Tag: PURC

The Public Utilities Regulatory Commission (PURC) has dismissed media reports claiming that the Electricity Company of Ghana (ECG) is on the verge of bankruptcy, describing these claims as misreported.

According to PURC, the reports inaccurately attributed the warning of ECG’s financial collapse to the Commission’s Executive Secretary, Dr. Ishmael Ackah. In a statement signed by its commissioners, PURC clarified that it had not issued any such warning regarding ECG’s bankruptcy.

The Commission emphasized that the reports circulating in the media on September 18, suggesting that ECG was in financial crisis, were incorrect and misrepresented. The misreported claims originated from several media outlets, which alleged that PURC had expressed concerns over ECG’s dire financial state.

However, PURC explained that the concerns about ECG’s finances were first raised in a letter sent by ECG’s management to the presidency and the Minister of Energy. The Commission urged the public to seek accurate information and not to rely on misleading reports.

“The ECG in a letter to the Honourable Minister of Finance, referenced MD/MOF/V.10/018 and dated 26th August 2024, with the subject: ‘Request for Buffer Period for Cash Build-Up,’ expressed serious concerns regarding their current financial situation and warned that ‘this situation, if not addressed promptly, could lead to severe financial instability and potential bankruptcy for ECG.’”

“The media publications wrongly created the impression that the Commission on its own originated the issue of bankruptcy without an initial appeal from ECG.”

Lawyers representing the board members of the Electricity Company of Ghana (ECG) have contested the GH₵5.8 million fine imposed by the Public Utilities Regulatory Commission (PURC) for failing to provide a consistent load-management schedule.

The Public Utilities Regulatory Commission (PURC) has issued a six-week ultimatum to the Board Members of the Electricity Company of Ghana (ECG) to pay a fine of GHC5,868,000.

The Board members of the Electricity Company of Ghana (ECG), who served from January 1st to March 18th, 2024, are required to pay the regulatory charge for overseeing power outages without notifying consumers during this period.

The Public Utilities Regulatory Commission (PURC) issued this directive in a letter to ECG on Monday, April 15.

In a letter to the PURC dated April 17, 2024, the lawyers argue that the PURC exceeded its authority by targeting the board members. They assert that the Commission’s legal mandate allows it to impose fines on the company (ECG) as a public utility, not on individual board members.

They further argue that board members, who are not directly involved in day-to-day operations, cannot be held personally responsible for the company’s actions.

While the PURC justified the fine by citing the board’s responsibility for strategic direction and ensuring quality service, the lawyers counter that only “principal officers” directly involved in day-to-day management can be held personally liable under the Public Utilities Regulatory Commission Act.

“It is patently clear that under the said provision, the Commission can only impose a regulatory charge on a public utility. The Commission does not have the power/authority to purport to impose any regulatory charge on officers of the public utility. The Commission in purporting to impose the said regulatory charges on the Board Members of ECG clearly exceeded their jurisdiction as it is not within their powers/authority to do so.

“It must also be stated that the Electricity Company of Ghana Limited as a corporate body has a legal personality that is distinct from its Board Members. This is the very foundation of Company Law. The officers of the company cannot be held liable for the acts of the company.

“Lifting the veil of incorporation to go after the officers of the company can only be done in exceptional cases and can only done by a court of competent jurisdiction. The Commission’s lack of jurisdiction, power and/or authority to lift the veil of incorporation in the instant matter to purport to impose regulatory charges personally on the Board Members of ECG is strengthened by the provisions of Sections 38 & 42 of The Public Utilities Regulatory Commission Act, Act 538,1997,” a part of the letter read.

The lawyers also raised concerns about due process, claiming that the board members were not given an opportunity to be heard before the fine was imposed, which they argue violates the principles of natural justice.

The board members, through their legal representatives, reject the fine and its implications, maintaining that the PURC acted unlawfully and without proper authority.

