Energy analyst, Kwesi Abaidoo, says the non-compliance of the Electricity Company of Ghana (ECG) to the Cash Waterfall Mechanism (CWM) is collapsing the energy sector.
Mr. Abaidoo, who spoke to the media in Accra, says the Public Utilities Regulatory Commission (PURC) indicated that despite efforts by government and the Commission’s decision to increase tariffs by more than 75% since September 2022, ECG’s financial difficulties persist.
“Indeed, for June and July, 2024 ECG declared GHS 884,200,000.00 and GHS 857,000,000.00 according to the Cash Waterfall Mechanism(CWM) report on the PURC website. This amount was not enough pay the Tier A plus WAPCo’s bill of $47 million per month. Unfortunately, in August, 2024 ECG declared less than 800 million. This represents about 45% of the revenue expected by the Commission to be collected and pay to players.”
Mr Abaidoo underscored the need for deeper introspection and structural changes beyond tariff adjustments,saying “For IPPs, they are currently receiving less than 40% of their invoice. These are big challenges. Whilst ECG collects more than 1 billion, they declare less than 850 million per month. They do not account for the difference for what they collect and what they declare.” This, according to him, averages more than 300 million every month.
He cited examples of structural transformation of utilities in Kenya where the utility has been listed on the stock to raise more funds, Uganda where the metering, billing and collection have been privatized and in Tanzania where government has injected additional funding to the utility. He said these utilities however have high collection rate, less than 10% technical and commercial losses and other good indicators.
The PURC in a letter to the presidency recommended that there should be, drastic reductions in technical and commercial losses, Enhanced fiscal discipline and a directive for ECG to avoid engaging in non-core activities, and a relook at the nature of power purchase agreements and an exchange rate regime that lessens the burden on consumers.
The utility regulator also recommended an independent economic and technical audits of ECG to assess the utility’s true financial position, while asking the ECG to provide transparency on key issues such as:
Revenue collection versus CWM declarations, Institutional contracts and other monthly commitments (e.g., meters, Hubtel, loans), Commercial and technical losses, Non-core activities and structural challenges, such as fuel payments, that are impeding the company’s ability to achieve financial sustainability.
The energy economist, however, commended the Public Utility Regulatory Commission for the pro-active measure to write this letter to the Energy Minister.
He cautioned media houses of serving as propaganda mouthpiece of the utilities claiming that the ECG and some media houses have twisted the PURC’s letter to force government to put money in a leaking basket.
Meanwhile, ECG says the latest report by the Public Utilities Regulatory Commission (PURC) on the operations of the power distributor as they relate to the Cash Waterfall Mechanism (CWM), leaves much to be desired.
The company in a statement expressed disappointment with the PURC’s review of the CWM.
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