By: Franklin ASARE-DONKOH
Ghana’s largest power distributor, the Electricity Company of Ghana (ECG), which is supposed to be a key driver of the country’s economic growth, has become a liability rather than an asset, according to economic analysts.
According to data from the power distributor’s website, ECG was established as the Electricity Corporation of Ghana in 1967 by Government Decree (NLCD 125) and was subsequently incorporated under the Companies Code, 1963 (Act 179), as the Electricity Company of Ghana Limited (ECG) in February 1997.
The company, however, is 100% owned by the Ghana government.
ECG serves over 80% of Ghanaians and purchases over 90% of the power produced in Ghana. ECG has a direct staff population of 6,500 and over 100,000 indirect employees made up of third-party suppliers and contractors.
Why should the public worry about the problems at ECG? Company officials and independent analysts identify two major reasons: firstly, its ability to provide more secure power for domestic and industrial use. Secondly, its limited capacity to contribute to government revenue to help fund developmental programmes such as those in health and education.
The over 80% of Ghanaians, including direct and indirect workers whose livelihoods depend on ECG, all face the risk of seeing the country’s largest power company fall deeper into debt.
ECG’s situation is reportedly getting dire by the day, according to individuals familiar with its operations who requested anonymity due to corporate security concerns. They said the power distributor is incurring more debt, which is affecting its capacity to supply electricity and defeating business principles and the purpose for which ECG was established.
Urgent steps need to be taken to address the wobbling situation that threatens the sustainability of the power distributor, they said. The fate and state of ECG have a direct bearing on the nation’s economic health, since electricity is a key factor in every developmental initiative.
The electrical power distributor’s growing revenue losses have become an albatross on the national economy. A number of officials are flagging ECG’s porous financial situation as a ticking time bomb that could explode with disastrous consequences for Ghanaians.
Looking at Ghana’s biggest power supplier’s level of debt accumulation and the intervention required from the state, it is just a matter of time before Ghana is plunged into another energy crisis.
Data from the Ghana Statistical Service (GSS) show that between 2017 and 2022, ECG’s losses increased from about GHS 295 million to about GHS 9.7 billion.
In 2024, ECG lost 32% of its purchased electricity, the highest in over two decades, leading to a substantial amount of revenue loss.
Official data from the Energy Sector Recovery Program (ESRP) estimate that power sector shortfalls between 2019 and 2023 alone were about US$8.25 billion. Certainly, this waste of public resources cannot persist.
Also, with Independent Power Producers’ (IPPs) debt mounting and gas suppliers and transporters demanding payment for their long-standing debts, the government is under intense pressure to use revenue meant for physical infrastructure development, like roads, hospitals, school buildings, and other social investments, to offset ECG’s avoidable debts.
According to sources within the Energy Ministry, some IPPs have already begun targeting payment guarantees to recover some of their outstanding debts.
Karpower, one of the IPPs, for example, has drawn down about US$112 million to settle the debt owed to them. On the gas side, drawdowns on Standard Chartered Bank Letters of Credit (LCs) by the Offshore Cape Three Point (OCTP) partners have an outstanding balance of about US$400 million to be settled by the government.
ECG’s current debt portfolio reveals a concerning reality that threatens not just the existence of the company but the country’s developmental drive as well as the sustainability of its budget.
For many years now, customers of the power distribution company and the general public at large have been saddled with a huge financial burden (astronomical increases in tariffs, high taxes on petroleum products, among other indirect costs), all in an attempt to pay for ECG’s inefficiencies. Observers warn that the continuing accumulation of debts could raise concerns about the sustainability
Despite longstanding signs of inefficiency, political elites who call the shots have failed to take decisive action to fix the economic mess ECG’s management has created in the past and continues to create.
Allegations of procurement irregularities, equipment mismanagement, and power theft have been cited by some investigative reports and civil society actors as contributing factors to ECG’s financial struggles.
According to a report by the Africa Centre for Energy Policy (ACEP), ECG’s under-recoveries between August 2023 and July 2024 amounted to approximately GHS 13.6 billion, with an average collection rate of only 43%.
Between 2018 and 2023, the electricity distribution company incurred a cumulative loss of GHS 23.4 billion (approximately US$1.5 billion) due to various factors, including illegal connections. A significant portion of this loss was attributed to power theft and unpaid bills, according to ECG’s audited report.
In 2022, the then Energy Minister revealed that ECG was losing approximately US$400 million annually to illegal connections.
The Ashanti Regional ECG office loses over 14% of annual revenue due to illegal electricity connections. These illegal connections take various forms, including direct connections, meter bypassing, and unauthorised service connections.
