Innumeracy in High Places

Charlie says:

As a math lecturer, I'm always interested in seeing the confusion many people have about the subject. Tuesday of this week, the Public Utilities Regulatory Commission here in Ghana announced new tariffs. Here's the headline: "UTILITY BILLS UP: Electricity by 89%, Water by 36%." (Story by Michael Donkor, Daily Graphic, Tuesday, 1 June, 2010)

Now, this seemed a bit extreme, so we read on:

Consumers will now pay a total of 125 per cent increase in utility bills following an upward adjustment of 89 percent in electricity and 36 per cent in water tariffs announced yesterday by the Public Utilities Regulatory Commission (PURC).

Speaking at a press conference, the Chairman of the PURC, Dr. Emmanuel K. Annan, explained that the increases were arrived at after a wide range of individual and institutional stakeholders consultation to solicit views.

He said for electricity, consumers within the threshold of 0-50 would continue to pay the old tariff of 9.5Gp, while those within the range of 51-300 would now pay 17Gp as against the existing 12Gp.

He said those within the range of 301-600 would pay 21Gp, as against the existing 16Gp, with those within the range of 601 and above paying 23Gp, as against the existing 19Gp.

Dr. Annan said in adjusting the tariffs for electricity, the commission did not lose sight of the social impact on and fairness to consumers, hence the lifeline tariff for electricity consumers.

He said, however, that consumers in the residential category of between 51-300 units had an increase of 42 per cent per kilowatt-hour, which translated into 17Gp per kilowatt-hour, up from the existing 12Gp per kilowatt-hour.

Dr. Annan said the increase was partly to restore the value of the tariff in dollar terms, which dropped from 13 cents per kilowatt-hour in November 2007 to eight cents per kilowatt-hour in November 2009 as a result of exchange rate depreciation.

He explained that it was also to ensure that consumers of electricity got value for money through an improvement in the quality of service being delivered by the utility service providers.

Dr. Annan said that the increase was based on a projected hydro/thermal generation mix of 60/40 and it was envisaged that the delivery of natural gas from Nigeria and its use in the generation of thermal energy later in the year would have an impact on generation tariffs.

He said the increase in tariffs fell substantially below the level requested by the utility companies and left a financial gap of approximately GHc49 million.

On water, Dr Annan said the current adjustment was meant to assist the GWCL/AVRL meet key operational costs, such as the cost of chemicals for the treatment of water, replacement of obsolete equipment, maintenance of the system, among others.

He gave the assurance that the commission would closely monitor the GWCL's performance and would not hesitate to impose the necessary sanctions where laid-down benchmarks were not adhered to.

He reiterated that tariffs alone could not raise all the desired funds for investments, maintenance, replacement and refurbishment of utility equipment and, accordingly, advised the government to continue sourcing investment funds to supplement the tariff income.

He said that would enable the utilities to achieve the desired level of investments in service delivery.

He said the PURC would ensure that stringent but realistic quality of service benchmarks under relevant regulations were adhered to by the utility service providers.

Dr Annan said failure to comply with these benchmarks would result in the application of penalties and sanctions under the regulations.

Ken read the story and figured the 89% number came from adding the percentages in each of the bands, I guess that is as good an explanation as we'll ever get. To recap, here is a table:

Band old new %increase

0-50 9.5 9.5 0%

51-300 12 17 42%

301-600 16 21 31%

601+ 19 23 21%

and the sum of these is 93%, close to the 89%, but clearly not the correct number. The Graphic had to print a front page retraction later in the week. I suppose the summing of the 89% and the 36% to get a total of 125% falls in the same category...