The Ghana Grid Company (GRIDCo) has warned that the recent increase in its tariff "does ont assure the financial viability" of its electricity transmission business, and joined calls for the automatic tariff adjustment formula to be implemented from next quarter.

GRIDCo, which was singled out for praise by the World Bank in a dismal power sector report in July, said it needs a higher tariff if it is to continue to invest in modernising the ageing transmission system and network amid soaring demand for electricity.

“The 13.5 percent transmission service charge [increase] approved by the PURC is a 10.83 percent reduction in real terms when compared to the increase of December 2011,” the power company said in a statement.

“This has reduced GRIDCo's ability to meet its financial obligations and purchase spares and other critical equipment”, the statement said further.

The Public Utilities Regulatory Commission (PURC) raised GRIDCo's transmission tariff by 13.5 percent last month after government cut energy subsidies, which culminated in a 78.9 percent hike in the end-user retail electricity tariff. GRIDO had applied for an increase of 38.89 percent, which it argued was the level it required to operate optimally.

The PURC watered-down the tariff demands of GRIDCo and other utilities — the Volta River Authority (VRA), Electricity Company of Ghana (ECG), Northern Electricity Distribution Company (NEDCo), and Ghana Water Company — after listening to the concerns of workers and industries over the impact of a substantial jump.

But by reducing the magnitude of tariff rises, the PURC has left the utilities without sufficient revenues to recover their costs and narrow a wide investment gap in the sector.

The VRA, whose proposal for a tariff rises, the PURC has left the utilities without sufficient revenues to recover their costs and narrow a wide investment gap in the sector.

The VRA, whose proposal for a tariff increment of 128 percent was trimmed to 36 percent, told the B&FT its current tariff covers only 60 percent of its costs, and it will need support from government to close the gap.

GRIDCo, according to its former chief executive, Charles Darku, must invest US$1.2billion over a five- to eight-year period to completely transform the power transmission system of the country.

Albert Quainoo, Head of Public Relations for the power transmitter, said in an interview that although the company will not halt ongoing project^,'future investments will be imperilled if tariffs are not increased further.

“If people want to support you with finance and they look through your books and find that payment will be a problem, you know the judgement they are going to pass,” he said, adding that the PURC must reintroduce the quarterly "adjustment'’ formula to enable GRIDCo service loans contracted for capital investment.