Government to Begin Consultation With IPPs

The government is to begin a three-month consultation process with Independent Power Producers (IPPs), gas producers (GPs) and other players in the energy sector over 'take or pay' contracts and excess power supply.

The initial consultation, serve as a forum for these stakeholders to contribute to government's energy strategy, was agreed on at a meeting between the Ministry of Finance, Ministry of Energy, IPPs and GPS in Accra.

A message contained in a statement signed by Patrick Nomo, Chief Director of the Ministry of Finance and issued in Accra, yesterday said more details about the consultation process would be given in the coming days.

The Minister of Finance Ken Ofori-Atta presenting the 2019 mid-year budget review announced that the government would effective August 1, 2019, only pay for energy and gas that it actually consumed.

According to him, there was the need to reserve the 'take or pay' power deals that the previous government signed with IPPs because it had resulted into huge financial cost to the state.

"All take-or-pay contracts will be renegotiated to convert to take-and-pay for both Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs)," he told the House.

For this to become effective, the Finance Minister said with parliamentary ratification where appropriate, the government would suspend indefinitely or terminate all PPAs currently under negotiation and immediately place a complete moratorium on signing new PPAs and Put-Call Option Agreements.

The Minister of Energy, Mr John Peter Amewu has also said that the government loses close to US$30 million annually due to excess electricity capacity in the country.

He said that the amount which was being borne by consumers was expected to rise to US$403 million in 2020 and US$493 million by 2021 if nothing was done to curb the situation.

According to the statement, the meeting addressed the government's approach to reforming the current take or pay structure and excess supply that undermine the energy sector and pose serious financial risks to the economy.

"As part of its long term strategy, reflecting financial, environmental and industrial considerations, Ghana will also continue to look to develop its gas sector.

It noted that the country was leading the way in energy supply and electricity coverage on the continent and that it was in the interest of its citizens, businesses and investors for the economy to continue to flourish.

"Therefore, government intends to deliver a sustainable, fair and balanced energy sector for all stakeholders - domestic and international," the statement said.

It said the government's agenda to wean the country off aid required secured, reliable and affordable electricity supply and sustainable generating capacity for residents and businesses and create a conducive environment for investors

"As a result, government continues to promote policies to deliver a regime of competitive tariffs, growth of strategic industries, and universal access to power," it said.

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