Business News of Tuesday, 9 April 2013
Source: Graphic Business
The World Bank has warned that until the government puts the right regulatory and tariff framework in place to enable consumers of electricity pay the right prices, the ongoing challenges will not end any time soon.
According to the bank, the government requires the investment from the private sector to be able to fund the huge cost of infrastructure at all the generation, transmission and distributions levels while being allowed to sell the power to consumers at the right prices.
Answering questions from financial journalists at an interaction in Accra, Dr Waqar Haider, Sector Leader, Sustainable Development of the World Bank in charge of Ghana, Liberia and Sierra Leone, said “no private investor is interested in investing in any economy to make losses”.
He said the potential in electricity generation was great but without good regulatory and tariff regimes no one would be ready to invest in that sector. For more than a year now, the Electricity Company of Ghana (ECG) has been compelled under strenuous circumstances to ration power in a manner that has affected a lot of business.
There are conflicting reports about the cause of the power shortage because while some officials of government blame a supposed damage to the West Africa Gas Pipeline beneath the sea, forcing a shutdown of the pipelines, while others have put the blame on the lack of investment in the sector to expand the sources of generation.
Presently, the country’s generation capacity is far less than what the supply, thereby forcing the authorities to ration power. The worse of the situation is the lack of the right amount of investment from the central government into the sector to expand the systems and build new ones. Again the pricing of power was not competitive enough to allow for more private power producers.
The present situation of power rationing is not being implemented effectively and this has created additional problems to manufacturers. Those that cannot afford the use of generators have been forced to either reduce production or shut down completely. Dr Haider wondered why for more than a year and half for instance, there has not been a review of the tariffs.
“Here we learn that the refusal to increase the tariffs is being done in the name of the poor but we cannot run away from the reality”, he said.
He said the tariffs are not right and therefore no attraction to private investors because they cannot cover cost when they come, “otherwise money is out there to flow into the sector to change the trend for the better in a more sustainable way”.
The demand of energy is increasing by between 12/13 per cent per annum but this is not being met in terms of supply. According to him, the bottom line is that “unless we put mechanisms and the enabling regulatory framework and the tariff framework in place to charge the right tariffs, we will never have the energy challenge resolved.”
Mr Haider said the government will never attract investors enter the sector to do so and “the government cannot have that money to do the generation and transmission infrastructure let alone take care of the distribution which comes at a huge cost far beyond its budget”.
According to him, it was time for the country to face the reality and encourage the government to allow the utility regulator to get the players in the industry to charge the right prices for their services to ensure sustainable supply of power.
It is estimated that ECG needs nearly US$200million annually to improve on the electricity distribution networks while the Volta River Authority is seeking to raise nearly US$500 million on the international markets to finance four new projects that will generate 700 megawats of electricity within three to four years. The government in the 2013 budget statement has pledged its commitment to expand its generation capacity indicating that the Bui Hydroelectric Power Project would come online with the full capacity of 400MW by December 2013.
The installed capacity of 2,312MW will increase by 532MW by the end of 2013. The implementation of the transmission improvement projects is expected to continue with Substations Reliability Enhancement projects, Kpando- Kadjebi Transmission and Power System Reinforcement Projects, as well as Tumu-Han-Wa 161 KV Transmission Line and related substations.
Works on Ghana Inter-connection with Burkina Faso will commence whilst the 330KV line to Togo-Benin will continue and it is expected to be completed by the end of the year. In area of distribution, it said the Electricity Company of Ghana would continue to expand the distribution network through the construction of bulk supply points, primary and secondary substations, interconnection lines and pre- payment metering to all urban communities.
It will also install distribution transformer meters for auditing purposes, implement software applications to improve customer service delivery, enhance revenue collection and revamp operational areas to ensure rapid set up of custome