- ECG remains committed to complying with the CWM model
- The PURC demanded that ECG allocate all tariff revenue as prescribed by the CWM
- ECG working actively to resolve its challenges
Electricity Company of Ghana (ECG) is facing difficulties meeting its financial obligations under the Cash Waterfall Mechanism (CWM), a system designed to ensure transparency and stability in electricity revenue distribution.
The core issue boils down to unexpected fuel costs. The Ministry of Finance (MoF), usually responsible for procuring fuel for power generation, reached an agreement with ECG. ECG would purchase the fuel upfront and receive reimbursement later. This seemingly simple solution resulted in a $20.4 million burden on ECG since August 2023. The CWM, however, does not allocate funds for fuel purchases, leaving ECG with less money to distribute to Tier 2 beneficiaries under the program.
This financial strain prompted a response from the Public Utilities Regulatory Commission (PURC) in March 2024. The PURC demanded that ECG allocate all tariff revenue as prescribed by the CWM.
ECG, in a press statement signed by the managing director, Mr Samuel Dubik Mahama dated March 27, explained the situation and proposed a solution. Following discussions, they reached an agreement to collect GHS 1 billion monthly for both Tier 1 and Tier 2 beneficiaries. An additional GHS 300 million will be set aside specifically for future fuel purchases, ensuring a more sustainable approach.
However, ECG also highlighted challenges with the CWM implementation. Here are some key points they raised:
Early Power Classification: ECG argues that Early Power, a power generation company, deserves Tier 1 beneficiary status. This is based on a “Take or Pay” agreement between the two entities, and outstanding bills for electricity generated by Early Power.
WAPCo Payment: Ministerial directives require WAPCo, another power company, to be included in Tier 1. Additionally, these directives mandate payments to be made directly to WAPCo in US dollars, reflecting the currency of their account.
Loan Repayments: To prevent debt accumulation for Bui Power Authority and Ghana National Gas Company, ECG took over their loan repayments, totaling GHS 250 million. They argue that these repayments should be factored into the CWM to avoid further financial strain on ECG.
ECG remains committed to complying with the CWM model, according to Mr Mahama.
“We are actively seeking solutions to the aforementioned challenges to ensure a more efficient and financially secure electricity sector in Ghana.”
