The Auditor-General’s report has revealed that the Electricity Company of Ghana Ltd. (ECG) entered into 50 contracts totalling US$145 million for the procurement of 862,750 metres between 2016 and 2021, failing to comply with the Public Procurement Act (PPA).
The audit of meter management practices indicated that ECG avoided the mandated competitive bidding procedures, choosing restrictive tendering methods without adequate justification.
“ECG did not take steps to explore the possibility of getting metres of the same specifications at lower prices from manufacturers other than the ones in their database,” the report states, highlighting a lack of value for money considerations.
Non-compliance
Notably, ECG’s stance on PPA compliance is particularly concerning. The report said: “ECG is of the opinion that it should not adhere to the PPA requirement as it is a limited liability company that does not depend on government subvention to finance its operations”.
This position was evidenced by a letter dated February 12, 2014, in which ECG sought the Energy Minister’s legal opinion on PPA adherence.
Despite seeking exemption from the Ministry of Finance and Economic Planning in July 2020, ECG proceeded with non-compliant procurement practices without receiving official approval.
The report notes: “In the absence of exemption from the Minister of Finance and Economic Planning, we expected that ECG would be guided by commercial procurement practices in Section 15 (2) of the Public Procurement Act to procure meters”.
The audit uncovered staggering losses from faulty readings, metre bypassing and power theft. In just four regions over a five-year period, ECG detected GH¢54million (US$4.5million) in losses. Alarmingly, only 39.3 percent of this amount was recovered. Commercial losses averaged 30 percent, well above the 21 percent target, due to insufficient monitoring.
The report states: “ECG recovered GH¢21,260,166 representing 39.3 percent of the GH¢53,988,463 total amount detected from fraud activities and faulty readings.”
Contract management issues further exacerbated the situation. The audit found that “ECG failed to comply with conditions of contract to terminate a contract with a manufacturer in the process of procuring the meters”, even when suppliers failed to deliver on time.
The report cited examples of customers resorting to illegal connections after waiting over a year for meter installations. One customer at the Legon District Office stated: “”If I don’t get the metre today, I will be forced to connect directly to the mains until such time ECG supplies me with a meter”.
Operational Losses
In the first nine months of 2023, the Energy Ministry reported that the Electricity Company of Ghana (ECG) experienced collection losses amounting to GH¢2.05 billion.
This figure is an improvement compared to the GH¢2.45 billion in losses recorded for the entire year of 2022.
For system losses, ECG reported GH¢4.04 billion by September 2023, a significant increase from the GH¢2.6 billion reported in 2022.
Technical losses were GH¢1.3 billion as of September 2023, down from GH¢2.8 billion the previous year. However, commercial losses rose to GH¢2.8 billion, up from GH¢1.9 billion in 2022.
The Auditor-General’s office has recommended several measures to address these issues, including strict compliance with the Public Procurement Act, better contract management and enforcement, enhanced monitoring of prepayment meters, recovery of detected fraud, and prosecuting customers involved in power theft to serve as a deterrent.
In response, ECG management stated they are “implementing a new monitoring regime whereby metre readers will visit both post-paid and prepayment metres.”
However, they cited staff inadequacy as a challenge for field monitoring.