PURC Warns of Imminent Bankruptcy at Electricity Company of Ghana
The Public Utilities Regulatory Commission (PURC) has issued a stark warning, stating that the Electricity Company of Ghana (ECG) is teetering on the edge of bankruptcy, raising concerns about the financial health of the entire energy sector.
In a letter addressed to the Presidency and key ministries, PURC’s Executive Secretary, Dr. Ismael Ackah, underscored that financial strains at ECG are also impacting the operations of other major energy bodies, including the Volta River Authority (VRA), the Ghana Grid Company (GRIDCo), and the Bui Power Authority.
Severe Financial Stress
Despite efforts to improve revenue collection through digitalisation and metering initiatives, ECG continues to face severe liquidity challenges. The company’s cash flow has been insufficient to meet its obligations under the Cash Waterfall Mechanism (CWM), a critical structure for payments to power producers.
In June and July 2024, ECG reported revenues of GHS 884.2 million and GHS 857 million, respectively—insufficient to cover its monthly $47 million payment under the CWM. The situation worsened in August, with revenue falling below GHS 800 million, representing just 42% of what is required to pay energy sector players.
PURC’s report highlighted an alarming GHS 860 million shortfall in payments to independent power producers, leaving Tier B entities—including VRA, GRIDCo, and Ghana Gas—struggling to meet their operational costs. The liquidity crisis has resulted in delays in salary payments and has exacerbated the company’s administrative difficulties.
Lessons from the Sub-Region
In its communication, PURC pointed to successful examples from neighbouring countries as potential models for reform. Kenya’s Power and Lighting Company, for instance, listed 50% of its equity on the stock exchange, raising non-tariff funds for critical investments.
Tanzania’s state utility, TANESCO, benefited from the government converting a substantial loan into equity, enabling the company to return to profitability and reduce losses. Meanwhile, Uganda’s Umeme has involved private sector actors in metering and billing, achieving a collection rate of nearly 99%.
A Call for Structural Reforms
Drawing from these examples, PURC recommends a suite of structural reforms for ECG. These include aggressive reductions in technical and commercial losses, tighter fiscal discipline, and a reassessment of power purchase agreements to reduce pressure on tariffs. Furthermore, PURC calls for independent audits to ascertain the true financial and technical condition of the utility.
Perhaps most controversially, PURC suggests that privatisation should be seriously considered as a long-term solution to ECG’s chronic inefficiencies. Any structural reforms, however, should be accompanied by rigorous performance metrics and transparency in ECG’s financial dealings.
The regulator’s letter stresses that while tariff increases have been necessary, they are insufficient to remedy ECG’s deeper financial troubles, which require comprehensive sectoral reforms and an overhaul of the company’s management structure.