“The Commission’s basis for holding the Board Members personally liable is because “These Board Members were at all material times responsible for providing strategic direction to ensure the provision of safe, adequate, efficient, reasonable and non-discriminatory service to consumers”

“As stated above, under Section 38 of Act 538 a default on the part of a public utility in the payment of a penalty may lead to the personal liability of a principal officer of the public utility. Under Section 49 of Act 538 a principal officer means the person responsible for the day-to-day administration of the affairs of the public utility.

“Board members of ECG are not responsible for the day-to-day administration of ECG and, therefore, are not principal officers within the intendment of Act 538 to be able to be held liable for a default on the part of the public utility ECG.

“The Commission’s Order imposing regulatory charges on the members of the Boards is unlawful, null and void as same is without jurisdiction. By this Order, the Commission has unlawfully clothed itself with the powers of the High Court, and imposed a sentence on the Board Members, without having been given the opportunity to be heard which amounts to a breach of the rules of natural justice. Our clients, therefore, reject the contents of the regulatory order relative to any personal liability on their part.”

The Board members of the Electricity Company of Ghana (ECG), who served from January 1st to March 18th, 2024, are required to pay a regulatory charge totalling GHS5,868,000.00 for overseeing power outages without notifying consumers during this period.

The board, including ECG MD Samuel Mahama Dubik and eight others, will be affected by this fine. Former board chairman Keli Gadzekpo, who resigned three weeks ago, will also be subject to the fine, along with Majority Chief Whip Frank Annor Dompreh and five other individuals.

However, current Deputy Energy Minister Herbert Krapah, who chairs the board, will not be affected as his tenure falls outside the period covered by the regulatory orders.

The Public Utilities Regulatory Commission (PURC) issued this directive in a letter to ECG on Monday, April 15. The PURC had previously requested information from ECG regarding tariff revenue allocation under the Cash Waterfall Mechanism (CWM), regulatory audit data, operational information, and other relevant data, with deadlines of March 25, March 27, and April 2, 2024.

It said, “The Commission established from its analysis of data submitted by ECG that there were 4142 outages to consumers within ECG’s operational areas between January and March 2024. Out of this number, 165 representing 3.98% of the total outages were ECG-planned outages.

“Further analysis showed that of the 165 ECG planned outages, 40 were supported by public notices, while there were no notices for the remaining 125 outages. Further, 38 of the 40 notices did not comply with the requisite three-day statutory notice prescribed under Regulation 39 of L.I. 2413. This indicates that in 163 instances of planned outages, ECG did not comply with the law”.

The specified amount is to be deposited into a dedicated fuel account jointly controlled by the Ministry of Energy and the Ministry of Finance by May 30, 2024.

Initially imposed on ECG, the fine was reassigned to the company’s board members by the PURC, citing concerns about the impact on ECG’s service delivery and the nature of its business.

“For failure to comply with the 3-day statutory notice on notification and publication of planned outages required under Regulation 39 of L.I. 2413, the Commission in accordance with Regulation 45 of L.I. 2413, also imposed a regulatory charge of 3,000 penalty units on ECG for each of the 163 breaches, amounting to Five Million, Eight Hundred and Sixty-Eight Thousand Ghana Cedis (GHS 5,868,000.00).”

“The Commission has determined that having regard to the nature of ECG’s ownership and business, the imposition of the penalty of Five Million, Eight Hundred and Sixty-Eight Thousand Ghana Cedis (GHS 5,868,000.00) on ECG would be counter-productive, as payment from ECG’s revenue would have a rebounding adverse effect on quality of service and consumers who pay tariffs to the company.

“For that reason, in the interest of justice and to protect the interests of consumers, the Commission shall hold the Board Members of ECG who were in office from 1 January to 18 March 2024 liable for the payment of the Five Million, Eight Hundred and Sixty-Eight Thousand Ghana Cedis (GHS 5,868,000.00).”

The Commission noted that these board members were consistently responsible for providing strategic direction to ensure the provision of safe, adequate, efficient, reasonable, and non-discriminatory service to consumers.

Additionally, the regulator has fined ECG GHS36,000 for its failure to submit all of its current bank and investment accounts to the Commission.

“The details of ECG’s bank accounts submitted were incomplete, contrary to the Order. 3.3 Submission of Information Related to Operational Matters.”

