofioo' royalty payment.
My return to the arithmetic title format is informed by the manner in which the current public discourses on new utility tariffs have been cast. It is all about what percentage increases in tariff will be acceptable to Ghanaians; when indeed it should be about the level of tariifs that would ensure the end of Dumsor and permanently ‘fix’ Ghana’s power problem.
The Public Utilities Regulatory Commission’s (PURC) stakeholder road show finally meandered into the Greater Accra region last week and I was invited to one the many supposedly public hearings to solicit the views of consumers ahead of the Commission’s formal consideration of the proposals submitted by the utilities. The session started 2.45 pm instead of its advertised time of 2.00 pm. So normal was this for Ghana that, in spite of my very audible protest, there was no apology from our moderator.
Sadly, apart from one notable exception from my protégé Kofi Ellis, the presentations were a bunch of very mediocre and recycled technical slide shows by GRIDCO, ECG & Ghana Water, on infrastructure additions leading to the inevitable demand for tariff increases of the order of 100 – 200%. We the stakeholders were unable to neither state our concerns nor contribute much to the session because the proposals from the utilities were not published ahead of the presentations (either in the national press as required or obviously on the websites of the commission and the utilities.
Now that I am done with my whining about the form or rather the lack of it, let me now confront my fellow citizens with the substance of my case. Put frontally and simply, we must be prepared to pay the level of tariff which will bring DUMSOR to an immediate halt and ensure that it never returns again at least for a generation. The key to unlocking this persistent problem is to ensure that we pay an economic, (not realistic or affordable) tariff to the Volta River Authority to ensure that it can produce the bulk of our power at the least cost and most efficient manner.
As we consider another major review of utility tariffs since 2013, the cardinal lesson we should all learn from continuing to live in semi-darkness is simple; if we do not produce enough power, we cannot end Dumsor in Ghana. A secondary lesson I will suggest is that if we do not treat VRA right, we will be paying a lot more in tariffs as we are forced to enter into economically-insane agreements with IPPs. The end result is what we have had for nearly four years, tariff increases with no end to Dumsor,
The PURC has reviewed utility tariffs **** times since 2013. Except for a singular case, all the reviews have increased tariffs, accompanied by the per functionary promise that the increases would end Dumsor and lead to better quality services. Not only are we now on the verge of the 4th straight year of Dumsor, the PURC has gone on record to suggest that their singular reduction of tariffs was a mistake and led to an exacerbation of Dumsor.
As we have seen so clearly since 2013, setting a “political’ rather than en economic tariff simply adds to our woes, and more importantly, forces us to pay more expensively to fill the deficit of inadequate power production from the national grid. Ironically, this does not affect those who introduce a political tariff because they live in so called security zones and are supplied power on an uninterruptible basis that they usually don’t pay for.
As I write this piece, the TUC has reiterated its pavlovian rejection of the proposals put up by the utilities for between 100 -200% increase in tariffs. Characteristically, the TUC has not declared what percentage level increase will be acceptable to them. As if on cue, the political parties which are not in power have joined the ‘yentua’ chorus of supposedly unaffordable percentage increase. Even the PURC has allowed itself to be dragged into the percentage increase ‘brouhaha’ by publicly engaging in a row with the Consumers Association as to the percentage increase levels we will be happy to live with.
After three years of percentage increases, we have learnt some bitter fundamental lessons. Dumsor remains stubbornly unresolved; our national utility companies are collapsing under the weight of mounting debts and rapidly deteriorating fabric and untold stress to their staff. Since the last review it has become patently clear that no matter what the percentage tariff increase, the difference is the same, there will be no end to Dumsor until we are able to deliver much more energy than we are doing, full stop.
Whether the final approved tariff increase is 10, 50 80, 100 or even 200 percentage, if it does not allow VRA to receive an economic tariff to be able to contribute its maximum quota of power, from its combined hydro and thermal capacities, we will never end Dumsor, no matter how often my brother Mahama repeats his ‘I will fix it’ mantra. Alas, the alternative refrains of ‘we need to pay realistic’ tariffs’, wheeled out each time by our governors, the utilities and PURC, has become so discredited and irritating that it has come to be seen by Ghanaians as the sickest of bad jokes and con.
What do we understand by a realistic tariff anyway? Realistic to whom? The consumer who has had to pay it several times over the past three years without getting the service promised?; the utilities who do not deliver on their promise; or the governors who saddle the utilities with unpaid debts for their consumption and accept no blame for their irresponsible conduct?
As far as I can surmise, the only meaningful use of ‘realistic’ is when we can couple the tariff with the total delivery, at the optimum efficiency, of the service for the tariff charged. Therefore, until we all start singing the same refrain, that realistic tariff and the full delivery of service, are akin to co-joined Siamese twins, We will never get rid of Dumsor, until we finally jump off the totally discredited which comes first game of realistic tariff before full service or vice-versa.
So let us look at what we need to do. Firstly, we must decide how much ENERGY we need to produce in 2016 to sustain the promised end of the year demise of Dumsor? Secondly, how do we produce this energy in the most cost-effective manner?; and, thirdly, what tariffs should we pay to ensure that the above can be sustained beyond next year and for at least the next decade? For the avoidance of any doubt, the solution is not about production capacity (MW); it is about Energy optimal combination of capacity (MW) and fuel to produce energy at the most efficient economic tariff
Based on the above, the best estimate I have is that we are projected to produce a minimum of 17,000 GWH of energy in 2016 to keep Dumsor at bay. It is not rocket science to assume that the cheapest and most efficient way to do this will be to first deploy the production capacity we already have in place, with the cheapest and most reliable fuel. It is only when this does not deliver all of the energy that we bring in external capacities and fuels.
The capacity in place now and therefore obvious part of the solution are VRA, (hydro and thermal), Bui, TICO, Asogli, CENIT, etc. Even though the lake level is likely to be about 30 feet below its maximum operating level for the next year, VRA has estimated that it alone can deliver nearly 12, 000 GWH of the total 17,000 GWH; i.e. nearly 71% of the total 2016 energy demand. Indeed VRA expects to produce nearly 14,500 GWH of the projected 2017 total of 19,000 GWH; p to almost 80% of the total utput.
Therefore it is a no brainer whatsoever that we must focus our priorities on ensuring that VRA is given the maximum possible assistance to deliver our energy needs in 2016 and beyond.
As far as the balance of 30% in 2016 and 20% in 2017 is concerned, this can be met from already in situ capacity such as Bui, Asogli, Cenit and a few minor plants. The question that remains then is how can we sustain production and increasing demand in the short to medium term? It is only in seeking answers to this question that power barges and related short term injections can be considered.
The implementation strategy proposed above will also be the one that can deliver sustained energy in 2016 at the most efficient economic tariff. to Ghanaian consumers. This is the win-win situation we all desire; good for consumers; good for the utilities; good for the PURC; and above all good for the workers leaders and the rulers.
On the other hand, if we opt to go down the old, tired, cobbled path of ‘what percentages increases can be afforded by the workers and politically palatable to our rulers, we will only end up with a realistic tariff which will not in reality deliver us from the current Dumsor, let alone deliver on the illusive vista of home grown industrialization. The debate about percentage increases will well and truly have become futile
How we get to achieve the "everyone wins scenario" of an economic tariff for a full quality service will be the subject of the next essay
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