ELECTRICITY COMPANY OF GHANA LIMITED

PROPOSAL FOR REVIEW OF DISTRIBUTION SERVICE CHARGE (DSC)

1.0 INTRODUCTION
As part of the Public Utilities Regulatory Commission’s (PURC) impending major tariff review
process, in accordance with the PURC Act, 1997 (Act 538), the Electricity Company of Ghana Limited
(ECG) has filed its tariff (Distribution Service Charge) proposal for a five-year period (2022-2027).

2.0 RATIONALE FOR PROPOSED REVIEW IN TARIFF

The tariff proposal is underpinned by the following:
2.1 Distribution Business: The prevailing tariff (DSC) was based on a distribution business where the
Asset Owner (AO) was not the Operator. Currently, the AO is also the Operator. With the current
structure of the distribution business, a review of the tariff is required to reflect same.
2.2 Need for Change in Tariff Structure: The prevailing tariff structure requires modification to
support current developments in the electricity business. Issues necessitating these changes include:
Cost of Service Allocation: Cross-subsidization among customer groups is inherent in the structure of
the prevailing tariff. This has the tendency to cause dissatisfaction among the affected group of
customers. A gradual approach to achieve cost of service tariff is necessary as it is appropriate for
tariffs to reflect the cost of providing service at each service level.
Tariff bands: The prevailing tariff has multiple bands with progressive rates which is a disadvantage
to the customer as well as the company. This aspect of the tariff makes it difficult for customers to
understand their bills (a deterrent to bill payments); a disincentive to genuinely increase
consumption; comes with implementation challenges; necessitates procurement of sophisticated
and higher priced meters that can mimic the tariff, etc. Hence, the need to review the tariff
structure.
2.3 Inadequate DSC: The prevailing tariff (effective July 1, 2019) was a 14% reduction on the
previous tariff. With very minimal increases in the past, this reduction widened the already existing
gap between the cost recovery tariff and the PURC approved tariff, making the tariff woefully
inadequate to support business operations. The inadequacy of the DSC has impacted negatively on
critical operations such as procurement of materials, payments to suppliers, execution of projects
aimed at improving quality of supply, etc. The unavailability of funds to execute critical operations is
therefore a concern to be addressed.
2.4 Effect of External Factors: Macroeconomic variables, mainly inflation and exchange rates have
further diminished the already inadequate DSC and made business operations increasingly
unsustainable. At the onset of the prevailing tariff, these variables were 8% and GHS5.05 to a dollar
as against the current rates of 19.4% and GHS7.11 to a dollar for inflation and exchange rates
respectively. With the existing PURC approved exchange rate as against the actual market rate, the
forex loss incurred in terms of power procurement is approximately GHS70 million per month.
Similarly, world market prices of major distribution inputs required for operations have also
increased consistently in the last few years due to increases in world metal prices. The PURC’s
quarterly adjustment mechanism which would have compensated for the effect of the
macroeconomic factors has not been consistent.
2.5 Recovery of Investment Costs: Investments are necessary interventions required to keep pace
with growing demand to sustain the company’s distribution system to ensure reliable and quality
power supply. The cost of several performance improvement projects undertaken within the last
few years needs to be recovered. The cost of planned projects aimed at improving quality of service
and to meet future demand is also to be considered.
2.6 Unrecovered Generation Costs: The company incurs additional costs emanating from
procurement of power which are not factored in the Bulk Generation Charge (BGC). These costs are
due to the partial pass-through of generation costs of some power plants, non-inclusion of tariff of
newly commissioned power plants, reserve margin, etc. It is expected that the PURC’s quarterly
adjustment mechanism and major tariff review would both be applied to address these issues.
The above-mentioned issues coupled with increased demand and rapid customer growth have
stretched resources beyond limits leading to an undesirable impact on the company. With the huge