Speaking in an interview with some residents at Danyame, Nhyiaeso, Adum, and Patasi, all suburbs in the Ashanti Region regarding the high rate of illegal electricity connections, many attributed it to the high cost of meters, which are also difficult to obtain, astronomical tariffs, and delays in billing.
For example, the Public Utilities Regulatory Commission (PURC) approved charges for Straight Service with Pole cost between GHS 2,120.00 and GHS 3,020.00; 2-Pole Extension goes for GHS 4,520.00 to GHS 6,720.00; while Separate Meter, which most residents interviewed claimed is in high demand but very scarce, is priced between GHS 700.00 and GHS 1,300.00.
According to Kojo Antobam, a resident of Danyame, the rising cost of electricity leaves households with little choice but to seek illegal alternatives.
“Households these days, no matter how rich or poor, cannot sleep in darkness. Hairdressers, tailors, hotels, hostels, cold stores, restaurants, clinics, and institutions want their businesses to stay afloat, so most owners cut corners by making illegal connections to beat down high electricity costs,” he remarked.
“We have been witnessing astronomical increments in utility tariffs year in and year out, with the excuse of paying debts, yet the debt keeps increasing. So, where does all the money paid in the past and that we are still paying go?
For how long are we going to pay for debts we did not cause? We’re all aware that ECG is not being managed well, yet the people whom we vote for every four years are careless about the worsening situation of the very thing our lives and our existence as a nation depend on,” another resident from Patasi pointed out.
Policy Lead, Petroleum & Conventional Energy at ACEP, Mr. Kodzo Yaotse, is of the view that ECG’s predicament can only be solved if the power distribution value chain is cleaned up.
According to him, the power distributor’s revenue performance is abysmal. Even more egregious is that ECG fails to properly account for the limited revenue it collects.
“ECG’s debt crisis is a result of its opaque procurement practices. Let’s highlight two prime examples. First, its introduction of the ECG PowerApp, a licensed payment system provider, which was awarded under sole sourcing,” he noted.
Mr. Yaotse further revealed that ECG outsourced the development and maintenance of its payment system app to a company called Hubtel Ltd., and according to a contract received from ECG, the total cost for the design and development of the platform is about GHS 171.8 million. Between November 2022 and December 2023, the cumulative service charge was over GHS 100 million.
In addition, Hubtel will be paid 0.95% of all revenues collected as service charges. At the time of contract execution, GHS 75 million had been paid to Hubtel under the framework cost. This information in the contract contradicts what Hubtel has communicated regarding its proceeds from the agreement.
Meanwhile, on March 28, 2024, just eight days after the contract was executed, Hubtel published the cost of developing the payment system at US$25 million (GHS 315 million), of which US$12 million (GHS 151 million) was paid in advance.
This new PowerApp, managed by Hubtel, replaced the “ECG Power” app, which had operated before December 2022. The contract reportedly gives Hubtel control over all revenues collected until such time as they are disbursed to ECG. The contract also creates a fund designed to receive an undetermined portion of revenues collected before the balance is disbursed to ECG.
However, available data shows that revenue performance under Hubtel’s operated app has worsened over the period, as the switch appears to have been procurement-driven rather than efficiency-driven.
This retention of unspecified amounts from all revenues collected undermines the requirements of the cash waterfall mechanism and efforts under the IMF program to bring visibility to ECG’s total revenues.
Our investigations uncovered a directive given to ECG by the utilities regulatory body, Public Utilities Regulatory Commission (PURC), to operate a single account to ensure visibility of total collection and onward transmission to value chain participants. This directive was not complied with. The PURC wrote to the then-President of Ghana to impress upon the power distribution company the need to heed the directive, but nothing was done.
Instead, ECG operated 61 accounts through 16 banks and did not make the details of those accounts visible to auditors.
Again, our source revealed that exchange rate manipulations were another major challenge at ECG, accounting for the huge debt the company incurred year after year. In many instances, the exchange rate reported by ECG to the cash waterfall committee was significantly higher than the interbank exchange rate. This alleged exchange rate discrepancy, according to sources familiar with the matter, contributed to a net exchange loss estimated at about GHS 6.5 billion in 2022 (up from GHS 609 million in 2021) and about GHS 7 billion in 2023.
This level of manipulation undermines ECG’s ability to pay the value chain and redirects public resources away from legitimate expenditure programmes.
In an interview with this reporter, ACEP’s Policy Lead for Petroleum & Conventional Energy called for an immediate audit of the Hubtel contract to verify all payments made to the company, to determine if there was value for money and to clarify discrepancies in cash values reported by Hubtel.
The official said this would help with resource management at ECG so that Ghana’s largest power distribution company can contribute more to domestic resource mobilisation (DRM) for national development projects.
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