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Reflex Eco Group – Ghana news

by Samuel Boadi (Local journalist)

Ghana needs to invest over $4 billion in the next 10 years to make up for the past investment deficit and upgrade its power sector infrastructure.

According to the World Bank, which quoted the amount, the country’s power generation, transmission and distribution needed substantial upgrading from new investments in a synchronized manner.

The Bretton Woods institution noted that though Ghana has some independent power producers (IPPs), its system for attracting new ones was not working well.

In line with this, it noted that the country may not have adequate supplies of gas for power generation until 2015 or possibly in 2018.

Indicating that Ghana’s governance and regulatory structures did not attract IPPs, it said potential IPPs lacked a credible buyer because ECG, the usual off-taker, was in poor financial state while there were legitimate concerns about its ability to pay power producers.

“What a potential IPP developer has to go through in practice is often significantly different from the official framework which creates uncertainty for the private investor. Finally, the IPP development process is cumbersome and time consuming because Ghana does not have a single window system for IPPs.”

In Ghana, tariff policies that provide subsidies to consumers have harmed the financial health of ECG and Northern Electricity Distribution Company (NEDCo).

Because of low residential tariffs, the bulk of ECG revenues come from non-residential consumers, who account for 56 percent of sales revenue, even though they account for only 2 percent of ECG’s unit sales. The implicit cross-subsidy imposes a significant burden on commercial consumers.

Furthermore, it said since PURC has failed to increase retail tariffs, ECG is expected to incur losses to the tune of $60 million this year. ECG’s losses are worsened by high technical losses, poor revenue collection from Government entities, as well as private consumers rising dollar-denominated payment obligations.

“ECG’s distribution losses are very high; they were 27 percent in the second quarter of 2012. ECG has to pay for ‘lost’ energy it buys from VRA but does not earn any revenue on it.

“Reducing these losses by 10 percent would save ECG $85 million per year.

ECG, it also advised, should collect its past dues from government, as well as private customers in order to offer improved services.