The Public Utilities Regulatory Commission (PURC) has hinted of an increase in electricity and water tariffs from January 1, 2014 as the Automatic Adjustment Formula (AAF) for review of tariffs kicks in.

Nana Yaa Jantuah, Director of Public Relations and External Affairs at the PURC, said the Commission was ready to implement the AAF three months after the major tariff review.

The AAF is a pricing mechanism that tracks and incorporates movements in key uncontrollable variables to reflect the actual cost of ectricity and water supply.

Nana Yaa Jantuah said the formula allows for the quarterly review of electricity tariffs to reflect changes in factors whose effects on operations were considered to be beyond the control of the utility companies, namely the Volta River Authority, the Electricity Company of Ghana, the Ghana Grid Company and the Northern Electricity Distribution Company.

Stakeholders, including labour, employers and industry have all called for the implementation of the AAF to avoid huge hikes in tariffs level during major tariff reviews.

The key parameters include the Ghana Consumer Price Index, the Ghana Cedi-Dollar Exchange Rate, generation mix, fuel mix, power purchase cost and demand forecast variations, among others.

“Indeed, the Utility companies do not have any control of these exogenous factors,” Nana Yaa explained, adding that there is certainly going to be some form of increase in tariffs, looking at the indicators that underpin the AAF.

“Although we are yet to know the level of increase in tariffs, all the key indicators point to some form of increase,” she said.

Besides, the increasing demand for electricity means that there would be heavy reliance on thermal sources for generation to meet the load growth.

Nana Yaa Jantuah said key indicators, such as inflation, is on the rise, while the Ghana Cedi continues to fall against the dollar, indirectly increasing the cost of inputs and cost of generation, transmission and distribution.

The rate of inflation for November hit 13.2 percent, while the exchange rate of the Cedi to the dollar is 2.40 Cedis

“Even though price of crude oil and gas supply remain around the same level, the depreciation of the Cedi against the dollar means an increasing cost to the utilities,” Nana Yaa added

The AAF would be implemented every quarter, beginning from January 1, 2014.