- Ghana’s Power Crisis Is Not Just an ECG Problem — PUWU Challenges IMF, World Bank on IPP Pricing
Ghana’s attempt to repair its financially strained electricity sector risks focusing too narrowly on the Electricity Company of Ghana while leaving more expensive structural problems upstream, according to the Public Utilities Workers Union.
PUWU Deputy General Secretary Enoch Paul Hayes has challenged the International Monetary Fund and World Bank to pay greater attention to the cost of power procured from Independent Power Producers. “For example, the generation: we have IPPs and their pricing. Why is that not a concern?” he asked.
The argument goes to the heart of the economics of Ghana’s electricity market. ECG can improve collections, reduce commercial and technical losses and strengthen its balance sheet, but those reforms cannot by themselves alter the cost of electricity purchased under existing generation contracts.
If power-purchase agreements contain expensive capacity charges, foreign-exchange exposure or take-or-pay commitments, distribution-level efficiency can only partly offset the burden.
Ghana’s IPP programme emerged from a genuine need to add generation capacity more quickly than public investment alone could deliver. The difficulty is that contracts negotiated during periods of acute power shortages can become less economical when demand, fuel costs, exchange rates and fiscal conditions subsequently change. The result can be a system in which the state remains financially exposed to generation capacity that is not always fully utilised.
That makes energy-sector reform considerably more complex than restructuring ECG. A credible review would need to assess the effective cost of major power-purchase agreements, including capacity payments, take-or-pay clauses, foreign-currency obligations, fuel arrangements and the utilisation of contracted generation.
The key question, the source argues, is not whether private producers are inherently desirable or undesirable, but whether their contracts deliver electricity at a cost compatible with Ghana’s fiscal and economic circumstances.
International creditors have placed significant emphasis on the financial burden created by the electricity sector, but the debate can become concentrated on ECG because it is where consumers, billing, collections and losses are most visible.
The IMF has estimated a substantial financing gap across the energy value chain, yet reducing distribution losses does not automatically remove generation liabilities. A more efficient ECG could still see much of its improved cash collection absorbed by expensive upstream obligations.
Hayes has also questioned what he sees as inconsistent assessments of ECG’s performance. “The World Bank were the same people who said that currently, the ECG, our revenue is coming up, we are doing well. So what has changed?” he said.
His question underscores the need for a transparent set of indicators that distinguishes revenue collection, system losses, government transfers, generation costs, accumulated debt and wider fiscal exposure.
The issue is becoming more significant as Ghana considers greater private-sector participation in ECG’s operations. A concession or other private arrangement could potentially improve management, technology, billing and revenue assurance, but it would not automatically renegotiate costly generation contracts.
Ghana could therefore end up with a more commercially disciplined distributor sitting on top of an electricity supply chain whose upstream economics remain unchanged.
PUWU is consequently urging policymakers to look beyond prescriptions associated with external creditors and examine domestic options more critically. Hayes pointed to other African reform experiences and warned against assuming that externally designed solutions are automatically superior. “We can do something. We don’t always need to rely on the IMF. I want to state it clearly. We have evidence,” he said.
The underlying issue is one of policy ownership rather than a simple rejection of international support. The IMF and World Bank can provide financing, analytical capacity and technical expertise, but Ghana ultimately has to decide which reforms are commercially, politically and socially sustainable.
That distinction matters because energy policy directly affects households, industry, inflation, public finances and the attractiveness of the economy to investors.
The power-sector problem also has a significant fiscal dimension. Every cedi required to cover electricity-sector shortfalls competes with spending on other public priorities, while persistent liabilities can undermine fiscal consolidation even if expenditure elsewhere is controlled.
That makes IPP pricing and long-term power contracts potential contingent liabilities rather than merely technical energy-sector concerns.
A comprehensive review of power-purchase agreements could therefore examine opportunities for renegotiation, refinancing, restructuring or better utilisation of contracted capacity. Any such process would have to be transparent and commercially credible enough to reassure investors that Ghana is not pursuing arbitrary contract cancellation.
The balance is delicate because aggressive renegotiation could raise the risk premium on future infrastructure investment, while inaction could leave taxpayers locked into expensive obligations for years.
Hayes has also invoked the turnaround of Tema Oil Refinery as evidence that Ghanaian institutions can sometimes deliver when given greater responsibility. “Just like we stood as Ghanaians and turned around TOR, and we are praising ourselves today for the performance of TOR. We are seeing it today,” he said.
His broader point is that structural reform should not begin from the assumption that every difficult problem requires an externally designed solution.
The stronger lesson, however, is that Ghana’s electricity value chain needs to be assessed as a whole. ECG requires stronger governance and financial discipline, generation contracts need scrutiny, transmission infrastructure needs investment, tariff-setting must remain economically credible and government arrears have to be controlled. Consumers, meanwhile, ultimately need reliable electricity at a price that both households and businesses can afford.
Hayes was particularly critical of treating IMF support as a substitute for domestic policy responsibility. “The IMF is not Father Christmas. They are not coming to say that they are giving us something for free.
Whatever they put in, they know what they want to get from it,” he said. His argument reinforces the point that neither the IMF, World Bank nor ECG alone can determine the long-term sustainability of Ghana’s electricity system.
The danger is that Ghana could spend years reforming the most visible end of the electricity system while leaving its costliest obligations untouched upstream. The real test will therefore not simply be whether ECG becomes leaner or more commercially efficient, but whether the entire electricity value chain can become financially sustainable.
As the source concludes, that sustainability has to run “from the power plant to the meter, and ultimately to the public purse.”
