Challenges in power sector attributable to distribution — MiDA

The Millennium Development Authority (MiDA), has attributed the challenges in the power supply value chain in the country, to poor distribution.

The authority said the power distributing companies which consist of the Electricity Company of Ghana (ECG), the Northern Electricity Department Company (NEDCO), and Enclave Power were the weakest link among the power supply chain.

A director at MiDA, Mr Mawuli Rockson, said at a seminar in Accra, that unless the distribution companies operated on sound commercial principles, the sector’s investments could not be sustained.

He said “the availability of reasonably priced quality power was a pre-requisite for national development but if the country does nothing  about the present situation, with power, we would get the same unacceptable results we always”.

According to him, the best remedy was to attack the root causes of the challenges we have with power and noted that the Compact II of the Millennium Challenge Account will help address the root causes of the energy challenges in the country.

He added that the country had been presented with a credible solution under the Compact II programme to find lasting solutions to the  challenges in the power distribution sector, saying “let’s all work together to make it a reality”.

Compact II

He said presently an amount of between US$8 billion – US$12 billion was required for a new power generation plant in the next 10 years, but the government alone could not meet the funding requirement. 

Per the Compact II of the Millennium Challenge Account signed between the Government of Ghana and the United States government in August 2014, the ECG is set to be released on conssession for about 25 years.

Among other things, the move seeks to ensure reliable power supply for domestic and industrial use, improved transparency and independence in the setting up  of regulated tariffs by the Public Utility Regulation Commission (PURC), and improve ECG’s credit worthiness to enable it acquire additional generation capacity from the Independent Power Producers (IPPs) without, or with limited, recourse to the government guarantees.

Disagreement 

ECG’s challenges of poor and inefficient service, coupled with an inability to collect huge debts owed it have fuelled calls for the introduction of private  participation in the company.

IMANI Centre for Policy and Education, has called for the  privatisation of at least 80 per cent of the power distribution company.

The think tank believes that privatisation would bring about competition in the sector which will in turn bring efficient service.

However, many people including workers of the ECG and its external unions, have kicked against the move and in some instances threatened to frsutrate the process.

Response

Clarifying the issue about private participation in ECG, he said by releasing the company on concession only meant that the government was transferring its operational control of the distribution business in ECG to a private sector operator. 

“Ownership rights continue to reside with the public authorities to save operation and development rights. However the concessionaire operates and manage the assets on behalf of the government and gets paid through tariffs allowed by the regulator,” he said.  

He said due to challenges in the power sector, the government commissioned a private global research firm SYNEX from Chile to conduct a study on Ghana’s power sector.

Key among the findings were that, distribution was the weakest link among the power supply value chain in the country, hence a technical and financial sound distribution subsector was very important to the viability of the power sector.

The director said PSP in the sole power distributor was essential to solving the power problem in the country once and for all.

He indicated that an acceptable PSP provider has the added advantage of relatively easy access to investment capital thus helping to solve the investment problem.

“With sound technical and financial capability, the PSP should implement modern utility management and operational systems,” he said. — GB