The Public Utilities Regulatory Commission (PURC) has warned that the Electricity Company of Ghana (ECG) is facing severe financial challenges that could push it towards bankruptcy. In a letter addressed to the Presidency, the Energy and Finance Ministers, and other key stakeholders, PURC’s Executive Secretary, Dr. Ismael Ackah, highlighted that the crisis is also affecting the operations of the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), and the Bui Power Authority.
Dr. Ackah noted that ECG is struggling with delayed salary payments and difficulties covering administrative costs, stressing the urgent need for action. Despite initiatives to improve revenue collection through digital and metering programs, as well as tariff hikes of over 75% since September 2022, ECG’s financial troubles continue.
ECG’s Financial Struggles
PURC’s letter revealed that in June and July 2024, ECG reported revenues of GHS 884.2 million and GHS 857 million, respectively. These amounts were insufficient to meet the monthly $47 million Tier A payment, including WAPCo’s bill under the Cash Waterfall Mechanism. The situation worsened in August, with revenues falling below GHS 800 million, covering just 42% of the required amount to pay sector players. A report from PURC also indicated a GHS 860 million shortfall in payments to Independent Power Producers (IPPs).
This revenue gap has severely impacted Tier B companies, including Ghana Gas, VRA, GRIDCo, ECG, Bui, and regulators, making it difficult to meet staff and administrative costs. Dr. Ackah emphasized that solving ECG’s financial crisis requires more than tariff adjustments—it demands structural reforms.
Successful Interventions from Other Countries
PURC’s letter outlined how other countries have tackled similar challenges, offering potential solutions for ECG:
- Kenya Power and Lighting Company: Listed about 50% of its equity on the stock exchange, raising funds for critical investments.
- Tanzania Electric Supply Company Limited (TANESCO): The Tanzanian government converted a significant on-lend loan into equity, leading to consistent profits and reduced losses.
- Uganda’s Umeme Concession: Involved the private sector in metering, billing, and collection, achieving a 98.7% collection rate.
Recommendations for Reform
PURC suggested that ECG could benefit from similar innovative measures, but any interventions must include strict performance indicators, such as:
- Significant reductions in technical and commercial losses;
- Improved fiscal discipline and a focus on core activities;
- A review of power purchase agreements and exchange rate policies to ease the burden on consumers;
- Independent audits to assess ECG’s true financial and technical status.
Structural Reforms and Privatization
The letter also recommended a comprehensive review of ECG’s financial challenges, involving the Ministry of Energy, Ministry of Finance, the State Interests and Governance Authority (SIGA), and other key stakeholders. The aim would be to identify root causes and transform ECG to safeguard the energy sector.
Furthermore, PURC called for greater transparency from ECG regarding revenue collection, major contracts, and its commitments under the Cash Waterfall Mechanism. The Commission stressed that privatization should be considered a viable option to ensure ECG’s long-term financial sustainability and to stabilize Ghana’s energy sector.