ASEC hails energy sector debt clearance, warns reforms must follow

The Africa Sustainable Energy Centre (ASEC) has commended the government for clearing a substantial portion of legacy energy sector debts, describing the move as a major step toward restoring confidence in the country’s power industry.

In a statement reacting to government’s announcement that it had paid US$1.47 billion within its first year to clear energy sector arrears, ASEC said the action had reduced systemic risk and strengthened confidence among investors, development partners and industry players.

The government said the payments covered outstanding obligations to gas suppliers, Independent Power Producers (IPPs) and other sector players, and also enabled the restoration of the World Bank Partial Risk Guarantee, which is critical for supporting power sector financing.

According to ASEC, the debt overhang had become a serious threat to power supply reliability, public finances and industrial growth, making the recent intervention both timely and necessary. The think-tank noted that it had previously called for urgent action to prevent the crisis from deepening.

However, ASEC cautioned that clearing arrears alone would not guarantee long-term stability unless the structural causes of debt accumulation are addressed, particularly the chronic revenue and commercial losses at the Electricity Company of Ghana (ECG).

“ECG’s high commercial losses remain one of the most significant contributors to recurring financial distress in the power sector and must be addressed as a matter of urgency,” the statement signed by its Executive Director, Justice Ohene-Akoto said.

ASEC welcomed government’s indication that it would fast-track key reforms, including a focus on ECG’s commercial and industrial customers in the first quarter of 2026.

It argued that this customer segment accounts for a large share of electricity consumption and revenue potential, and that improving revenue assurance in this area is critical to strengthening cash flows across the energy value chain.

The Centre also called for major investment in smart metering and advanced revenue management systems. It said large-scale deployment of smart meters would improve billing accuracy, reduce electricity theft, enhance load monitoring and significantly cut commercial losses.

“These measures are essential to boosting revenue mobilisation and ensuring timely payments to generators and gas suppliers without repeated government bailouts,” ASEC noted.

Beyond ECG, ASEC urged broader reforms across the sector, including the introduction of cost-reflective tariffs, better power procurement planning, stronger regulatory enforcement, improved corporate governance and transparent operation of the Cash Waterfall Mechanism.

While praising the clearance of arrears as a major milestone, ASEC stressed that only deep and institutionalised reforms—especially at ECG—would permanently break the cycle of debt accumulation in the energy sector.

The Centre said it remained committed to working with government, regulators, utilities and industry stakeholders through policy advocacy, research and stakeholder engagement to build a financially sustainable, efficient and resilient energy sector capable of supporting industrial growth and national development.

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