If nothing is drastically done to salvage the huge monthly revenue losses of the Electricity Company of Ghana (ECG), the country’s legacy debt to the Independent Power Producers is likely to spiral out of control, this is according to the Africa Center for Energy Policy (ACEP).
The situation, the energy policy think tank believes also threatens the energy security of the country.
ACEP says out of the total power distributed by ECG every month, they are only able to recoup 43% of the expected revenue. This implies that 57% of the expected monthly revenue is not recouped due to a myriad of factors including inefficiencies.
This 57% of monthly uncollected revenues, ACEP says translates into an estimated revenue shortfall of $67 million worsening the financial woes of ECG.
The Policy Lead for Petroleum and Conventional Energy at ACEP, Kodzo Yaotse explains that not only will the situation, if not drastic checked, will impact the sustainability of ECG but will also worsen the mounting legacy debts to the Independent Power Producers (IPPs).
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“ECG is making 43 percent [revenue] collection rate. That means there is some 57 percent that is not collected that must be paid and that translates into some $67 million every month, which if not paid, would only go up to add to what is already owed to the IPPs in terms of legacy debt,” Kodzo Yaotse explained at a media capacity-enhancement workshop in Kumasi last week.
He, therefore, emphasised that “we have to find a way to be able to ensure that there is optimal revenue collection.”
Sector watchers believe the huge revenue shortfall is not only an operational issue but a looming national crisis. This is because these IPPs generate a significant portion of the country’s power.
Per the Cash Waterfall Mechanism operated by ECG, the power distribution company is obligated to make monthly payments to these IPPs for the power generated as well as the existing legacy debts.
However, given the inefficiencies in the revenue collection of ECG leading to very low collection rate, the country is at risk of compounding ECG’s legacy debts, straining relationships with IPPs and risking potential disruptions in electricity supply. Ghana currently owes the IPPs an estimated amount of $1.2 billion in legacy debt which is expected to be defrayed by the Cash Waterfall Mechanism.
