Yippee!!!!.\u00a0\u00a0 I am happy to read that Ghana\u2019s media have found another \u201cformer Chief Executive of the VRA\u2019 besides me.\u00a0 Twelve years after I left the position, and no matter what I do or talk about,\u00a0\u00a0 from the doctors\u2019 strike to abolishing TV licence fees, every reportage starts with \u2018the former Chief Executive of VRA\u2026<\/p>\n
Whilst welcoming Kweku Awotwi to share the accolade, I could not help but wonder whether someone had not goofed again. Although Kweku is eminently qualified to talk about power tariffs, I can say confidently and without equivocation that he was acting in a different capacity when he made his reported comments on power tariffs. If I was to be charitable, I would say someone was being modest. But I think the truth is that the title \u2018former Chief Executive of the VRA\u2019 has come to be the valedictory title of anyone who has ever held the position<\/p>\n
I cannot quibble with Kweku Awotwi\u2019s statement that there must be \u2018realistic\u2019 tariffs. \u00a0Indeed it is to be welcomed by every Ghanaian Living Everywhere who is waiting anxiously for the \u2018Omanhene\u2019 of Ghana to \u201c fix rather than solve\u2019 the temporary power crisis which tenure has almost reached the duration of the longest Provisional Government in our history. \u00a0\u00a0\u00a0Coincidentally, or is it more of Orchestration, that the \u2018Omanhene\u2019 repeated the pledge at the same event, although with a little less certainty than in the \u2018State of the Union\u201d address last January.<\/p>\n
I want to add to the debate by asking my fellow \u2018former Chief\u2026\u2019 what he means by \u2018realistic tariffs\u2019 which is a refrain I heard from VRA staff from as long ago as 1988 when I served as Energy Policy Adviser to the provisional government and whose biggest cheerleader, JOSEPH Ofedie, is also a member of the \u2018former Chief Executives of the VRA\u2019 club.\u00a0 By the way, the current Millennium Challenge Authority boss. Owura Safo, is also a member of the club, though I have not heard anyone describe him as such.<\/p>\n
As for me, I prefer and would suggest we talk about \u201cEconomic tariffs\u2019 rather than realistic tariffs.\u00a0\u00a0 The tern Economic is well understood, it describes the notion of covering all costs in delivering an outcome, plus a reasonable margin for investing in the venture. Unfortunately, realistic is a form of art, subject to political considerations, such as Kan Dapaah\u2019s Affordability, and\u00a0 the general feeling of entitlement of most Ghanaians who think they should have power to chill their beer for free. Such feelings\u00a0 have dogged our country\u00a0 and been exploited by every government ever since the Akosombo dam was opened 50 years ago<\/p>\n
We borrowed World Bank money to build Akosombo. To be able to pay back the loan and save a little for a rainy day, we sold the power to Kaiser\u2019s Valco. Valco paid an economic tariff in US cents,\u00a0 \u00a0based on recovering the full costs and earning an eight percent rate of return on VRA\u2019s assets. Like the present IMF demand for us to STRICTLY enforce the petroleum pricing formula (illegally and disingenuously sold as deregulation) there was no wiggle room for the politicians to feign concern for the people.<\/p>\n
Because VRA recovered all of its costs and returns from Valco, the power for the people was \u00a0virtually given away free.. Nobody saw it fit, or to be fair, \u00a0necessary, to charge an economic rather than a politically-motivated \u00a0tariff to domestic and industrial consumers. Even when Rawlings\u2019 Choker almost took our last breath away, prematurely in the 1983 drought and we discovered the necessity for \u2018thermal complementation\u2019, successive governments believed in the freebie tariff for domestic consumers; even as the proportion of the more expensive thermal proportion rose and rose to reach its current level of 50%.<\/p>\n
So entrenched is our entitlement mentality that we are one of the few countries in the world that prioritizes the domestic consumers\u2019 power needs over that of industry\u00a0 which\u00a0 produces the value addition to our natural resources to give us real wealth, and not \u2018Dutch diseased petrol dollars.\u00a0 Why do I say so? We continue to charge domestic consumers a lower tariff than industrial and commercial uses.\u00a0 And when we have gotten into our periodic Dumsor, we are proud to cut off supply to industry and focus all our energies on giving the little power we have to the domestic sector and so called emergency services, such as the offices and homes of the governors.<\/p>\n