“The Commission hereby imposes an initial regulatory charge of 3,000 penalty units on ECG in accordance with Regulation 45 of LI 2413, amounting to Thirty-six Thousand Ghana Cedis (GHS36, 000).”

It said “ECG shall pay the initial regulatory charge of GHS36, 000 to the Commission on or before 22 April 2024.

On the time-frame for compliance, the PURC added that after the payment, “for every working day that the requested details remain outstanding, ECG shall pay an additional regulatory charge of 3,000 penalty units, calculated daily until the date of compliance.”

Additionally, apart from fulfilling its existing obligations under the Cash Waterfall Mechanism, the PURC instructed ECG to remit the sum of GHS446,283,706.29 to Category B beneficiaries under the CWM.

“The amount represents actual revenue collected by ECG, declared by ECG to the CWM, and approved by the CWM Standing Committee for payment from August 2023 to February 2024, but which remains unpaid.”

The Commission specified that ECG must pay the amount of GHS446,283,706.29 on or before April 30, 2024. Failure to comply by the specified date will result in the board members and management of ECG being held accountable.

The Electricity Company of Ghana (ECG) reported issuing over 100 power outage notifications in the first two and a half months of this year, mostly due to maintenance activities.

This disclosure came in response to a request from the Public Utilities Regulatory Commission (PURC) for the ECG’s records of power outage notifications in 2024.

Out of three inquiries posed to the power distributor, this response was the only one due by March 27th. One of PURC’s requests was for a schedule of load shedding.

PURC’s assessment found that the ECG did not adhere to two of eight directives, notably failing to release a load-shedding timetable. PURC has informed the commissioners of ECG’s failure, leaving them to decide on potential sanctions.

The Ghana Energy Commission’s 2024 forecast predicts a reliable capacity of 4,756 MW to meet the estimated system peak demand of 3,788 MW. However, due to planned maintenance and fuel supply, the available capacity might decrease by 356 MW.

On Thursday, March 28, 2024, ECG issued a power outage notice labeled as a ‘GRIDCo outage,’ affecting 69 areas in Tema.

In Tema area 1, which includes residential zones, 32 areas experienced the outage, including Afienya, Christian International School, Prampram, and Dawhenya.

Tema area 2, primarily industrial, also faced the outage, affecting 37 locations such as Japan Motors, Unilever, GPHA Terminal 1&2, Tema Oil Refinery Pumping station, Dangote Cement, and Cocobod Warehouse.

The Public Utilities Regulatory Commission (PURC) has criticized the Electricity Company of Ghana (ECG) for its decision to use funds from the cash waterfall mechanism to purchase fuel for power generation.

This decision has reportedly left the Volta River Authority (VRA) and the Ghana Grid Company (GRIDCo) cash-strapped between November 2023 and January 2024, negatively impacting their operational capacity.

PURC has given ECG a one-week ultimatum to respond to a set of demands and warned that it may impose sanctions if the demands are not met.

Alhaji Jabaru Abubakar, the Director of Regional Operations and Consumer Services at the Commission, emphasized that the ECG must adhere to regulatory guidelines and cannot operate on its own terms. He dismissed speculation of a turf war between the PURC and ECG, stating that the PURC is simply fulfilling its role as a regulator.

Energy analyst Kwame Jantuah suggested the need for a mediation body to resolve the differences between the two entities.

Meanwhile, the Mines and Energy Committee in Parliament has summoned the Energy Minister and the managing director of ECG to address the recent public dispute. Committee Chairman Samuel Atta Akyea stated that they view the matter as important and aim to understand the root cause of the disagreement between the regulator and the distributor.

An audit conducted by PricewaterhouseCoopers (PwC) on the Electricity Company of Ghana (ECG) has revealed significant discrepancies in its adherence to the Cash Waterfall Mechanism (CWM) established by the Public Utilities Regulatory Commission (PURC).

The Cash Waterfall Mechanism Validation Report for November 2023 Payment echoed concerns about the handling of cash collection and distribution by ECG management.

