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GRIDCo’s debt recovery from ECG worsens, IES says

Nzema Electricity3.jpeg As of January 2020 the total debt owed to GRIDCo by ECG was GH

Mon, 3 Aug 2020 Source:

The Electricity Company of Ghana’s (ECG) debt to the Ghana Grid Company (GRIDCo) has increased by 31 percent to GH¢1.114bn this year from GH¢850.99m recorded in 2019, energy think tank Institute of Energy Security (IES) has said.

The think tank has projected that, based on its trend analysis, the debt position of ECG to GRIDCo could hit GH¢1.4bn by the end of the year, should ECG continue to pile up debt of close to GH¢11.0m per week.

The institute said the projected figure could be higher if government fails to pay fully the bills it has committed to absorb for consumers as part of the coronavirus alleviation measures.

The IES said its trend analysis of cash receivables of GRIDCo in the first half of the year indicates that the receivables profile of the power transmitter is getting worse.

According to the think tank, as of January 2020 the total debt owed to GRIDCo by ECG was GH¢902.86m, from December 2019’s figure of GH¢850.99m.

“The monthly analysis done for the first half of the year (2020) showed that the amount owed by the ECG to GRIDCo totalled GH¢451.468m. However, the ECG paid only GH¢188.198m, representing 41.69 percent of total invoices issued,” the institute said.

For instance, at end-January 2020, GRIDCo invoiced ECG an amount of GH¢74.87m, made up of GH¢68.56m in Transmission Service Charge (TSC) and GH¢6.31m as Regulatory (PURC) Levy, sending total outstanding debt to GH¢902.86m.

Out of the GH¢74.87m, ECG paid only GH¢23.0m, representing 30.7 percent of the invoiced amount, the IES said in its analysis.

The IES said the payments of February to June invoices by ECG followed a similar pattern, suggesting a huge payment gap. The institute’s analysis showed that ECG currently piles up close to GH¢11.0m debt per week.

This is because GRIDCo bills ECG about GH¢19m per week, of which ECG pays roughly GH¢8.0m per week.

“Compared to 2017 when the GRIDCo used to receive close to GH¢8.0m per week from a billing rate of GH¢13.0m per week, the current debt recovery rate is nothing but worse. Because of the increasing payment gap, the outstanding debt of ECG to the GRIDCo is found to be increasing at an astronomical rate. Data show GRIDCo’s receivables from the ECG are increasing despite government clearing its indebtedness to the ECG at end-2019, leaving a credit in excess of GH¢500.0m, enough to cover its bill for January 2020 to April 2020,” the institute said.

In March, the government committed to fully absorb the electricity bills for all lifeline consumers for three months beginning April. It also offered to pay 50 percent of the electricity bill for residential and commercial consumers for the period, using the March bill as the benchmark.

According to the IES, the logical expectation was at least 90 percent full debt recovery for both ECG and GRIDCo, if the government committed to its promise of paying for the electricity used by the people of Ghana, saying “that was not to be, and government has proceeded to extend the freebies for an additional three months” for lifeline consumers.

The IES said it was not against providing social protection programmes for Ghanaians in these times of hardship caused by the COVID pandemic.

“However, the IES abhors policies that are targeted to see vital institutions whose contribution promotes economic development go down the drain due to political decisions that can go wrong,” it added.

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