‘Prudent management of economy saves Ghana from sliding back into dum-so’

From the year 2017 to date, Ghanaians have, in most of the cases, enjoyed uninterrupted supply of electricity for both domestic and industrial use. This is contrary to what pertained in the country earlier, where Ghanaians slept in the dark for well over five years.

This, The Chronicle understands, has been made possible by the prompt payment of debts amounting to over GH¢12 billion for the past four years by the current government. These debts are mainly excess electricity power the country does not need, but has to pay for it because of the earlier contract signed with the power producers by the previous government.

A source at the Ministry of Finance told The Chronicle that but for the conscious efforts and prompt payments made by the immediate past Finance Minister and currently Minister-designate for the sector, Mr Ken Ofori-Atta, a different story would have been told in the energy sector.

Currently, of the 60% of 2,300 megawatts (mw) of installed capacity of electricity contracted between 2011 and 2016 on a take-or-pay basis, only 40% of it is actually consumed.

“Ghana has an installed capacity of about 5,000 megawatts and dependable capacity of about 4,700mw, with all time high peak demand of 2,700mw. This means since 2017, Ghana has had to look for money to pay about 600mw of excess capacity that was never used,” the source said.

To address this inimical issue, the government, through the Finance Ministry, came out with the Energy Sector Reform Programme (ESRP) to effectively deal with all key issues in the energy sector that is seen as a pillar to propel the economy Beyond Aid.

Under the ESRP, the government is in the process of renegotiating with the independent power producers (IPPs) to convert purchase agreements from Take-or-Pay to Take-and-Pay to put an end to the payment of excess capacity that keeps adding to Ghana’s debt stock.

Though, government attempts at renegotiating with the IPPs seem a herculean task with the cordiality that has been created between the players, certainly there’s light at the end of the tunnel for Ghana.

Interestingly, there’s a looming danger where, from 2020, the country would have to pay also for annual excess gas capacity charges of between $550 million and $850 million every year due to, again, contracts that the previous government entered into with gas producers too.

Specifically, government paid $520m (GH¢2.7 billion) energy sector debt in 2018; $604m (GH¢3.14 billion) by end June 2019, with a projected $1billion (GH¢5.2 billion) payment by end 2019.

The costs to government would increase over time to an accumulated total of over $12.5 billion by 2023 if business as usual in the energy sector continues.

Due to the expensive power purchase agreements that included Pay-or-Take between 2010 and 2016, electricity tariff was increased over an accumulated 268%.

In the midst of persistent unreliable power supply, rising inflation and interest rates, as well as fast depreciating cedi, the Public Utilities Regulatory Commission (PURC) still went ahead to increase electricity tariffs by 59.2% in 2015 to attract competitive private investment.

Once again, the basic excuse was assisting service providers to raise funds for maintenance works and avoid an immediate collapse of the distribution network.

The rises were also in fulfilment of Ghana’s three-year aid deal with the International Monetary Fund (IMF), which the government signed in April, 2015 to restore a fiscal balance and fix the power crisis.

Under President Nana Akufo-Addo in 2018, the New Patriotic Party (NPP) government reduced electricity prices of businesses by 30% and for households by 17.5%, an average of around 22%.

Though electricity tariffs witnessed an increase of 11% and 5.6% in July 2018, evidence affirms that the NPP government has cumulatively reduced tariffs by about 2%. To the critics, the strength is not in the talk but in action. In governance, it’s in the policies, programmes and the relief that these policies bring to the ordinary citizen that counts.

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