ECG ordered to rectify financial and operational discrepancies

The Public Utilities Regulatory Commission (PURC) has issued a strict directive aimed at the Electricity Company of Ghana Limited (ECG) to ensure the financial stability and operational integrity of the energy sector.

The directive, issued under Sections 3 and 24 of the Public Utilities Regulatory Commission Act, 1997 (Act 538), follows ECG’s non-compliance with established regulatory frameworks and transparency standards, the utilities regulator said in a statement.

The statement highlighted series of significant discrepancies observed in ECG’s financial allocations and operational practices. A central concern is the implementation of the Cash Waterfall Mechanism (CWM), approved by the Cabinet in May 2017.

As explained by the statement: “The CWM mechanism is to ensure that ECG distributes the tariff revenues it collects among all sector players along the electricity value chain”.

The statement said in June 2023, the Ministry of Finance mandated the PURC to validate the revenue collections and payments due to other entities under the CWM guidelines, leading to the revelations.

“Per a Consultancy Services Contract signed on 31 October 2023 between the Ministry of Energy and PricewaterhouseCoopers (Ghana) Ltd. (PwC) for the validation of ECG’s Revenue/Collection Accounts, ECG was obliged to submit prescribed reports, documents and resources to PwC, to enable and facilitate PwC’s analysis and submission of a final audit report to PURC,” it was stated.

However, it said the “ECG failed to provide critical data requested by PwC on customer billing, revenue collection data and bank statements for the periods covered by the audit, presenting a significant obstruction to the audit and transparent administration of energy sector revenues, and regulatory validation by PURC”.

It is further to this that it said through its monitoring of tariff revenue allocation by ECG, it observed discrepancies in ECG’s allocation of tariff revenue approved by PURC to sector entities – Bulk Generation Charge (BGC), Transmission Service Charge-TSC, and Distribution Service Charge-DSC)”.

“Among other discrepancies, ECG made zero payments to the Volta River Authority from November 2023 to January 2024. In the case of the Ghana Grid Company Ltd. (GRIDCo), ECG made zero payments in October and November 2023. These payment inconsistencies are a serious threat to the financial stability of the energy sector. PURC’s observation is confirmed by the PwC report dated February 29, 2024.”

Intended to ensure the fair distribution of electricity tariff revenues, PURC notes that ECG’s failure to adhere to CWM guidelines has raised significant concerns.

According to the PURC, this lack of transparency has not only hindered regulatory validation but also compromised the financial stability of the entire energy sector.

Operational concerns, it asserted, add another layer of complexity to the situation, with declining quality-of-service delivery and increasing power outages across ECG service areas. “Customer complaints regarding billing inaccuracies and unauthorized service connection fees further underscore the urgent need for corrective action”.

In response to these urgent concerns, the PURC has issued the order to ECG, exercising its regulatory authority to safeguard consumer interests, foster fair competition, and enhance the efficiency of public utilities.

The order mandates ECG to address its financial discrepancies and furnish essential operational data within specified timeframes

Under the directive, ECG is required to adhere to the CWM mechanism, guaranteeing the equitable allocation of tariff revenues among all sector participants. Failure to comply with these guideline, the statement warns, could significantly impact the financial stability of the energy sector.

Additionally, ECG is mandated to submit various documents and reports to the PURC. These include government directives on fuel procurement for power generation, details of fuel procurement contracts, monthly bank and investment statements, incident reports on power outages, and information on overloaded transformers.

The PURC statement emphasised that ECG must comply with its orders, stating that failure to do so will lead to significant penalties under the law, including fines and regulatory charges.

The statement concluded that the measures are intended to enforce accountability and maintain the regulatory standards necessary for the efficient operation of the energy sector.