Despite the devastating effects of the coronavirus on world economies, including Ghana, the Akufo-Addo government has for some months now managed to supply power to a segment of Ghanaians for free.
In addition to his, Ghanaians have enjoyed stable electricity supply since 2017, as opposed to the dreaded ‘dumsor’ they endured from 2011 to 2016 during the National Democratic Congress regime.
Pundits believe the change in the tune from ‘dumsor’ to free electricity could not have been possible without the Finance Minister and Economic Planning-designate, Ken Ofori-Atta, being resourceful enough, since 2017 to 2021, to meet Ghana’s financial commitments to Independent Power Producers (IPPs).
Available records indicate that Ghanaians had to go through dumsor partly because of the NDC government’s inability to pay IPPs to keep the lights on.
Bad PPAs
The situation was so bad that, under persistent pressure in 2015, the then Deputy Power Minister, John Jinapor, admitted that money was partly to blame for the excruciating power challenges Ghanaians endured.
Experts in the energy sector believe the persistent unreliable power supply was compounded by the bad Power Purchase Agreements (PPAs) that saddled the nation with huge debts in the sector.
They further admit that this avoidable energy sector debt still poses a threat to the economy for adding up to the country’s debt stock.
Information available to the Daily Statesman indicates that, through the instrumentality of the Finance Minister-designate Ken Ofori-Atta, the government has been able to pay much of the huge debt inherited in the energy sector to ensure that Ghanaians never experience the dreaded dumsor that brought about painful socio economic crisis to all.
Debts paid
According to available records, the Finance Ministry has so far paid over GH₵12 billion as the cost of excess energy capacity charges inherited since 2017. The whopping amount was paid for electricity that Ghana did not use (excess capacity) but had to be paid due to the nature of power contracts signed during the NDC era.
Currently, of the 60 per cent of 2,300 megawatts (MW) of installed capacity of electricity contracted between 2011 and 2016 on a take-or-pay basis, only 40 per cent 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.
ESRP
To address this issue, the Akufo-Addo government has crafted 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 ESRP, the government is in the process of renegotiating with 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 the government’s attempts at renegotiating with IPPAs seem a herculean task, with the cordiality that has been created with the players, it is expected that a solution will be found.
Analysts, however, believe the country is not out of the woods yet. As at last year, the country had to also pay for annual excess gas capacity charges of between $550 million and $850 million every year due to contracts the previous government entered into with gas producers.
Specifically, the government paid $520m (GH¢2.7 billion) energy sector debt in 2018; $604m (GH¢3.14 billion) by end of June 2019; and a $1billion (GH¢5.2 billion) payment by end of 2019.
The costs to the government are expected to 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, which included Pay-or-Take between 2010 and 2016, electricity tariff was increased over an accumulated 268 per cent.
PURC
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 per cent in 2015 to attract competitive private investment.
The PURC justified it with the excuse that it 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 government reduced electricity prices of businesses by 30 per cent and for households by 17.5 per cent, an average of around 22 per cent.
Though electricity tariffs witnessed an increase of 11 per cent and 5.6 per cent in July 2018, evidence affirms that the NPP has cumulatively reduced tariffs by about 2 per cent.
Many have commended the NPP government for its policies and programmes and the reliefs brought to the ordinary citizen.
