The Volta River Authority (VRA) owes banks over $1.3 billion and, therefore, cannot pay its debts to Nigeria for gas supplied.
Consequently, the company is crumbling financially because of non-payment of power supplied to some of its major customers as well as low approved tariffs, which fall far below production cost.
It costs VRA 30 pesewas to buy fuel to generate one kilowatt hour of electricity but consumers pay only 14.6 pesewas per kilowatt hour approved by the Public Utilities Regulatory Commission (PURC), which means VRA loses half of the money spent on generating power.
The result is that VRA has to depend on a number of banks in the country to sustain its operations, piling up debts for the authority.
The indebtedness is primarily the result of the failure of Electricity Company of Ghana (ECG), Independent Power Producers (IPPs) and the Volta Aluminium Company (VALCO) to pay VRA for services rendered.
The Finder has information that even though ECG has signed a power purchase agreement with IPPs, it is reluctant to do same with VRA.
We are informed that one of the reasons ECG has persistently failed to sign the power purchase agreement is a clause in the agreement which demands that ECG pays interest on outstanding debts.
ECG argues that consumers of electricity do not pay outstanding debts with interest; therefore it cannot do so to VRA.
It is also known that ECG usually pays IPPs first before considering paying VRA and Ghana Grid Company (GRIDCo).
Information gathered indicates that consumers pay ECG in cedis but ECG has to pay IPPs the dollar equivalent of power purchased using prevailing exchange rate as stated in the power purchase agreement.
This takes a large chunk of ECG’s money, for which reason ECG is unable to settle its debt to VRA and GRIDCo.
It is also known that an appreciable amount of power ECG purchases goes to government institutions, which do not pay bills.
Despite the huge indebtedness, VRA cannot cut supply to ECG because of its strategic nature.
Added to this problem is that fact that VRA supplies fuel to the IPPs in the country.
However, the IPPs have failed to fully pay for the fuel with the explanation that ECG has not paid them in full, and since ECG and VRA are state institutions, VRA should collect the fuel money from the money ECG owes them.
Despite this challenge, VRA continues to supply the IPPs fuel because failure to do so would result in huge deficits in power supply.
Another critical factor is the indebtedness of VALCO. Power supplied to VALCO is partly subsidised by government.
However, VALCO has failed to pay huge amounts owed VRA while government has also not paid the subsidy on the power supplied to VALCO.
Following from all the above, VRA has borrowed money from numerous banks just to keep generating power for the nation.
Now, most of the banks are reluctant to lend to VRA because of its huge indebtedness.
The government in 2013 settled arrears in tariffs owed by the Ministries, Departments and Agencies (MDAs) to ECG, and instructed the MDAs to pay their own utility bills thereafter.
For this reason, it is increasingly difficult for VRA to get any financial support from the Ministry of Finance and Economic Planning to purchase crude oil for its operations.
The ministry expects MDAs to pay their electricity bills, and, therefore, ECG should be able install prepaid meters and to collect their money and pay VRA.
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Source: The Finder 2015-10-14