Probe activities of utility companies – CJA

General News of Friday, 12 April 2013

Source: CJA

Kwesi Pratt 05Oct2010

Political pressure group, the Committee for Joint Action (CJA) has prevailed on government “to order a general management and financial audit of the utility companies” namely the Volta River Authority (VRA), Ghana Grid Company (GRIDCO) Ltd, Electricity Company of Ghana (ECG) and the Ghana Water Company Ltd; and to also investigate into their award of contracts over the last 10 years.

The group also wants government to “overhaul the management of the utility companies to improve efficiency.”

“…we call on the government to prevail upon the ECG to publish, in the newspapers, a full list of all major companies which are in arrears of more than two months in the payment of electricity tariffs….The CJA believes that arbitrary increases in tariffs will not be the best way forward unless the above recommendations are implemented,” the CJA said in a statement cum recommendations signed by Kwesi Pratt Jnr., for the group’s convener.

Below is the full text of the statement by the Committee for Joint Action (CJA)

STATEMENT ON MALADMINISTRATION AND CORRUPTION IN THE PUBLIC UTILITIES

Introduction:

The purpose of this paper is to examine the state of the state-owned utility companies in Ghana in relation to maladministration and corruption, and make recommendation for the effective management of those Companies. The Companies in question are the Volta River Authority (VRA), Ghana Grid Company (GRIDCO) Ltd, Electricity Company of Ghana (ECG) and the Ghana Water Company Ltd.

The main sources of revenue for these companies are tariffs that are levied on consumers. The rate of tariffs are recommended by the utility companies and approved by the Public Utilities Regulatory Commission (PURC.

Over the years, the public has been concerned about the rate of tariff increases especially as the utility companies fail to improve their services to justify the increases.

The public has been concerned about the lack of expansion and improvement in quality of services, which is largely the result of maladministration, inefficiencies and corruption in those services.

Volta River Authority: The VRA cannot attribute its loss-making performance solely to the absence of gas from the West African Gas Pipeline. After all, the accident which blocked the supply of gas occurred in August 2012 (less than 8 months ago). It therefore could not have been the reason why the VRA had projected that it will end the year 2012 with a loss of GH¢720 million.

In 2009, the VRA recorded an operational profit of GH¢11.3 million. In 2010, VRA made a net profit GH¢40.6 million, while its net profit amounted to GH¢ 82.6 million in 2011. These profits were made in spite of the fact that the average weighted bulk generation tariff went up by only 3%.

The main reason why the VRA fell into debt in 2012 was because of a number of factors which include the following:

In 2011, the government asked the VRA and GRIDCO to supply electricity to VALCO although the government was aware that VALCO was not in a position to pay the tariff, especially since the latter was producing at 20% capacity while consuming a whopping 70mw of electricity.

As a result, by the end of 2012, VALCO was indebted to the VRA by GH¢77 million. In addition, VALCO owes GRIDCO over GH¢10 million. Furthermore, the government owes the VRA GH¢509 million. If VALCO and the government pay VRA the total debt of GH¢586 million, the anticipated loss of GH¢720 million would be greatly reduced. In such a situation, there will be no need for an 80% tariff increase.

Another factor that is contributing to the indebtedness of the VRA is inefficiency and maladministration that goes on in VRA. The failure on the part of the VRA to conduct regular maintenance caused all five generators at Aboadze to develop faults at the same time, which caused serious disruptions in February 2013.

Maladministration in the VRA is so rife that management is not even able to monitor their stores. Just before the 2012 elections, the VRA management failed to notice that they were getting short of light crude oil. When attention was drawn to it, they found it difficult to establish letters of credit. This compelled government to intervene by facilitating fast-track arrangements to provide letters of credit for the Authority. In the end, the light crude that was hurriedly ordered was very expensive and was of such poor quality that it had to be refined to make it usable. At the time these were happening, the top management of the VRA was spending time at a conference in Abuja, Nigeria.

THE ELECTRICITY COMPANY OF GHANA (ECG):

The ECG suffers from endemic maladministration, systemic corruption and inertia.

The main source of revenue for the ECG is the collection of tariffs from consumers. However, the management is unable or fails to collect tariffs from private sector corporate entities that consume huge amounts of electricity. According to their own annual report, total unpaid tariffs in 2009 alone amounted to GH¢30 million while in 2008, uncollected tariffs amounted to GH¢16.4 million. According to undercover investigations conducted in 2012 by Anas Amereyaw Anas, more than one thousand private companies and public institutions owed the ECG more than GHS460 million as at November 2011.

In addition, government ministries, departments and agencies are known to be owing more than GH¢230 million in tariffs which the ECG has failed to collect. Furthermore, other state-owned institutions including the three major universities owe more than GH¢9 million in tariffs.

