Addressing Power Sector Crisis: ACEP’s five recommendataions to Gov’t
According to a recent report by the African Centre for Energy Policy (ACEP), Ghana’s power sector is mired in a deepening crisis, characterized by significant delays in implementing efficient and effective policies. Regrettably, the situation shows no signs of improvement.
ACEP highlights how disastrous policy decisions and inefficiencies throughout the value chain have led to escalating payments by the central government to cover under-recoveries. Central to this problem is the Electricity Company of Ghana (ECG), whose poor choices contribute significantly to the sector’s woes.
The report titled “Switching Gears: Protecting Ghana’s Economic Sustainability In the Face of Power Sector Risks” sheds light on the distressing state of affairs, with ECG’s recent payment to cover only about 11% of the revenue requirement, despite a substantial increase of nearly 100% over the past nine months. This alarming level of under-recoveries, it says undermines recent revenue adjustments and reveals the pressing need to prevent further deterioration in the power sector.
Beyond the immediate concerns, the report underscores the broader implications for Ghana’s oil and gas sector. Investors in this industry already harbor apprehensions about payment issues related to gas production and future exploration. Mismanagement of the power sector could have far-reaching consequences, impacting the national budget and the overall economy.
Addressing the crisis necessitates a paradigm shift towards enhanced transparency and accountability throughout the power sector’s value chain. The ACEP calls for a patriotic commitment to prioritize systemic planning and policy implementation over narrow interests. Without such fundamental changes, no intervention or solution can effectively tackle the prevailing challenges.
ACEP in the report emphasizes the imperativeness of the government to take publicly trackable actions and engage citizens in honest and crucial discussions on sustaining the power sector. The Think Tank in he report highlights several urgent recommendations that warrant thorough exploration:
- ECG’s Revenue Accountability: ECG must provide a transparent account of its revenues, including the GHS 3.1 billion recovered from debts. Such accountability is essential for measuring the effectiveness of tariff adjustments in ensuring the power sector’s financial sustainability.
- Enhanced Reporting and Performance Accountability: ECG’s performance reporting must transcend mere Public Relations (PR) campaigns and focus on regular and transparent reporting. Comprehensive data on collections and expenditures should inform decision-making and targeted interventions. Reformation of the currently opaque Cost of Power (CWM) framework is crucial, as payments and retentions outside the CWM are deemed unacceptable.
- Urgent Meter Procurement: The prolonged lack of meters must be addressed promptly. ECG should take immediate action to ensure meters are readily available, including allowing customers to make upfront payments that can be recovered through billing. Transparent procurement processes involving the Public Utilities Regulatory Commission (PURC) are necessary to protect consumers.
- Long-term Private Investment in ECG: Considering the recurring challenges influenced by political factors, the report suggests reevaluating the role of the private sector. However, caution must be exercised to avoid repeating the flawed model of the previous Power Distribution Services (PDS) concession. ACEP recommends breaking down financing requirements into manageable portions for local investors, fostering a robust management structure that could ultimately lead to ECG’s listing on the Ghana Stock Exchange.
- Procurement of Efficient Power Plants: Regulators must establish policy benchmarks for the efficiency of new power generation additions. The existence of efficient power plants in Ghana serves as evidence that installing the most efficient technology is feasible. Continuing to rely on inefficient power plants signifies poor oversight by regulatory institutions, posing risks to grid stability, environmental impact, and long-term costs for consumers.
Addressing Ghana’s power sector crisis necessitates a collective effort involving government agencies, stakeholders, and the public. The severity of the situation demands swift and decisive action to revitalize the power sector, ensuring its stability, reliability, and long-term sustainability for the benefit of all Ghanaians.
