Power sector shortfalls expanding, as electricity tariffs constitute 73% of cost recovery – IMF

The International Monetary Fund has declared that the power sector shortfall remains large and expanding, as electricity tariffs constitute only 73% of cost recovery levels, with a large differential between household and business tariffs.

This tariff has also increased just 5% since 2015.

The Fund Said: “A tariff review was scheduled for July 2021. The authorities’ modeling analysis suggests that adjusting tariffs to inflation would be needed to bring the annual financial shortfall from electricity generation under US$500 million by 2024.”

The Bretton Wood institution said the Electricity Company of Ghana continues to suffer large technical losses, reaching ¢3 billion in 2018, a significant deterioration compared with 2016 and 2017.

To address these losses, it proposed a private concession that was agreed in April 2019, but subsequently terminated due to governance concerns.

It said the ECG continues to manage electricity distribution, without a clear reform plan.

A metering system is being put in place to address power theft and losses.

However, the IMF stated “the cash waterfall mechanism now distributes revenues more evenly across the sector, but it is creating new cashflow issues for SOEs across the supply chain. The increase in power consumption in 2020 worsened technical and commercial leakages in distribution”.

The IMF also cautioned that about the financial shortfalls in the gas sector which it says is a growing challenge, worsened by infrastructure bottlenecks, and tariffs that do not reflect cost recovery.