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Power sector insolvency to worsen – IPPs warn of inadequate electricity supply

The Chamber of Independent Power Generators has disclosed that, the power sector’s debt to Independent Power Producers is expected to increase by around $1.8 billion by 2024.

This projection, it stated, is based on the Public Utilities Regulatory Commission’s decision to decrease electricity rates by 6.56%, citing an insufficient supply of electricity to the national grid.

“The power sector is likely to experience an exacerbated debt of about $1.8 billion to the IPPs alone, by the end of the year 2024. This prediction is based on Public Utilities Regulatory Commission’s (PURC) decision to further reduce electricity tariffs by 6.56% amidst escalating variable costs of electricity production such as fuel, maintenance, idle capacity charges, as a result of commissioned generation capacities coming on-grid and off-grid generations. Natural gas, for instance, sells currently at an average high price of 8.8 US Cents/mmscf, continuous depreciation of the Ghana cedi etc”.

In a statement, the Chamber of Independent Power Generators mentioned that generation tariffs are set as automatic upward adjustments due to rising variable costs and other cost events.

It further added that, while the tarrif reduction will be beneficial to customers, it will not decrease the cost in production – leading to significant deficit.

Again, it stated that the underlying cause of ECG’s financial problems is an imbalance between revenue generation and operating expenditures.

“Despite ECG’s commitment to a fixed $43 million monthly sum to IPPs, it continues to pile up about 70% of its monthly obligations to the Independent Power Producers alone. With this tariff reduction, the Government of Ghana renegotiation appeals to IPPs may hit the rock, as the risk of default on obligations going forward becomes high.”

Source: Energy Ghana