ECG debt to IPPs hits US$900m

The Electricity Company of Ghana (ECG) owes Independent Power Producers (IPPs) some US$900million for power bought.

The Electricity Company of Ghana (ECG) owes Independent Power Producers (IPPs) some US$900million for power bought.

The arrears, accumulated between 2021 and this year according to the Chamber of Independent Power Producers, Distributors and Bulk Consumers (CIPDiB), are causing IPPs to record huge forex and interest losses.

“The problem is that looking at the free-fall of the cedi and the time of our reconversion to pay our suppliers, lenders, we end up making a lot of forex losses,” the Chamber’s Chief Executive Officer, Elikplim Kwabla Apetorgbor, told the B&FT in Accra.

Mr. Apetorgbor, who spoke on the sidelines of a multi-stakeholder tariff review organised by the Public Utilities Regulatory Commission (PURC), blamed the debt on ECG’s inability to effectively collect revenue from the electricity it sells to consumers.

He said the debt had dropped considerably to about US$400million at a certain point last year, but has suddenly jumped to US$900million.

He also warned that if not addressed urgently, the arrears could pile up to unsustainable levels.

The state-owned power utility buys electricity from producers and distributes to consumers in southern parts of the country.

However, due to weak revenue collection, its annual losses – technical and system – is about 30 percent of its revenue, far above the regulator’s allowable loss margin of 23 percent.

As a result, the company loses around GH¢3.2billion yearly, according to Minister of Energy, Dr. Matthew Opoku Prempeh.

The minister had warned in 2021 that if not addressed ECG’s inability to effectively collect revenue from electricity sale could propel energy sector-related debt to over US$12billion by 2023.

On whether the cash waterfall system, which distributes revenues proportionately to sector players, has been effective, Mr. Apertogbor said: “It ensures transparency in the disbursement of funds, unlike in the old days when you had to chase ECG for your money. The only thing is that ECG must do more to collect revenue so that we can get paid satisfactorily”.

Meanwhile, ECG – which is demanding a new tariff increment of 148 percent, said it declared GH¢625million as bad and doubtful debts between 2019 to 2021.

The figures, contained in ECG’s 2022-2026 tariff proposals submitted to the PURC, said in 2019 ECG made provision for GH¢59million as bad and doubtful debt.

The amount shot up to GH¢277million and GH¢290million in 2020 and 2021 respectively.

“This is based on the company’s policy on provision for bad and doubtful debts.

The majority of these bad debts emanate from demolished structures due to road constructions, relocation of slums, removal of temporary structures, illegal transfer and removal of meters by unscrupulous customers [mostly SHEP areas],” it said.

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