investment needs of the distribution industry for the next five years, the main objective of our tariff
proposal is to request for a cost recovery tariff to sustain the delivery of efficient and reliable
electricity service to meet the ever-increasing electricity demand.
3.0 INITIATIVES UNDERTAKEN SINCE THE LAST REGULATORY PERIOD
To a large extent, the company continues to experience the devastating ripple effect of the COVID-
19 pandemic which hindered business operations considerably in 2020 and 2021. However, the
execution of major projects to improve service delivery to our cherished customers continued in all
our operational areas.
3.1 Service Delivery: Several measures aimed at enhancing the existing service delivery procedures
were put in place. These led to improvement in processes and timelines for business activities such
as meter reading, billing and bill delivery, new connections, response to faults, etc. The continued
deployment of Automatic Meter Reading (AMR) meters for high consuming customers improved
billing accuracy for these customers. Revenue collection was also boosted through the launch of
ECG’s E-payment system (ECG Power), the opening of 1,314 new vending points and the
collaborations with more third-party agents. The features of the E-Payment system were enhanced
to enable more customers to access the application, with over 9.29 million transactions registered
since its inception. Furthermore, existing and new systems such as the ECG contact center, social
media application and ECG web portal are continuously being improved for customer convenience
in making enquiries, complaints, and for publicity purposes.
Several metering projects were also implemented to improve energy sales accounting. A total of
1,005,603 faulty and overaged meters were replaced at no cost to customers. The use of Advance
Metering Infrastructure (AMI) to remotely monitor the load and consumption of specific customers
was expanded. The company also widened the scope of primary substation, distribution
transformer, feeder and boundary metering across its operational areas.
System reliability within ECG’s network has seen consistent improvement since 2018, and system
availability as of March 2022 was 99.66%. The company continues to improve its system reliability
through the adoption of measures such as a more coordinated approach in executing planned
maintenance works, creation of redundancies for system flexibility and operational efficiency, live-
line works, undertaking system improvement projects such as increasing transformer capacities,
installation of capacitor banks, VIT feeder automation, increasing sizes of conductors and intensive
vegetation control.
The company is hopeful to achieve at least 70% customer satisfaction during the five-year regulatory
period. This would be delivered through continuous roll out of measures to enhance procedures in
service delivery to its customers. Value-added services such as premium service connection, high
consuming customer relationship management, meter management services, consultancy services,
electric vehicle charging facilities, etc. are expected to be introduced to enhance customer
satisfaction. Further measures adopted to improve network operations include the deployment of
Outage Management System (OMS), Geographic Information System (GIS), live-line technologies,
drones for inspection, etc.
3.2 Completed Projects: Major performance improvement projects funded by ECG since the last
regulatory period cost USD393.11 million and is expected to be recovered. These investments were
geared towards addressing not only the high demand for power supply but also to maintain high
level of system availability, reliability, and quality of supply to our cherished customers. Other
benefits include significant operational efficiency through reduction in technical and commercial
losses.
ECG-funded Projects:
 Construction, Rehabilitation and Upgrade of 19 Primary Substations and 33kV Switching Stations
(Airport 2, Kisseman (GIMPA), Tsopoli, OLAM (Tema), Tema Meridian, Trade-Fair, Mobole,
Nkwanta, Mpraeso, Suhum, Asamankese, Awaso, Daboase, Damang, Agona, Cape-Coast, Denu,
Anloga and Ejisu).
 Construction of 30 Network Interconnecting Circuits (33kV tower lines, 33/11kV overhead lines
& underground circuits) & Dedicated Power Supply to Customers.
 Installation of 3 Automatic Voltage Regulators (AVRs).
 32 Sub-Transimmission Improvement Projects: Construction, Expansion, Reinforcements of
33/11kV Interconnecting Circuits (overhead and underground networks).