The effect of these massive arrears is that tariffs are being paid mostly by individual household consumers and small/ medium size companies, whose electricity supplies are quickly disconnected as soon as they fall into arrears.

To make matters worse, there is widespread corruption among staff and management of the ECG. These range from illegal connections to premises, collection of bribes from defaulters, and strange contract awards.

It is also true to say that there is very little planning within the ECG. This is borne out by a large chunk of procurement within the ECG which is undertaken either by sole-sourcing or restricted tendering. The usual excuse is that certain equipments or projects have to be undertaken as a matter of urgency. However, this is one of the ways by which top management of the ECG are able to handpick companies without any value-for- money considerations. In the end, it is reasonable to suspect that the over-riding consideration in choosing a winning company is how much ECG officials would personally benefit from such contracts. This could be the only reason why the ECG has opted not to follow the requirements under the Public Procurement Act.

The situation in which the top management are appointed on the basis of partisan political considerations rather than competence results in an erosion of any professional commitment to improved performance. Whereas sometimes, the demands of politicians (such as requests to award contracts to political allies, recruitment of relatives, etc) undermine existing management structures and procedures, managers also take advantage of the resulting lapses and loopholes to feather their own nests.

GHANA WATER COMPANY

The recent revelation that the Ghana Water Company imported and used expired chemicals in the water system is only a tip of the iceberg with regards to corruption and callousness on the part of senior management.

It is frightening that the senior management of the Water Company, while abandoning effective maintenance of equipment, is unconcerned about the health and wellbeing of the public. In 2009, an investigation conducted by the Coalition Against Water Privatisation revealed an appalling neglect of equipment at the Kpong Water works.

In spite of claims in recent past by the Management of the Ghana Water Company Limited (GWCL) that rehabilitation and expansion works were being undertaken to restore and improve the capacity of the Kpong Water station to provide water to Accra and its environs, no work has been on-going. This is partly the cause of the severe water shortage that has hit the following parts of Accra Region: Tema, Nungua, Accra Plains, Agomeda-Dodowa, Kpong-Akuse and the Akwapim Ridge in the Eastern Region.

According to the findings of the investigation, the intake plant, which draws water from the Volta Lake for treatment, was not functioning properly. This is because the scranners, which filter debris and impurities from the raw lake water, had broken down but had not been repaired for a long time. As a result, raw water with all the debris was being taken directly to the pumps.

The report further stated: “Out of the four pumps available, (J101A, J101B, J101C and J101S), three of them should be working at all times while one is supposed to be on stand-by. For some time now, pump J101B has completely broken down for more than one year. This means that the remaining three pumps work 24 hours a day without any respite. In view of this, there is no back-up for continuous supply in the event of a breakdown of any one of the remaining three pumps. The implication is that the Company has to shut a pump in the event of a need for routine maintenance; thus causing massive water shortage to the large communities.

Replacement pumps purchased by the Management of the GWCL do not meet the required specifications and therefore do not have the capacity to pump water in the required quantities to the two treatment plants at the old works site and another one at the new works site”.

The two treatment plants at the old site and one at the new site are supposed to filter any impurities that might remain after the initial filtering by the non-working scanners. One of the two at the old site, called Putsch Bamack, had been shut down completely. The Pintsch Bamack plant was installed 50 years ago (1963) during the Kwame Nkrumah regime but had since neither been maintained properly nor replaced. Because of this situation, the treatment works at the old site is only able to produce 6 million gallons a day instead of its expected capacity of 9 million gallons. At the new site where the other plant is capable of processing 40 million gallons of water at full capacity, there is not enough water getting into the plant because the intake machines are unable to pump enough water to them.

At the old site, where there are two “air blowers” which are supposed to be used periodically to clean the water filters one of them has broken for several years leaving the situation without backup.

Out of 5 Segmentation Tanks which should store treated water and where further purification is supposed to take place, one of them has been shut down. Again there is another machine, known as the “scrapper” which is supposed to clean debris from the storage tanks. Because none of them is working, the storage tanks are seriously filled with debris. As a result, the workers at the filters have to physically dive into the water to undertake manual cleaning; a process which breaks all the rules of health and safety.

Three of the “high-lift” pumps that pump water to Tema, Accra East and parts of Eastern Region have broken down, reducing the capacity to provide adequate water to those areas.

This is the state of neglect of our drinking water plants.

RECOMMENDATIONS The government ought to order a general management and financial audit of the utility companies which should take a look at the award of contracts over the last 10 years;.

The government also needs to overhaul the management of the utility companies to improve efficiency

Lastly, we call on the government to prevail upon the ECG to publish, in the newspapers, a full list of all major companies which are in arrears of more than two months in the payment of electricity tariffs.

The CJA believes that arbitrary increases in tariffs will not be the best way forward unless the above recommendations are implemented.

Kwesi Pratt Jnr.

For Convener

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