ECG declares Gh¢625.34 million as bad debt

0

For the past three years, the Electricity Company of Ghana (ECG) has declared Gh625.34 million (equal to US$80,668,860) as bad debt.

The corporation claims that bad debt is in line with the company’s policies.

“This is based on the company’s policy on provision for bad and doubtful debts,” ECG stated in its tariff recommendations for the years 2022-2026, which were submitted to the Public Utilities Regulatory Commission (PURC) for review.

In 2019, the Ghana Electricity Company set aside Gh58.51 million for bad and doubtful debt.

This number increased in 2020 and 2021.

A provision of Gh276.50 million was made in 2021, while a provision of Gh290.33 million was made the following year.

The Electricity Company of Ghana explained the reasoning behind such a company policy.

“Majority of these bad debt emanates from demolished structures due to road constructions, relocation of slums, removal of temporary structures, illegal transfer and removal of meters by unscrupulous customers (mostly SHEP areas)”.

ECG claims to be taking steps to guarantee that bad debts are kept to a minimum.

They said they work with Districts and Municipal Assemblies on a regular basis to ensure that information on demolitions, road construction, and other issues is provided to ECG in a timely manner.

Government is yet to fully settled electricity subsidies granted as COVID-19 relief to the Electricity Company of Ghana.

This is captured in a report by the power distribution firm submitted to the Public Utilities and Regulatory Commission (PURC) for consideration to increase electricity tariff.

ECG however expects the government to continue to honour its debt obligations to keep the company afloat.

It therefore expressed worry that subsidies expected to be paid by the government on behalf of customers are always in arrears, thereby negatively affecting the financial health of the company.

Government’s indebtedness to ECG in the last recent few years had however gone down to ¢4.2 billion.

Governments indebtedness to ECG in the last few years were ¢1.015 billion, ¢1.375 and ¢1.840 billion in 2019, 2020 and 2021 respectively.

The components of government bills are MDAs, GWCL, Subsidies, Streetlight shortfall, Utility Relief granted to all customers from July 2016 to June 2019 and Covid-19 Relief. Read Also >>> GOVERNMENT YET TO FULLY SETTLE COVID-19 RELIEF TO ECG, DESPITE PAYING ¢16.76BN OF TOTAL INDEBTEDNESS

The Electricity Company of Ghana wants tariffs to be increased by 148% for 2022 and with 7.6% average adjustments between the periods of 2023 to 2026.

The sharp proposed increment, according to ECG, is due to the gap between the actual cost recovery tariff and PURC-approved tariffs as well as the cost of completed projects.

In a similar fashion, the Ghana Water Company is also proposing an increment in its tariffs to be able to at least recover its costs.

These are contained in tariff proposals presented to the Public Utilities Regulatory Commission (PURC) by the two companies.

In the report, the two utility companies raised concerns about the continuous refusal of the Public Utilities Regulatory Commission to fix tariffs in line with the cost of production.

For them, the situation has affected their operations, and it is essential that the problem is rectified. Read Also >>> ECG PROPOSES 148% INCREASE IN ELECTRICITY TARIFF FOR 2022