The Electricity Company of Ghana is back in the news headlines again, but this time not because of uncovered malfeasance. Rather it is because government’s proposed strategy to rectify the ills bedeviling the national electricity retailer is generating intense opposition, primarily from organized labour which fears job losses, as well as some other interest groups which fear unbridled tariff hikes.
The proposed strategy is for ECG to hand over its billing and revenue collection activities to several concessionaires, each with a specific geographic area to cover. However those opposing change at ECG are having difficulty distinguishing between this form of private participation in ECG’s activities and outright privatization of the state owned power distributor.
But is the difference that greatly reduces the likelihood of either of those two worries from actually manifesting. Indeed, nether stakeholder segment however has nearly as much to worry about as they think.
However even before considering the depth of those worries, every stakeholder, from government itself, through organized labour, to users of electricity, need to acknowledge that the current framework for electricity distribution is not sustainable and indeed the circumstances it is generating worsens by the month; ECG keeps making losses and its debts continue to rise. It is instructive that both the International Monetary Fund and the World Bank regard Ghana’s energy sector debt as the biggest threat to the country’s fiscal stability, and the Finance Mister agrees.
This means a major increase in revenues, or a major reduction in expenditure – or preferably both – are needed.
A reduction in expenditure can be achieved by cutting out the malfeasance, such as the diversion of items meant for ECG’s operations such as aluminum cables, and more importantly, the procurement of unbudgeted item that are not needed; as well bad processes for clearing goods through the ports which leads to huge and unnecessary demurrage costs. ECG’s staff have work to do and their work would still need to done, whether by the company itself or by its concessionaires. It is retraining that is needed not redundancies.
An increase in revenues can be achieved by ensuring that all electricity sold is billed and those bills are promptly paid. This requires the higher commitment to commercial objectives that the concessionaires would bring and investment in pre-paid meters which they can bring but which ECG cannot afford.
All these would expectedly close the gap somewhat between expenditure and revenues which have led to ECG’s losses and accompanying indebtedness. But more needs to be done as well.
For one thing Ghana still has lots of leeway to replace relatively expensive and environmentally unfriendly heavy diesel with relatively cheaper and environmentally friendly gas, which the country still has plenty of but is still being flared – despite the state policy of zero flaring – because of lack of processing and distribution infrastructure. For another, GRIDCo still suffers significant power transmission losses. These issues have to be resolved to eliminate the inefficiencies that are responsible for Ghana’s power sector travails.
Neither this newspaper, nor all the other stakeholders in Ghana’s power sector know for sure whether the resolution of all these challenges would fully close ECG’s financial gap at current tariffs, whether it would enable an actual reduction in current tariffs or whether tariff increases would still be needed. We would only find out when all the holes are plugged.
What is clear though is that while the problems are being addresses, ECG’s debt cannot be allowed to continue rising, even if it means higher tariffs for now. And if after the leakages have been resolved there is still a financial gap, government should be ready to raise tariffs to bridge it.
No matter how much people would complain about the rising cost of power, they would admit that expensive power is better than no power at all.
