When the last light goes off

By Kofi Akordor
THE early warning signs were clear: power supply became erratic and unreliable. There were the usual explanations and assurances from the Electricity Company of Ghana (ECG), the nation’s power distributor, that its engineers and technicians were doing their best to restore power to consumers.
In the past, power outages were a regular feature, especially during the dry season when the water in the Akosombo Dam dropped as a consequence of low or no rainfall. Late last year, the situation was different — it had to do more with technical problems, poor logistics and obsolete equipment. And the three service providers — the Volta River Authority (VRA), which is the bulk supplier, GRIDCo, the transmission company, and the ECG, the distributor — have their problems which aggregately affect power supply to the consumer, whether domestic, commercial or industrial.
On December 12, 2009, the Ministry of Energy made a public admission of the constraints facing the power supply system when Mr Emmanuel Armah-Kofi Buah, a Deputy Minister of Energy, told Parliament that supply of power was “characterised by inadequate generation reserve margin, excessive transmission, network constraints and poor voltage support, especially during the peak demand period of between 6 p.m. and 10 p.m. each day”.
He explained further that even though total installed generation was about 1,945 megawatts, scheduled maintenance activities had reduced the total available capacity to about 1,425 megawatts.
He told Parliament that even though a number of projects were in place to bring about a significant improvement in the distribution system, the country would need US$1 billion in capital investments in the medium term to ensure a reliable distribution network in the country.
From Mr Buah’s submissions to Parliament last year, it should be obvious that power supply in the country is in a very critical situation in terms of installed capacity, transmission and distribution.
On Thursday, February 4, 2010, the VRA brought its case into the public domain when the Daily Graphic published an interview with Mrs Gertrude Koomson, its Head of Public Relations, on the VRA’s operations in relation to power supply in the country.
In that interview and subsequent disclosures, the VRA made it clear that unless there was a drastic improvement in the financial position of the VRA, the power supply system was heading towards total collapse.
Some of the problems enumerated by the VRA might sound too technical for ordinary people like us to understand, but in the ordinary person’s language, it is running at a loss.
First, a lot of organisations, including ministries, departments and agencies (MDAs), industries and some mining companies owe the VRA over GH¢250 million and it has projected that it will lose GH¢570 million this year at current tariff rates.
Two, it had been compelled under circumstances beyond its control to sell power cheaper than the production cost and thereby forced into the situation where it is not able to raise enough funds to sustain its operations. For instance, the VRA says it spends between US$30 million and US$40 million on crude importation monthly to operate its thermal plants, without generating enough revenue to pay for the oil.
The last tariff adjustments were made in 2007, on the assumption that the West African Gas Pipeline Project would become operational and bring gas from Nigeria at a cheaper cost to Ghana. The story of that project is still being told in different voices. But the truth is, the Nigeria gas is yet to flow through the pipelines.
At a joint press conference on Monday, February 8, 2010, the three service providers placed their cards on the table and made a case for tariff adjustment to reflect current operational costs and to raise revenue to increase installed capacity, improve and modernise the transmission and distribution systems.
Mr Kweku Awortwi, the Chief Executive Officer of the VRA, made a 115 per cent rise in tariffs, while Mr Charles Darku of GRIDCo, which does the transmission, asked for a 173 per cent rise. Mr Cephas Gakpo of the ECG, the distribution company that comes into regular contact with the consuming public, made demand for a 105 per cent rise at current rates.
All the chief executives defended their positions with facts and figures which painted a gloomy picture of the power supply situation in the country in the future. The ECG says it will need at least US$180 million to meet its annual investment in order to meet the growing need for electricity in the country. Mr Gakpo said at current rates, the ECG was able to internally generate only US$30 million annually to support its capital investment projects, with the explanation that that amount could not satisfy the seven per cent annual demand growth for energy of the country.
On the part of GRIDCo, Mr Darku explained that the peak power demand in Accra had grown from about 110 megawatts in 1990 to about 400 megawatts as of last year. He said the transformer capacity of Accra, which is about 415, is almost exhausted. This demands a capital investment programme to cater for the construction of transmission lines and substations, the installation of transformers and substation equipment and the provision of tools for maintenance and operations.
Enter the Public Utilities Regulatory Commission (PURC), the body that acts as a buffer between consumers and service providers. The PURC admitted receiving proposals from the three service providers but it was unable to approve them for several reasons. Its main concern, however, was that the three service providers had not exhibited enough efficiency in their operations; otherwise there could have been savings to reduce cost.
Again, the PURC argued that in 2007 it approved a 35 per cent tariff increase for the VRA on the understanding that it would generate 65 per cent of power from hydro and 35 per cent from thermal. Instead, the VRA generated 75 per cent from hydro and 25 per cent thermal and so to it the VRA had made enough money to sustain its operations.
The position of the PURC can be understood, especially from the point of view of consumers who want good and efficient service at a reasonable price. Where these are lacking, there is a weak argument for increase in tariffs. It can also be argued that the service providers cannot deny that there are administrative and operational bottlenecks within their systems that can impede smooth and cost-effective delivery of services.
These notwithstanding, there are some basic truths that we cannot run away from.
One, expansion over the years failed to match increase in population and for that matter increase in demand for electricity for domestic, commercial and industrial use.
Two, a lot of the equipment of these service providers are not only old and obsolete but also dangerous for service delivery, taking cognisance of the fact that electricity is a dangerous energy and the replacement of this equipment is capital intensive.
Three, the default rate is very high. Incidentally, most of the defaulters are government institutions which the ECG and the VRA in particular find difficult to deal with. It is the responsibility of the government to pay its due and meet its obligations, and then the service providers can proceed from there.
Four, not only is our population expanding; the economy is also growing and will even experience phenomenal growth when the oil and gas industry comes mainstream. Naturally the demand for power will increase.
Five, the Nigerian gas we have all been waiting for has so far proved elusive, which means the VRA will continue to rely on crude oil imports to operate its plants. The cedi/dollar rate is not in our favour and, therefore, to continue to pretend that everything is all right will mean postponing doomsday which will come with cataclysmic consequences.
It is, therefore, necessary to do a balancing act. While ensuring administrative and operational discipline, it is also prudent that the PURC sits down with the service providers to come to a reasonable compromise for the sake of adequate and efficient power supply. The three institutions cannot all be wrong at the same time and these are highly technical institutions that cannot just take things for granted.
The PURC may be making an argument in favour of consumers for now, but what about tomorrow when there is no power even to pay for? I heard Nana Owusu-Afare, the President of the Association of Ghana Industries (AGI), saying that the association would prefer constant delivery of power at a cost to an erratic, irregular and sometimes no power system which, in the long run, becomes more expensive to industry.
That is the issue confronting us. Efficient and regular power delivery as against low tariffs — which comes first? Remember, when the last light goes off, there will be no tariffs to pay.

fokofi@yahoo.co.uk
kakordor.blogspot.com