Fortunately, the IMF\u2019s \u2018strictly\u2019 rule as applies to the quarterly revision of power tariffs, although my brother Samuel Sarpong & niece Nana Yaa Jantuah,of PURC, have disguised the moratorium on the last review as an eminently sensible show of concern when consumers have been waiting for almost four years for the Omanhene to fix the crisis<\/p>\n
In case anyone is wondering what I am doing wasting your dark and sweaty nights with this toli, here is the beef in the sandwich. \u00a0Coincidentally I am the beef in the Kweku Awotwi sandwich when it comes to \u2018former chief Executives of the VRA\u2019.\u00a0 The gentle giant demoted me from Chairman to CEO when Kweku Awotwi first turned down the job. Then when the gentle giant bowed to Kwesi Pratt and co\u2019s \u00a0excessive noise about an \u2018atakwame \u2018shower falsely described as a Jacuzzi, Kweku Awotwi stepped into my seat, both as Chairman and CEO.\u00a0 He then took an enforced retirement and returned as CEO under the \u2018Asomdweehene\u2019.<\/p>\n
The problem is that the approach to setting of tariffs in Ghana\u2019s power sector has been \u00a0moribund and untenable since the days when VRA had complete responsibility for all power generation in Ghana. It has continued to today where we are not sure if ECG is a distribution company or is slowly and inexorably assuming VRA\u2019s generation role in addition to its distribution mandate;\u00a0 Amuna\u2019s GRIDCO IS \u00a0the meat in the supply sandwich.<\/p>\n
Confusingly, VRA\u2019s generation role has not been entirely abandoned. It is still called upon to sign generation power purchase agreements from time to time. The problem is that nobody has quite explained to Ghanaians when it is better to deal with VRA and when it is better to deal with ECG. The decision I suspect depends on whether we want everything to be above board in \u2018Sor\u2019 or we prefer to operate under a dum dum\u00a0 cloak and dagger manner.<\/p>\n
From the birth of Akosombo, VRA\u2019s procurement process has always been by open tendering. Under that we got the best value for what we wanted.\u00a0 However, under constitutional governments, openness has ironically turned to ‘esumase. ‘ ECG alone has been forced to sign over 22 power purchase agreements without tender. VRA has also signed some under dum dum conditions, having been forced to abandon its traditional transparent environment.<\/p>\n
About 10 of the agreements have been signed under the label of Emergency Power, although those in charge cannot see the irony of a so-called emergency plant being deployed long after Dumsor has officially ended and my brother Kwabena Donkor\u2019s job has been saved by the bell.\u00a0 The truth is that the key to ending Dumsor lies with assured fuel supply for our now rehabilitated generators and a dehydrated Akosombo lake responding to the prayers of the pastors and our home grown \u2018akomfo\u2019<\/p>\n
The trouble is that when things are done the way we are going about it now in the power sector, the costs for supplying power to all classes of consumers rocket up to take account of the \u2018sleaze premium\u2019. \u00a0Labeling something emergency automatically means paying\u00a0\u00a0 a premium to get the service.\u00a0 That\u2019s a double whammy we have to factor into the costs of producing and delivering power, which of course needs to be fully recovered and a return added to achieve an economic or realistic cost.<\/p>\n
The other issue that puts a monkey wrench in the spooks of arriving at and charging economic or realistic tariff is the changed but unplanned structure of doing business in the power sector. \u00a0ECG\u2019s PPAs\u2019 are priced with IPPs in dollar and cents, including Chinese owned Asogli. ECG also bills us and collects our tariffs in the constantly wobbling Ghanaian cedi. VRA also signs all its contracts-, PPAs, fuel purchases from WAGP and yes, Ghana Gas, and power purchases from Ivory Coast to watch football, in dollars and cents too.<\/p>\n
Now here is the rub. The current PURC tariff methodology is based on the old and ordered system when VRA was in charge of all generation and ECG\u2019s business was restricted to trying to distribute whatever power it got from VRA in an equitable manner.\u00a0 Then it was simple; PURC determined the Bulk Supply Tariff(BST), and paid it to VRA (including GRIDCO) and ECG\/NED collected and kept its portion of the End-User Tariff(EUT).<\/p>\n
Now we have the added complication of ECG being forced to take on generation , much of which is classed as emergency and been procured under dum dum. As the one who has signed the PPA and also collects our tariffs, ECG is obliged to first pay its\u00a0 IPP partners in dollars and cents at current forex rate, before it can share the rest of it with\u00a0 VRA and , Gridco,<\/p>\n
