The Public Utilities Regulatory Commission (PURC) has issued a formal press statement in response to recent media reports that have raised significant concerns about the financial health of the Electricity Company of Ghana (ECG) and alleged misinterpretations of PURC’s role in this matter.
The Commission seeks to clarify the nature of its involvement and address the personal attacks on its leadership. One of the central issues revolved around a letter from ECG, dated August 26, 2024, to the Minister of Finance, which highlighted the company’s financial distress.
The letter, titled “Request for Buffer Period for Cash Build-Up,” warned of potential bankruptcy if immediate action was not taken. This letter was later cited in a subsequent communication from PURC to the Ministry of Energy and the Presidency on September 16, 2024.
The media, however, erroneously presented the situation as though PURC itself had raised the issue of bankruptcy without prior input from ECG. The Commission, in its statement, clarified that it had merely responded to ECG’s own concerns, which had been formally communicated to the government.
PURC emphasized that it was fulfilling its statutory responsibility to advise relevant authorities on public utility matters. The Commission had written to the Energy Ministry and the Presidency to highlight the potential threat posed by ECG’s financial instability, which could affect the broader energy sector and the security of electricity supply.
“ECG itself raised the specter of bankruptcy in its letter of August 26, 2024, among others, in which it appealed for governmental support to prevent financial collapse.
“To date, ECG has not provided the detailed financial and operational data requested by PURC to substantiate its claims of impending bankruptcy.”
Public Utilities Regulatory Commission (PURC)
In its advisory to the Minister, PURC recommended a series of interventions aimed at facilitating ECG’s financial recovery, transforming its operations, and securing the overall sustainability of the energy sector.
The media reports, published by MyJoyOnline on September 18 and 19, 2024, discussed issues including ECG’s potential bankruptcy and criticisms from ECG regarding PURC’s stance on the Cash Waterfall Mechanism (CWM) and the procurement of fuel by the electricity provider. In view of the seriousness of the issues raised, the Board of PURC has chosen to provide context and clarity.
Response to Criticisms on Cash Waterfall Mechanism and Fuel Purchases
The second key issue addressed in PURC’s press statement was the allegation made by ECG that the Commission had “missed the point” in its advice concerning the Cash Waterfall Mechanism (CWM) and fuel purchases.
“Unfortunately, ECG in purported response to PURC’s advice to the Energy Ministry, attacked the entire leadership of the Commission, particularly, the person of the Executive Secretary in their rejoinder above referred to and dated September 19, 2024.
“The Commission affirms that decisions of the Commission are collectively taken by the Board and executed by the Executive Secretary.”
Public Utilities Regulatory Commission (PURC)
The Commission pointed out that its advice to the Ministry of Energy, regarding the financial challenges of ECG and the need to safeguard the energy sector, was rooted in ECG’s own letters and appeals.
In relation to the forex losses mentioned by ECG, PURC stated that these are addressed in the Commission’s Quarterly Reviews, and contrary to ECG’s assertion, forex losses are not overlooked. The Commission stood by its reviews, affirming that it follows strict procedures when dealing with issues such as forex losses and payments to IPPs.
Regarding ECG’s involvement in fuel procurement, PURC took issue with the company’s decision to independently procure fuel, describing it as a deviation from ECG’s core mandate of power distribution.
“The Commission holds the opinion that ECG should concentrate on its core mandate of electricity distribution business which currently remains inefficient, and not on ancillary businesses of procuring fuel for power generation, which is not a distribution activity.”
Public Utilities Regulatory Commission (PURC)
According to PURC, fuel procurement distorts the revenue allocation mechanism in the energy sector, and ECG was directed by the Economic Management Team (EMT) in November 2023 to refrain from procuring fuel.
The Commission emphasized that the responsibility for procuring fuel falls to the Volta River Authority (VRA) with the Ministry of Finance’s support, and any procurement done outside this framework without proper regulatory oversight undermines the sector’s transparency and financial integrity.
The PURC concluded by assuring the public of its commitment to its regulatory role, which involves balancing the interests of consumers and utility service providers while ensuring the sustainability of the energy sector.
It called for a collaborative effort among stakeholders to address the pressing challenges facing the electricity distribution sector and reaffirmed its focus on transparency and financial integrity in all its dealings.
The Commission also urged the media to present factual and balanced reports on the issues affecting the energy sector to avoid misinforming the public and undermining the efforts to address these challenges.
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