 31 Distribution System Improvement Projects (Achimota, Prampram, Takoradi, Bogoso, Kasoa,
Saltpond, Agona Swedru, Praso, Koforidua, Nsawam, Oda, Kade, Nkwanta, Kpando, Jasikan, etc).
 8 Special Grid Intensification Projects (Bekwai, Winneba, Kpeve, Tafo, Kade, Asamankese and
New Abirem).
 5 Rural Network Extension and Intensification Projects within Accra, Eastern and Central regions.
 Network Extension to 432 Communities in Accra, Ashanti, Western, Eastern and Volta regions.
 Procurement of Specialized Tools for Live-line Work and Cable Test Vans.
 Construction of 5 District Offices (Nuaso, Kasoa, Juapong, Half Assini and Denu).
 Construction of 14 Customer Service Centers (Lakeside Estate-Ashaley Botwe, Agogo, Nyinahin,
Nsuta, Adansi Fomena, Dadieso, Atieku, Nsawam, Daboase, Sefwi Akontombra, Dambai, Dodze,
Adidome and Abor).
GoG-funded and Donor Partner Projects:
 GoG-funded Rural Electrification and Grid Extension in 507 Communities in Ashanti, Western,
Eastern and Volta regions (Phase I) with technical support from ECG.
 JICA-funded Project: Construction and Upgrade of 1 Bulk Supply Point at Graphic Road, Accra.
 Millennium Challenge Corporation-funded Projects: Distribution Network Modernization
Projects including Kasoa and Pokuase BSPs and Interconnecting Circuits; Primary Substations at
the University of Ghana Medical School (UGMC) and Kanda complete with their interconnecting
33kV circuits and 11kV offloading circuits; LV Bifurcation in six (6) districts in Accra; Meter
Management System (MMS); and Utility Geographic Information System.
3.3 Ongoing Projects: Major performance improvement projects funded by ECG at various stages of
completion are estimated to cost USD274.42 million and expected to be recovered. Most of these
projects are executed in phases and are currently benefitting customers. Majority of these projects
are likely to be fully completed by the end of 2023, in view of the expectation of a cost recovery
tariff.
ECG-funded Projects:
 82 Sub-transmission Improvement Projects: Construction, Rehabilitation and Automation of
Primary Substations complete with the 33/11kV Interconnecting Circuits in all operational areas.
 101 Distribution System Improvement Projects across ECG’s operational areas.
 232 Special Grid Intensification Projects: 33/11kV Primary Substation Construction and
Automation Projects in Greater Accra, Ashanti, Western & Eastern Regions.
 Ghana Energy Development and Access Project (GEDAP): Supply and Installation of Primary
(33/11 kV) Substations, BSPs, 33kV Switching Stations, Shunt Capacitor Banks, Bulk Metering
Systems and Smart Prepayment Meters.
 72 Rural Projects - Network Extensions and Intensification in Rural Operational areas.
 Construction of 8 District Offices (Amrahyia-Dodowa, Ablekuma, Manhyia, Bekwai, Ashanti
Mampong, Akwatia, Sekondi and Agona Nkwanta).
 Construction of 22 Customers Service Centers in Accra, Western, Western North, Eastern, Volta,
(Tema Newtown, Tsopoli, East Legon hills, Amasaman, Mankranso, Asutsuary, Akim Osino,
Achiase, Ofoase, Akim Akroso, Teacher Mante, Anloga, Kpeto, Golokwati, New Ayoma, Sefwi
Asawinso, Elubo, Juabeso Bia, Axim, Boinso, Mpohor and Bodi).
GoG-funded and Donor Partner Projects:
 GoG-funded Rural Projects in 2,334 Communities in Ashanti, Western, Central, Eastern and Volta
regions.
 Millennium Challenge Corporation-funded Projects: Outage Management System (OMS);
Enterprise Service Bus (ESB) to integrate IT systems; Enterprise Resource Planning (ERP); Smart
Energy Efficient Street Lighting and Data Centre Communication Network.
4.0 PROPOSED TARIFF
In accordance with the PURC rate setting guidelines, the company’s Annual Revenue Requirement
(ARR) to cover distribution costs for the five-year regulatory period includes operational expenses,
depreciation, capital recovery and a reasonable return on regulatory asset base. The ARR from 2022
to 2027 ranged from GHS4,388.96 million to GHS9,573.60 million. This translates into tariffs (DSC)
ranging from GHp39.95/kWh to GHp57.10/kWh for 2022 to 2027 respectively.

5.0 CONCLUSION
The approval of the above proposal would support the execution of critical projects and
interventions aimed at enhancing the delivery of quality and reliable electricity supply to the rapidly
growing customers and make our services accessible to all in the Southern Distribution Zone of
Ghana.
We therefore wish to seek the support of all stakeholders with respect to our tariff proposal.