Unfortunately, both the cedi denoted BST and EUT rapidly lose their value against the dollar under a yo-yo performing cedi, destroying all of their planning assumptions.\u00a0 Alas the reality is that ECG needs to convert the cedis into dollars to pay the IPPs. Even before then, they must pay their staff; And if there is anything left pay VRA, GRIDCO and anybody else in the supply chain . As for there being money for the maintenance of the distribution equipment, \u201cNyame wo ho\u201d<\/p>\n
To add insult to a \u2018koobi- infested\u2019 injury , the government and its various agencies refuse to pay for the power they use,\u00a0 be it at work or at home or at play; \u00a0adding to the woes of our power producers and suppliers. This is how we have come to the unedifying and despicable spectacle of today :ECG being owed billions of cedis by GOG, VRA being owed billions of cedis by ECG, ECG unable to pay Asogli power for the most reliable source of thermal power; ASOGLI owing VRA for the gas it uses to produce power; VRA owning WAGP, and yes, Ghana gas, millions of dollars to supply fuel to run our thermal plants.<\/p>\n
Rather than sorting the foregoing pretty mess, our government has rather sunk millions of dollars into acquiring new generation capacity on the pretence of fixing the power crisis instead of solving it. So much generation capacity is being brought in under the pretext of \u2018emergency\u2019 when in fact the urgent problems have to do with getting assured regular and ample fuel to power our existing home grown generators, which in turns is very much dependent on paying outstanding bills to the power producers and suppliers.<\/p>\n
Unfortunately the approach to fixing the power problems leads to several obstacles to \u00a0determining realistic or economic tariffs in Ghana. Under the system of contracting new generation from the IPPs, the cost of power has two main components, namely a Capacity charge, and an Operational charge.\u00a0 Capacity charge represents a cost that is paid simply to have the plant here in Ghana. \u00a0It has nothing to do with whether \u00a0it is producing power or not.<\/p>\n
Therefore any power generation capacity acquired, beyond the peak load plus a spinning reserve of about 25%, which is just sitting doing nothing, is adding to the costs that go into the calculation of the realistic or economic tariffs. Therefore with our current peak load of about 2000 MW, the notion of racking up Ghana\u2019s generation capacity to 5000MW\u00a0 by 2016 -17 is both absurd, irrational; and ultimately costly to the consumers who have to pay the so called realistic tariffs<\/p>\n
Already the \u2018Omanhene\u2019 and his ministers in charge of power have said we will have to pay more for power. As one who famously once suggested that \u201cthose who think that power is \u00a0expensive should try candles\u201d, I cannot quibble with the principle of paying an economic rate \u00a0for reliable supply, except for the small matter of the politicians usurping the supposedly independent authority of the PURC to make such judgment calls.<\/p>\n
So here is the scenario. The people we have elected to act on our behalf have contracted huge additional power generation capacity through non-transparent processes. \u00a0They have failed to convince us of the technical merits of the size of capacity to be optimal for our needs in the short, medium and long term. They have also failed to disclose and justify the costs of acquisition to we the people in whose name and on whose behalf they exercise power.<\/p>\n
For me the case for increasing tariffs\u00a0 has till to be made convincingly and justifiably on its own merits, \u00a0notwithstanding \u00a0what the Omanhene and his acolytes have pronounced.\u00a0 Charging realistic tariffs is a no brainer in this discussion. However, arriving at what constitutes realistic or economic power tariffs is still a pending case, yet to be made convincingly to us the people through the PURC.<\/p>\n
Let me offer a way forward to assist the process.\u00a0 I want to invite all living former chief executives of VRA (the venerable Kobla Kalitsi, yours truly, Kwaku Awotwi, Joshua Ofedie, Owura Safo, and Kweku\u2019s clone), plus their colleagues from ECG and GRIDCO, to a conclave on the approaches, choices and the costs of\u00a0 the responses of decision makers to fixing the 3-4 year temporary crisis.\u00a0 Apart from tea and fuel allowances, plus accommodation, we should consider this as legacy national service.\u00a0 I believe our deliberations would make a welcome contribution to the impending debate on what should be the economic \/realistic tariffs to ensure that never again would Ghana have endure an unreliable load shedding schedule<\/p>\n
\u00a0Charles WEREKO-BROBBY(DR)<\/strong><\/p>\n