The Africa Centre for Energy Policy (ACEP) has asked the Public Utilities Regulatory Commission (PURC) to immediately audit the Hubtel contract for the collection of bills on behalf of the Electricity Company of Ghana (ECG) to verify whether there are discrepancies in the collections and also determine the values reported by Hubtel and ECG.
ECG, ACEP, had abandoned the internal capacity built to develop and maintain a payment system for an exorbitant development fee and maintenance cost for this hurriedly arranged transaction through a sole-sourced contract.
It explained that in the contract, the total cost for the design and development of the platform by Hubtel is about GHS171.8 million, adding “between November 2022 and December 2023, the cumulative service charge was over GHS100 million”.
In addition, Hubtel will be paid 0.95percent of all revenues collected as service charges. At the time of contract execution, GH¢75 million, had been paid to Hubtel on the framework cost.
This was after ECG, had to outsource the development and maintenance of its payment system to Hubtel, having collapsed its power App.
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ACEP, pointed at contradictions in the information provided on the contract by Hubtel in communication it gave on its proceeds from the agreement.
“On March 28th, 2024, eight days after the contract was executed, Hubtel published the cost of developing the payment system at US$25 million (GHS315 million), of which US$12 million (GHS151 million) had been paid.
“Intriguingly, PURC, which should have accounted for such expenditures in the tariff methodology, is now requesting transparency and access to the contract.
“The contract gives Hubtel control over all revenues collected until such a time it is 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. 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.
“PURC should immediately audit the Hubtel contract and verify all the payments made to the company to assure value for money for the country and clarify discrepancies in cash values reported by Hubtel and ECG”.
ACEP, also demanded the dismissal of the management of the ECG over mismanagement.
ACEP, stresses that revenue losses, for instance, have increased from GH¢295 million to GH¢9.7 billion between 2017 and 2022.
Policy lead on petroleum and conventional energy with ACEP, Kodzo Yaotse, during a press conference yesterday Thursday, September 19, called for the management of ECG to be dismissed for performing poorly in its revenue mobilisation efforts.
“The growing fiscal burden imposed on the economy by ECG’s poor performance has become a ticking time bomb that can undermine the progress made after the domestic and international debt restructuring to keep Ghana solvent.
“The current management of ECG should be relieved of the jobs and immediately replaced with effective and transparent management that would salvage the company and its attendant fiscal burden on the state”.
“With the level of debt accumulation and the intervention required of the state, it is just a matter of time before Ghana is plunged into another debt crisis. With IPP debt mounting and gas suppliers and transporters demanding payments, the pressure on the government to sacrifice social investment is high.”
Mr Yaotse, also called for an end to what he said is a wasteful use of state resources, which he said cannot be allowed to persist.
“The political lethargy to enable ECG to deliver value to the people of Ghana continues to hurt Ghana’s budget and, by extension, development efforts. The Energy Sector Recovery Programme (ESRP) estimates that realised power sector shortfalls between 2019 and 2023 were about US$8.25 billion.
“This is a sheer waste of public resources that cannot persist. In light of the above.”
ACEP also asked that “PURC should assume its regulatory functions over ECG. Specifically, the Commission should implement aggressive measures to have visibility over how much revenue is collected is collected and spent on: – Value chain participants – Any other expenditures that may be undermining the sustainability of the sector”.
“The political lethargy to enable ECG to deliver value to the people of Ghana continues to hurt Ghana’s budget and, by extension, development efforts. The Energy Sector Recovery Program (ESRP) estimates that realised power sector shortfalls between 2019 and 2023 were about US$8.25 billion. This is a sheer waste of public resources that cannot persist”.
“After numerous warnings about the mismanagement of the Electricity Company of Ghana (ECG), it is becoming clear that the carefully maintained façade through media campaigns and celebrity endorsements by the company’s management is starting to crumble, revealing a concerning reality that threatens not just the existence of the company but the sustainability of the country’s budget.
“For the past few years, the public has been shouldering the financial burden of subsidising ECG’s operations, raising serious concerns about the political will to reform the utility company and push it to operate with a business-oriented mindset. Despite longstanding signs of inefficiency, politicians have failed to take decisive action to fix ECG.
“Since the inception of the IMF program in 2022, a major condition was for the government to establish systems to eliminate the recurrent under-recoveries borne by the budget by 1. Programming for the under-recoveries in the budget. 2. Taking corrective actions to prevent the materialisation of the under-recoveries.
However, there has been no sign of improvement, contrary to what the company makes the public believe.
“The major challenge of the company has been: 1. Revenue collection ECG does not collect enough revenue to account for power sales. This situation has worsened over time despite claims that the company is doing better. Between 2017 and 2022, ECG’s losses increased from about GHS 295 million to about GHS 9.7 billion.
“One of the major challenges of ECG is its handling of the exchange rate for its transactions. In many instances, the exchange rate reported by ECG to the cash waterfall committee was significantly higher than the inter-bank exchange rate.
This exchange rate manipulation created a net exchange loss of about GHS 6.5 billion in 2022 (from GHS 609 million in 2021) and about GHS 7 billion in 2023.
“ACEP, through the RTI process, requested historical exchange rates used by ECG for its transactions. The company has since May 2024 not been able to supply the requested information, stating in an August 2024 response that: “…the requested information is quite extensive and will require some time to compile.
“All efforts are being made to put together the information requested for submission. We acknowledged your forbearance thus far and implore your continued support as we work towards meeting the request.”
“This level of manipulation undermines the ability of ECG to pay the value chain and redirect public resources away from legitimate expenditure programmes. Implications of ECG’s Poor Performance on the Economy The growing fiscal burden imposed on the economy by ECG’s poor performance has become a ticking time bomb that can undermine the progress made after the domestic and international debt restructuring to keep Ghana solvent.
“With the level of debt accumulation and the intervention required of the state, it is just a matter of time before Ghana is plunged into another debt crisis. With IPP debt mounting and gas suppliers and transporters demanding payments, the pressure on the government to sacrifice social investment is high. Already, some IPPs have begun targeting payment guarantees to pay some of their outstanding debt.
“Karpower, 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 OCTP partners have an outstanding balance of about US$400 million to be settled by the government. The government needs to urgently replenish or stay current with the OCTP partners, failing which subsequent drawdowns will trigger an attack on the World Bank guarantees on the project.
