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Business News of Tuesday, 29 January 2013

Source: B&FT

Public sector owes VRA GH¢1.1bn

The Volta River Authority (VRA) is being deprived of revenue by the failure of some Ministries, Departments and Agencies (MDAs) as well as the Volta Aluminium Company (VALCO) and others to settle their indebtedness to the electricity generator.

VALCO et al owe VRA a whopping GH¢1,086,423,500, being non-payment for bulk sales of electricity made to them. Of the said amount, MDAs are indebted to the tune of GH¢230million; Electricity Company of Ghana (ECG) GH¢270 million; VALCO GH¢77million; while government owes the Authority GH¢509million.

The indebtedness of these entities to the VRA raises serious concerns, especially at a time when the Authority requires funds to import crude oil to generate thermal power due to the unavailability of gas from the West African Gas Pipeline.

The Authority currently spends about US$2.5million per day to import crude and requires US$50million to import 400,000 barrels of crude oil every 20 days.

The VRA currently relies on letters of credit from government for the purchase of crude.

“There should be one source of those funds [for the purchase of crude] - which is the tariff the VRA receives from the Public Utility Regulatory Commission (PURC). If the tariff is good enough we should have no difficulty in buying crude,” Mr. Kweku Andoh Awotwi, Chief Executive Officer of VRA, told the B&FT in an interview.

“In 2011 in particular, when we had a good supply of gas, we had a good enough tariff to buy our gas and crude. The Authority only bought five cargoes of crude [which cost] about US$200-225million,” he said.

“In 2012, on the other hand, we purchased 12 cargoes of crude and that was US$600million; and the tariff that was good enough for 2011 did not change. Our regulators did not adjust the tariff to reflect the lack of gas as a result of the damage to the West Africa Gas pipeline that occurred.

“We were effectively receiving a mix of gas and crude oil tariff when it was an all-crude oil situation. Clearly we could not handle that.”

Government, according to Mr. Andoh Awotwi, has had to absorb the shortfall in revenue as a result of the non-revision of its tariffs.

It is estimated that the VRA will need US$300million to import crude oil from now till the end of March, when gas is expected to flow in from Nigeria. Ghana’s own gas input into the generation of electricity is not expected until September, when the Gas Company will have laid the pipeline to carry gas onshore from the Jubilee oil field.

The Authority estimates that for a country growing rapidly at a rate of about 10 percent per year and using under 2,000 megawatts of electricity, Ghana ought to be bringing on-stream 200 megawatts of new capacity every year.

Energy experts calculate that it will require US$200million of investment to bring on-stream each year 200 megawatts of new capacity. However, government is not able to keep up with that kind of investment.

The Ghana Grid Company Limited (GRIDCo) also estimates that the country needs 340 megawatts of reserve power capacity for contingencies -- such as the recent shutdown of the 200 MW Asogli Power Plant owing to the unavailability of gas from Nigeria.

This is the “ideal scenario” for a country that consumes about 1,700 MW of electricity annually, said GRIDCo boss Charles Darku.

According to GRIDCo, electricity demand and consumption hit 1,664 MW in 2011, and grew to 1,800 MW in 2012, with the demand rising by between 8-10% every year.

Captains of industry have urged government to attract the private sector into production and distribution of electricity by laying down clear-cut and transparent contractual arrangements, and revamping the entire value-chain of production.

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