Double charges on consumer utilities unfair
The Africa Centre for Energy Policy (ACEP) has asked government to find alternative sources to help utility companies to defray their debts, rather than putting the burden on consumers through the newly introduced petroleum levies.
A component under the new Energy Sector Levies Act (Act 899) is to cater for power generation and infrastructure support, but this move, according to ACEP, is to the detriment of consumers who are already paying higher electricity tariffs.
“We have challenges understanding why apart from paying higher electricity tariffs, consumers are also being asked to pay debts accumulated from inefficiencies on the part of VRA and ECG, as well as government negligence of its responsibility to the utilities, through petroleum levies,” the Executive Director of ACEP, Dr Mohammed Amin Adam, said in Accra.
Dr Amin said the utility companies were expected to operate efficiently and competitively to generate profit and recover their investment cost through the capital recovery charge which consumers of electricity pay as part of electricity tariffs.
“It therefore amounts to double charges on Ghanaians who pay capacity charge for electricity and at the same time being asked to pay a levy on petroleum products for the same purpose,” he said.
The utility companies have been saddled with a lot of debts to both internal and external sources, and according to ACEP, government would use revenues generated from the levy to pay off some of these debts.
As of the end of 2015, the national power-producing company, the Volta River Authority (VRA), was indebted to the Ghana National Gas Company to the tune of US$142 million. The debt covered gas supplied between April to October 2015 from the gas plant at Atuabo to the VRA’s thermal plants at Aboadze in the Western Region.
In October 2015, Nigeria Gas (N-Gas) threatened to cut gas supply to Ghana as a result of the failure of the VRA to pay its debt for gas supplied under a contractual agreement. After discussions, however, N-Gas, which supplies gas to Ghana through the West African Gas Pipeline (WAGP), gave the VRA up to the end of February 2016 to clear its outstanding debt of US$171.5 million.
“We recognise that the Government has responsibility to invest in the energy sector to improve on generation and distribution of electricity. As the sole equity holder in both VRA and ECG, the responsibility for capitalising the utilities rests with the government. We also know that the balance sheets of the utilities are not good, due to a number of factors, the central factor being the huge indebtedness of the utilities,” he said.
Levy must be well managed
Dr Amin Adam also explained that the new levy had the potential of providing sustainable resources for addressing the energy sector investment challenges, but it must be well managed.
“In spite of this dilemma, it is our considered opinion that this levy will provide sustainable resources for addressing the energy sector investment challenges, and thereby helping to end the crisis we have in our power sector. We must ensure that this levy meets its objective and does not become like the unending Tema Oil Refinery (TOR) Debt Recovery Levy,” he said.
He said to ensure sustainability, government should audit and publish the true state of the debts of our utilities, publish a legislative instrument providing a sunset clause to determine the exact period over which the debts would be paid and subsequently, the levy should be abolished.
On the use of the levy to support generation infrastructure, he said ACEP had a different view because there were alternative ways of supporting generation infrastructure development.
“We recommend that government should introduce private sector participation into the thermal component of a restructured VRA Holding Company, to ensure its competitiveness against Independent Power Producers (IPPs). This will facilitate accelerated capital recovery to allow for generation investment,” he said.
He also added that the Government should further adopt an open and competitive bidding process for inviting IPPs that have capacity to raise the necessary financing for generation projects and also revisit its proposal to issue energy bonds for generation infrastructure and paid for through electricity tariffs. — GB