Ghana’s Africa Centre for Energy Policy (ACEP) has called for transparency regarding the Electricity Company’s (ECG) discretionary spending of GH₵540 million, despite the power sector’s tight liquidity concerns.
ACEP stated that the power distribution company used these funds, collected from consumers during the debt recovery exercise in March and April, without proper justification.
The power sector in Ghana has been grappling with various challenges, with the government struggling to settle a debt of GH₵1.9 billion to Independent Power Producers (IPPs) by the end of June. The inability of the ECG to effectively collect revenues from power sales to consumers has contributed to the liquidity issues.
ACEP highlighted that there has been no noticeable improvement in liquidity, as indicated by the Cash Waterfall Mechanism (CWM) data. The organization’s analysis revealed that a significant portion of ECG’s collections was not directed towards paying off debts to IPPs and other stakeholders, exacerbating the escalating debt situation.
Earlier this year, ECG initiated a debt recovery campaign to collect an estimated GH₵5.7 billion owed by power consumers, but only managed to recover around GH₵3.1 billion.
ACEP asserts that all revenues should be properly accounted for and distributed according to the approved proportions determined by the CWM committee. However, reports indicate that more than 50 percent of the reported revenue from the GH₵1.1 billion collected by ECG was allocated for discretionary spending. This leaves only about 11 percent of the revenue available to meet sector requirements under the CWM for March and April 2023.
According to ACEP’s report, ECG claimed to have used GH₵540 million to procure liquid fuel for power plants during gas supply shortfalls, while refusing to pay gas suppliers through the Ghana National Petroleum Corporation (GNPC). However, the CWM formula entitled ECG to approximately GH₵113.5 million, representing 26.37 percent of the revenue reported for March and April.
Contrary to the prescribed allocation formula, ECG disbursed approximately GH₵256 million to itself, deviating significantly from the approved guidelines. This amount represents about 78.4 percent of ECG’s billed invoices for the period, while payments to other entities within the value chain ranged from 3.1 percent to 12.4 percent.
ACEP’s report further revealed that ECG’s claim of improved revenue collection suggests that a significant portion of the collected revenues is not reported under the CWM. The non-payment to gas sector companies has led to reduced gas volumes and curtailed gas supply from the West Africa Pipeline Company Limited (WAPCO). Additionally, payments for gas supply from the Sankofa Gye Nyame (SGN) field are also in arrears.
ACEP concluded that ECG’s prioritization of liquid fuel payments while undermining gas supply demonstrates a lack of concern for the fiscal damage inflicted on the public purse.
Source: Norvanreports