Cabinet approves formula for payment of service providers for ECG

Mr Boakye Agyarko,Energy Minister.

Mr Boakye Agyarko,Energy Minister.

Cabinet has approved a new revenue distribution system that seeks to address the persistent loss of revenue in the power sector and control the huge debts incurred by the Electricity Company of Ghana (ECG).

The system, known as the Cash Waterfall Mechanism (CWM), will create an escrow account to ensure sufficient funding to pay power producers, fuel suppliers, and other stakeholders in the power value chain.

The purpose of the system is to create a formula for equitble distribution of revenue to all stakeholders in the electricity value chain.

The ECG has, over the years, not been able to raise enough revenue from power supplied to consumers and pay suppliers and service providers for services rendered.

According to officials of the Ministry of Energy, ECG fails to collect about 20 per cent of the electricity bills from consumers. The situation has made it difficult for the company to pay for the services of power producers in the sector.

The failure of ECG to raise revenue from power consumed to pay its creditors has led to difficulties for players in the energy sector, leading to a huge Legacy Debt of $2.4 billion as at December 31, 2016.

The debt has had its rippling effects on the nation’s economy. As part of the measures to address the problem, government has indicated its readiness to raise Energy Bonds to settle the debts and attract investors in the sector.

Cabinet has also directed the Ministry of Energy to ensure that the ECG begins the installation of prepaid meters across the country to reduce systems and revenue losses which has affected its operations and ultimately saddled it with debt.

The power distributor is expected to install the meters for at least 95 per cent of its customers.

By Yaw Kyei

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