Despite efforts put in place to reduce the energy sector legacy debt, inefficiencies and power-theft remain the biggest challenge, particularly in the distribution of electricity to consumers, Independent Energy Consultant Dr. Nii Darko-Asante has said.
According to him, players in the industry, including government, have worked to successfully reduce the energy sector legacy debt by US$5billion from the initial US$12.5billion over the period. But power-theft and inefficiencies have made the cost of electricity high in the country.
He therefore stressed that the power distribution companies such as the Electricity Company Ghana (ECG) and Northern Electricity Distribution Company (NEDCo) should complement efforts of the generation companies in reducing the level of theft and inefficiencies in the system.
“In terms of industrial tariffs, Nigeria has a lower tariff than Ghana in the sub-region due to cheaper gas. To improve, a significant portion of the inefficiencies and electricity-theft must be stopped to reduce debt in the sector.
“We need to bring the ECG and NEDCo more in line with efficient operations. There is a performance improvement programme that both of them are being mandated to put together to reduce their losses by 2 percent on year-on-year basis,” he said.
Dr. Darko-Asante maintained that the financial performance of ECG and NEDCo is important to sustainability of the energy sector, hence the decision by government to strictly monitor their operations in order for them to achieve the set target is very necessary.
“When it comes to ECG and NEDCo meeting the performance indicators, there will be benefits and sanctions enforced by regulators and the State Interest and Governance Authority to ensure that for the needed change we actually meet the targets,” he said.
He explained that even though Ghana is not doing badly on setting electricity tariffs in the West African sub-region, cost of electricity to industry is still high compared to its peers in the region.
Providing some solutions, Mr. Darko-Asante cautioned that Ghana’s economic growth can only be realised if industrial tariffs are made competitive to attract manufacturing companies to the country.
He is of the view that stakeholders should deliberate on whether to reverse the current situation wherein domestic electricity tariffs are rather lower compared to industrial tariffs, since power is needed more by the latter to drive economic growth.
Cash waterfall system
Dr. Darko Asante stated that in an effort to improve revenue collection on the part of ECG, the cash waterfall system was introduced to clear the debt owed power production companies.
He further explained that the cash waterfall system was introduced to automatically demarcate a portion of the revenue collected by ECG to pay-off the capacity charges of power plants to reduce debt in the sector.
“Normally, when the producers supply power to ECG, ECG is supposed to pay directly to the producers so that they (producers) will pay the fuel suppliers. But ECG was unable to pay the power producers because of losses and theft in the system.
“The good thing about this system is the certainty and predictability it brought to the industry in terms of providing liquidity on weekly basis to the power plants,” he said.
Dr. Darko-Asante expressed optimism about the system, saying he is hopeful the cash waterfall mechanism will gradually help in reducing the energy sector debt as cheaper gas is supplied to the power plants to generate electricity.