Business News of Tue, 25 Jul 20172
Cash waterfall insufficient to deal with power sector debts – Analyst
Some analysts in the energy sector say the government’s new cash waterfall mechanism to help the power sector will yield little results if the ECG fails to improve its revenue collection.
They assert that overcoming the underlying challenge of revenue mobilization should translate in the prompt settlement of monies owed all agencies in the supply chain.
Cabinet has approved a new cash waterfall mechanism to address the persistent debts within the power sector.
The mechanism provides a formula for the equitable allocation of all revenue recorded in the supply of power.
But the Director of Research and Policy at the Institute of Energy and Climate Change Policy (IECP), Dr. Philip Adom tells Citi Business News ECG must block all loopholes before the intended results will be achieved.
“I seriously doubt because if you look at the policy, basically what it seeks to do is to ensure the equitable distribution of the little resources that we are able to collect from the distribution of power. But the core issue has to be addressed which is ECG’s inability to collect bills. So long as that core issue is not addressed, the new policy will address equality but it but it will not solve the fundamental problem,” he remarked.
The new mechanism comes at a time that the ECG is saddled with a 20 percent revenue collection deficit.
The failure of ECG to collect power consumed and pay its creditors has led to major difficulties for players in the energy sector, hampering their operations.
At present, government is faced with a legacy debt of 2.4 billion dollars sitting on the books of banks.
This has also affected the general economy.
On addressing ECG’s revenue collection challenges, Dr. Adom indicated the need to limit its interference in the operations of the power distribution company.
“The first thing is to make sure that all individuals and firms that are still running on post paid are moved unto the prepaid system. Also it is high time that the government stops its interference to allow the ECG conduct its business. In addition, that the government institutions must fulfill their obligations in the power that is distributed to them by the ECG.”
He added, “In the short term when this is implemented, the companies that were shortchanged will be given some kind of relief but that will still not solve the core problem for the ECG to address the issues.”