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PURC warns of ECG’s potential bankruptcy in a letter to Presidency and Energy Minister

The Public Utilities Regulatory Commission (PURC) has warned that the Electricity Company of Ghana (ECG) is facing severe financial distress and is at risk of bankruptcy.

In a letter addressed to the Presidency, the Ministers of Energy and Finance, and other key stakeholders, PURC’s Executive Secretary, Dr. Ismael Ackah, outlined the financial crisis affecting not only ECG but also the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), and the Bui Power Authority.

Dr. Ackah highlighted the impact of these financial challenges, including delays in salary payments and administrative expenses, stressing the need for urgent intervention. Despite initiatives like digital metering programs and over 75% tariff hikes since September 2022, ECG’s financial struggles persist.

ECG’s Financial Crisis

PURC’s letter revealed that ECG’s revenues for June and July 2024, GHS 884.2 million and GHS 857 million respectively, were insufficient to meet the $47 million monthly bill under the Cash Waterfall Mechanism. In August 2024, ECG’s revenue dropped below GHS 800 million, only covering 42% of what was required to pay sector players. Additionally, there was a GHS 860 million shortfall in payments to independent power producers, which has affected Tier B companies like Ghana Gas, VRA, GRIDCo, and Bui, leading to struggles in meeting operational and salary costs.

Comparative Solutions from the Sub-Region

PURC’s letter also pointed to solutions adopted by other countries with similar issues, such as:

  • Kenya Power and Lighting Company: Listed 50% of its equity on the stock exchange to raise non-tariff funding for investments.
  • Tanzania Electric Supply Company (TANESCO): Converted government loans into equity, leading to consistent profits and reduced losses.
  • Uganda’s Umeme Concession: Partnered with the private sector in metering and billing, achieving a 98.7% collection rate.

Recommendations for Reform

PURC recommends that ECG adopt similar reforms, emphasizing:

  • Reducing technical and commercial losses;
  • Strengthening fiscal discipline and focusing on core activities;
  • Reassessing power purchase agreements;
  • Conducting independent audits of ECG’s technical and financial state.

PURC also urged a comprehensive review of ECG’s operations in collaboration with key government bodies to address the root causes of its financial troubles. The Commission stressed the importance of transparency in revenue collection, major contracts, and ECG’s financial commitments, while suggesting that privatization could be a viable solution for the company’s long-term sustainability and for stabilizing Ghana’s energy sector.

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