Auditor-General's report exposes US$145m ECG meter procurement irregularities

The Electricity Company of Ghana Ltd. (ECG) signed 50 contracts worth US$145million to procure 862,750 meters between 2016 and 2021 without adhering to the Public Procurement Act (PPA), an Auditor-General’s report has shown.

The performance audit on management of meters revealed that the utility company bypassed required competitive tendering processes, opting instead for restrictive tendering without proper justification.

“ECG did not take steps to explore the possibility of getting meters of the same specifications at lower prices from manufacturers other than the ones in their database,” the report states, highlighting a lack of value for money considerations.

Non-compliance

Notably, ECG’s stance on PPA compliance is particularly concerning. The report said: “ECG is of the opinion that it should not adhere to the PPA requirement as it is a limited liability company that does not depend on government subvention to finance its operations”.

This position was evidenced by a letter dated February 12, 2014, wherein ECG sought the Energy Minister’s legal opinion on PPA adherence.

Despite seeking exemption from the Ministry of Finance and Economic Planning in July 2020, ECG proceeded with non-compliant procurement practices without receiving official approval.

The report notes: “In the absence of exemption from the Minister of Finance and Economic Planning, we expected that ECG would be guided by commercial procurement practices in Section 15 (2) of the Public Procurement Act to procure meters”.

The audit uncovered staggering losses from faulty readings, meter bypassing and power theft. In just four regions over a five-year period, ECG detected GH¢54million (US$4.5million) in losses. Alarmingly, only 39.3 percent of this amount was recovered. Commercial losses averaged 30 percent, well above the 21 percent target, due to insufficient monitoring.

The report states: “ECG recovered GH¢21,260,166 representing 39.3 percent of the GH¢53,988,463 total amount detected from fraud activities and faulty readings”.

Contract management issues further exacerbated the situation. The audit found that “ECG failed to comply with conditions of contract to terminate a contract with a manufacturer in the process of procuring the meters”, even when suppliers failed to deliver on time.

The report cited examples of customers resorting to illegal connections after waiting over a year for meter installations. One customer at the Legon District Office stated: “”If I don’t get the meter today, I will be forced to connect directly to the mains until such time ECG supplies me with a meter”.

Operational Losses

In the first nine months of 2023 the power distribution company recorded a total of GH¢2.05billion collection losses according to the Energy Ministry, although this is lower than the total loss of GH¢2.45billion that the company recorded in 2022.

With regard to system losses, ECG reported a total loss of GH¢4.04billion as of September 2023 in contrast to the GH¢2.6billion recorded in 2022. The company also reported technical losses of GH¢1.3billion as at September 2023, which is a decrease from the GH¢2.8billion reported in 2022.

Regarding commercial losses, ECG experienced a loss of GH¢2.8billion compared to GH¢1.9billion recorded in 2022.

The Auditor-General’s office has made several recommendations including: immediate adherence to Public Procurement Act requirements; improved contract management and enforcement of delivery schedules; increased monitoring of prepayment meters; recovery of all detected fraud amounts; and prosecution of customers involved in power-theft as a deterrent.

In response, ECG management stated they are “implementing a new monitoring regime whereby meter readers will visit both post-paid and prepayment meters.” However, they cited staff inadequacy as a challenge for field monitoring.