Power sector shortfalls growing, as electricity tariffs represent 73% of cost recovery – IMF

The power sector shortfall remains large and growing, as electricity tariffs represent only 73% of cost recovery levels, with a large differential between household and business tariffs, the International Monetary Fund has said

This tariff has also increased just 5% since 2015.

“A tariff review was scheduled for July 2021. The authorities’ modeling analysis suggests that adjusting tariffs to inflation would be needed to bring the annual financial shortfall from electricity generation under US$500 million by 2024”, the Fund said.

The Bretton Wood institution said the Electricity Company of Ghana continues to suffer large technical losses, reaching ¢3 billion in 2018, a significant deterioration compared with 2016 and 2017.

To address these losses, it proposed a private concession that was agreed in April 2019, but subsequently terminated due to governance concerns.

It said the ECG continues to manage electricity distribution, without a clear reform plan.

A metering system is being put in place to address power theft and losses.

But the IMF said “the cash waterfall mechanism now distributes revenues more evenly across the sector, but is creating new cashflow issues for SOEs across the supply chain. The increase in power consumption in 2020 exacerbated technical and commercial leakages in distribution”.

The IMF also cautioned that about the financial shortfalls in the gas sector which it says is a growing challenge, exacerbated by infrastructure bottlenecks, and tariffs that do not reflect cost recovery.