Power Producers Avoid ECG

Independent power producers (IPPs) are hesitant on investing in the generation of power in the country due to the inability of the Electricity Company of Ghana (ECG), which is in charge of the distribution of power, to fully account for power sold to it by these independent producers.

"The major problem with the IPPs not coming on board is that we do not have a credible off-taker. A credible off-taker basically is a distribution company that will take the power from the IPP, sell it and bring back the money. In our case, ECG sells and brings half of the money and the rest are complaints, “The Chief Director of Ministry of Energy and Petroleum (MoEP), Prof. Thomas Akabsaa, said at a forum on the 2015 Budget in Accra.

Presently, over 2,000 IPPs, comprising 2,000 companies with expertise in solar energy and 50 interested in thermal, have registered with the ministry to produce power which they will sell to ECG in return for their money.

However, Prof. Akabsaa said just a handful of those companies were actively generating power under off-take agreements with the nation's power distributor. The rest, he said, were now asking for the government guarantees against ECG's frequent payment defaults.

"Under the circumstance, what these companies do is to demand that government should provide guarantees so that if ECG is not able to pay, it will become the government’s debt," Prof. Akabsaa said.

Should the government agree to be the guarantor in such off-take agreements, it will motivate the IPPs to invest in power generation and that will shore up the country's generation capacity, which is presently below demand.

It will also mean that the government will be paying for virtually half of the cost of the generation. That is because ECG has over the years not been efficient in the collection of revenues from which it will use to pay off producers.

The four-day forum on the budget was organised by the Institute of Financial Journalists (IFEJ) in collaboration with the Ministry of Finance to help educate the general public on key policy proposals and initiatives in the budget statement.

Finding solutions

ECG, which distributes power to six regions nationwide, currently has a load-loss of 25 per cent compared to the global standard of 17 per cent. Additionally, a bulk of the power it retails is stolen and/or not paid for, with majority of its biggest debtors being metropolitan, municipal, district assemblies (MMDAs) and state institutions.

These add to lack of investment in appropriate infrastructure and have all together made it difficult for the company to operate efficiently and appeal to IPPs eager to participate in the country's power sector.

The Chief Director of the Energy Ministry gave the assurance that the situation would soon improve as government was finding solutions to them.

"These are some of the issues that policy is now trying to cure," he said, and added that proceeds of the Compact II of the Millennium Challenge Account (MCA), which the country signed for in September, would be used to address some of the challenges in the power sector.

He said the ministry was currently discussing whether or not to outsource specific responsibilities of ECG to private companies in line with plans to reduce the company's burden, inject private sector efficiency into its operations, and in the process reduce the bottlenecks associated with power distribution in the country.

Source: Graphic Business