Businesses should prepare to possibly pay more in utility costs as the Public Utilities Regulatory Commission (PURC) reviews and recalculates electricity and water rates in 2025. The recent 14.75% increase in electricity tariffs and 4.02% rise in water bills, set to take effect in May, are already adding to the cost pressures businesses are facing.
These increases are based on factors such as inflation, exchange rates, fuel costs, and the energy generation mix between hydro and thermal sources. They also reflect an ongoing issue linked to a backlog of over $976 million in unpaid electricity units.
Although 50% of this backlog has been factored into the current increase, the remaining 50% will be spread out over the course of the year, which could lead to additional cost pressures for businesses in the coming months.
In an interview on City FM yesterday, April 14, Dr. Eric Obutey, Head of Research and Corporate Affairs at PURC, explained that the decision to spread the remaining backlog balance over future tariff reviews means further tariff adjustments could be on the horizon.
While the exact figures will depend on the four key parameters – generation mix, inflation, exchange rate, and fuel costs – this approach, by implication, means that businesses should expect potential adjustments as the remaining backlog is gradually absorbed.
Dr. Obutey also clarified that while quarterly tariff changes are based on objective factors like fuel prices and exchange rates, there are no immediate plans for another increase. However, the ongoing review process, particularly in the context of infrastructure costs and potential new power purchase agreements, could contribute to higher future costs for businesses.
“The commissioners, in their wisdom, decided that we should apply 50% of that to the current tariffs, the rest will be spread over the course of the year,” he said.
This gradual approach to the backlog was intended to mitigate the immediate burden on customers, but businesses should still brace for further increases as the full arrears are addressed. Additionally, the major tariff adjustments scheduled for 2025 could involve even higher costs, as they will account for both operational and capital expenses, including infrastructure upgrades and new power purchases.
While the PURC operates independently of the government, Dr. Obutey pointed out that any relief measures from the government would be separate from the commission’s tariff adjustments. He emphasized that the PURC’s role is to adjust tariffs based on operational needs and external factors, while government relief programs are outside its purview.
“PURC does its work independent of what the government does,” Dr. Obutey stated. “If the government decides to cushion consumers, that is entirely different.”
With the remaining backlog yet to be fully applied and new infrastructure expenses on the horizon, businesses must prepare for the potential of further price hikes throughout 2025. As Dr. Obutey noted, the major tariff review in 2025 will take into account both operational and capital expenses, potentially translating into paying higher tariffs.
“This year 2025 is when the three-year major tariff ends,” he said. “In 2025, we are supposed to undertake a major tariff review, and that will take care of both capital and operational expenses.”
