The Africa Centre for Energy Policy (ACEP) wants answers to the Electricity Company’s (ECG) GH₵540million discretionary spending despite tight liquidity concerns within the power sector.
ACEP, in statement, said the power distribution company discretionally spent GH₵540million out of the GH₵1.1billion it retrieved from consumers in March and April this year under the ongoing debt recovering exercise, without justification and in the face of tight liquidity concerns within the power value chain.
Challenges in the sector are well-documented, with government struggling to settle a debt of GH₵1.9billion to Independent Power Producers (IPPs) by June end – due to the ECG’s inability to effectively collect revenues from the power it sells to consumers.
“There has been no discernible improvement in liquidity, at least through the Cash Waterfall Mechanism (CMW) – the established mechanism for tracking collections and payments along the power sector value chain.
“ACEP’s analysis of the CWM data indicates that ‘substantial portions of ECG’s collections were not directed toward paying off the value chain or making any substantial impact on the continually escalating debt owed to the Independent Power Producers (IPPs) and the rest of stakeholders’,” the energy think-tank statement read.
It will be recalled that the ECG, a state-owned firm, embarked on a debt-recovery campaign to collect a projected GH₵5.7billion owed by power consumers; but only managed to get some GH₵3.1billion.
The civil society organisation asserts that per the CWM all revenues should be appropriately accounted for, and distributions should be carried out based on approved proportions determined by the CWM committee.
But reports from the CWM indicate that ECG’s earnings for the two months – being the GH₵1.1billion – represents approximately 35 percent of the GH₵3.1billion claimed to have been recovered by ECG.
According to ACEP, out of this amount more than 50 percent of the reported revenue is supposedly captured as being used for discretionary spending by ECG. The balance from the GH₵1.1billion accounted for only represents about 11 percent of revenue requirement for the sector under the CWM for March and April 2023.
ACEP, in its latest report on the power sector, says the ECG indicated that it used GH₵540million to procure liquid fuel for some power plants during shortfalls in gas supply while refusing to pay the gas suppliers through Ghana National Petroleum Corporation (GNPC).
But per the CWM formula, ECG was entitled to 26.37 percent of the revenue, which should have amounted to about GH₵113.5million of the reported revenue of about GH₵430million for March and April.
ECG, however, disbursed to itself approximately GH₵256million (about 59 percent of the CWM revenue), deviating significantly from the prescribed allocation formula. The GH₵256million ECG acquired is about 78.4 percent of its billed invoices for March and April.
Conversely, ECG paid between 3.1 percent and 12.4 percent of the invoices billed by other entities within the value chain.
ACEP asserted in its report that beyond the 78.4 percent disbursement, ECG’s claim of improved revenue collection suggests that far more revenues collected are not reported under the CWM.
“The non-payment to gas sector companies compelled the West Africa Pipeline Company Limited (WAPCO) to reduce Reverse Flow gas volumes from the West to the East to the contracted volume of 60mmscfd. On July 1, 2023, WAPCO curtailed the reverse flow of gas for hours because of the outstanding payments.
“Out of the prior agreed scheduled payment of US$15.236million due for June 2023, GNPC could pay only US$1.246million – attracting the activation of contractual clauses to cut supply. Subsequently, gas supply has been restored on condition that government pays half the outstanding balance of US$20million by July 7, 2023,” ACEP said.
Meanwhile, gas supply payments from Sankofa Gye Nyame (SGN) field are also in arrears of nearly US$600 million – about US$380million for LC drawdowns and additional invoices of about US$207million.
Furthermore, it is understood that government has already paid more than US$1billion for gas consumed by the power sector since 2018, though captured in the tariff.
ACEP therefore concluded that for the ECG to ignore all the realities and pay for liquid fuel while undermining gas supply, shows the company does not care about the fiscal damage it causes to the public purse.
