The Association of Ghana Industries (AGI) is urging the Public Utilities Regulatory Commission (PURC) to reconsider its recent decision to increase utility tariffs for the third quarter of 2024.
Starting from October 1, electricity tariffs will rise by 3.02%, while water tariffs will increase by 1.86%, which PURC attributed to the depreciation of the Ghana Cedi and other economic pressures.
Tsonam Akpeloo, the Greater Accra Regional Chairman of AGI, voiced concerns over the effect of these tariff hikes on industrial development, warning that they could raise operational costs for manufacturers and businesses, many of which are already struggling to absorb high utility prices without passing them on to consumers.
“We’re asking the regulatory authority to be concerned about the flight of the index and ensure that, at least in the next quarter, they either take steps to reduce it or maintain it at the previous rate because this increment is not going to be going well for industrial development,” Akpeloo stated.
Akpeloo explained that many businesses are absorbing the cost increases, rather than passing them on to consumers, as pushing these higher costs onto the market would further strain demand. However, he warned that this strategy is unsustainable in the long term. The continuous rise in operational costs, if not addressed, could force many businesses out of operation.
“A lot of companies are really getting out of business because of these high levels of utility tariff,” he added.
Absorbing increased costs typically allows businesses to maintain customer loyalty and market competitiveness, but it comes with a heavy price. Over time, such businesses may face shrinking profit margins, forcing them to cut costs in other areas, such as labor or product quality, which could harm their overall sustainability.
PURC outlined several factors behind the tariff hikes. The Ghana Cedi’s depreciation, by 4.96% against the U.S. Dollar between the second and third quarters of 2024, has significantly increased the cost of importing essential inputs like fuel and machinery for electricity generation.
While inflation has eased slightly, moving from 24.38% in Q2 to 22.27% in Q3, it remains a significant contributor to the rising costs of utility services. Additionally, the Weighted Average Cost of Gas (WACOG), which affects electricity generation costs, has seen a modest decline, from $8.0422/MMBtu to $7.8368/MMBtu.
However, this reduction was not sufficient to offset other rising costs, leading to an under-recovery of GH₵173.98 million, necessitating the tariff adjustments.
Akpeloo emphasized that unless the government or regulatory bodies intervene to manage these costs, businesses will continue to face increased pressure, threatening industrial growth and stability.
