The African Centre for Energy Policy (ACEP) has raised red flags about the Electricity Company of Ghana’s (ECG) mounting losses, which hit GH¢9.7 billion in 2023 from GH¢295 million between 2017 and 2022.
According to ACEP, ECG’s mounting losses, driven by worsening financial mismanagement, inefficiencies, questionable procurement practices, and a failure to adopt a business-oriented approach, now threaten the company’s survival and the sustainability of Ghana’s national budget.
Policy Lead for Petroleum and Conventional Energy at ACEP, Kodzo Yaotse, disclosed these at a media briefing on Thursday, September 19, issuing a damning statement on the performance of ECG and called for immediate reforms.
“The political lethargy to enable ECG to deliver value to the people of Ghana continues to hurt Ghana’s budget and, by extension, its development efforts. The situation is no longer tenable,” Yaotse warned despite public relations campaigns painting a rosy picture of ECG’s financial performance.
Data from the Public Utilities Regulatory Commission (PURC) also indicates that ECG’s revenue collection rate averaged a meagre 43% between August 2023 and July 2024. For many months during this period, it dropped as low as 34%.
“This poor performance raises serious doubts about ECG’s much-touted digitalization efforts, especially the introduction of the ECG PowerApp in January 2023. Rather than solving problems, the app has worsened revenue collection,” Yaotse added.
Yaotse explained that even more troubling than poor revenue collection is ECG’s failure to account for the limited funds it does collect.
A recent PwC audit revealed that ECG still operates 61 accounts through 16 different banks, despite a directive from the PURC and the President to consolidate collections into a single account. This lack of transparency has left auditors, regulators, and the public in the dark.
“ECG is flagrantly abusing regulations and has become ungovernable. The PURC is begging for transparency,” Yaotse remarked, stressing the toothlessness of the regulatory commission in holding ECG accountable.
According to Yaotse, one of the most glaring examples of ECG’s financial mismanagement is its controversial contract with Hubtel Ltd.
“The contract, which was sole-sourced and hastily implemented, has cost the state millions in service charges. While ECG claims that the total cost of developing the payment system with Hubtel is about GH¢171.8 million, Hubtel has publicly stated that the project cost is closer to GH¢315 million. To date, over GH¢100 million has been paid in service charges alone,” Yaotse noted.
“This contract is a blatant example of how procurement-driven decisions are putting the country at risk. ECG abandoned its internal capacity to develop its system for an exorbitant outsourced service, and the results have been catastrophic,” he stressed.
Yaotse called for swift measures to tackle the deepening challenges at the Electricity Company of Ghana (ECG), outlining a three-pronged approach to restore transparency and efficiency within the sector:
First, the Public Utilities Regulatory Commission (PURC) must take decisive steps to ensure full oversight of ECG’s revenue collection and spending. Without this, the sustainability of the energy sector remains at risk.
Second, an immediate audit of the controversial ECG-Hubtel contract is needed to address discrepancies in reported cash values between the two parties and ensure value for money.
Finally, the current ECG management should be replaced with effective, transparent leadership to salvage the company and secure its future.
Adding to ECG’s financial woes is its dubious handling of exchange rates. In 2022 alone, ECG’s exchange rate manipulations resulted in a net exchange loss of GH¢6.5 billion, a significant increase from GH¢609 million in 2021.
“In 2023, these losses ballooned further to GH¢7 billion. ACEP’s request for transparency on historical exchange rates used by ECG remains unfulfilled, with ECG claiming it needs more time to compile the data,” Yaotse said.
“This manipulation undermines ECG’s ability to pay its value chain participants and has redirected public resources away from essential social investment programs,” he added.
ACEP warned that ECG’s poor performance has triggered a cascade of economic challenges for Ghana, threatening to plunge the country into another debt crisis with Independent Power Producers (IPPs) and gas suppliers already demanding overdue payments.
“The government is under immense pressure. Karpower, one of the country’s largest IPPs, has already drawn down US$112 million in guarantees to settle debts owed to them, and gas suppliers are demanding an additional US$400 million in payments.”
“This is a ticking time bomb. If urgent action is not taken to reform ECG, Ghana risks losing all the progress made in its recent debt restructuring efforts,” Yaotse warned.
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