The audit, according to The Hearld, found that there were substantial disparities between the reported collections and the actual disbursements by ECG, amounting to approximately GHS3.5 billion over ECG’s CWM allocation from July 2022 to September 2023.

These findings are contrary to the requirements of the Cash Waterfall Mechanism for month-on-month analysis, as reported by The Herald.

The audit findings revealed that ECG disbursed funds to non-CWM beneficiaries in amounts that exceeded its allocated amounts as per the CWM guidelines. This deviation from the intended distribution mechanism outlined by PURC is significant.

“Disbursement to CWM beneficiaries from other ECG operational accounts post-MoF directive of June 21, 2023, effective July 1, 2023. The Ministry of Finance (MoF) issued a directive on June 21, 2023, effective July 1, 2023, that ECG should operate a single account from which all collections and payments will be made. In this regard, ECG designated Fidelity Bank Account Number 1070006628289 as the single collections account.

“From our validation procedures performed, we noted that some payments totaling GHS 684 million to CWM beneficiaries for the period from July 2023 to September 2023 were made from other ECG operational accounts, escrow accounts, and margin accounts. Payments through these other accounts were not in line with the MoF directive issued.

“We have raised this with ECG and requested the bank statements for these operational accounts, escrow accounts, and margin accounts to validate these payments to the CWM beneficiaries. We have yet to receive them.”

Additionally, the audit highlighted a net difference of GHS1.9 billion between the total collections declared on the CWM-approved schedules and the inflows consolidated from the bank account statements reviewed.

The audit team noted consistent differences between the collections and corresponding allocations made by ECG, compared to what was actually paid out. According to the CWM reports, this discrepancy was primarily due to overpayments/underpayments to beneficiaries, particularly those classified under Tier 2 (Level B).

“The total collections per the CWM were lower than the total collections per the two bank statements. We have raised this with ECG and requested explanations and supporting evidence for these disparities. As of the date of this report, ECG management has yet to revert with these explanations and supporting evidence.”

“The list of documents reviewed as part of the validation exercise includes the following: CWM payments (from 2022 to 2023); ECG GCB Bank Statement for account number 1011130011277 for the period from July 2022 to September 2023; Fidelity Bank Statement for account number 1070006628289 for the period from January 2023 to September 2023;

“Cheque registers for payments to CWM beneficiaries for the period from July 2022 to September 2023; bank transfer advice to various banks for payments to various CWM beneficiaries for the period from July 2022 to September 2023.

“Based on the data made available to us, we adopted the following approach to the exercise: Cash collections: We obtained the bank statements of the GCB collections account (1011130011277) and the Fidelity single collections account (1070006628289) and analysed all collections received in the account (credit transactions in the bank statement) on a monthly basis for the period from July 2022 to September 2023.

“We then compared the total monthly collections analysed from the bank statements to the amounts reported in the CWM, highlighting the differences noted for each month.

“We obtained the bank statements of the GCB collections account (1011130011277) and Fidelity single collections account (1070006628289) and analysed all disbursements in the account (debit transactions in the bank statement) on a monthly basis for the period from July 2022 to September 2023. We then identified all disbursements on a month-by-month basis made to CWM beneficiaries by obtaining and analysing the cheque register and bank transfer advice from ECG. For those payments made through the Fidelity and GCB accounts, we agreed these amounts to the bank statements.

“We then excluded the total CWM payments from the total disbursements to ascertain the non-CWM disbursements made by ECG and compared these amounts to ECG’s CWM allocation. Differences between Total Collections declared on CWM and the total collections consolidated from the bank statements of the GCB main account and the Fidelity Single Collections account. On a monthly basis, ECG is required to report their total collections for the month for input into the CWM, which would then be distributed amongst the CWM beneficiaries.

“To assess the amounts reported by ECG, we obtained and analysed all collections received in the GCB collections account (account number 1011130011277) for the period from July 2022 to September 2023 and the Fidelity Bank Single Collections Account (account number 1070006628289) for the period from January 2023 to September 2023).

“From our analysis performed on the bank statements received, we noted a net difference of GHS1.9 billion between the total collections declared on the CWM approved schedules and the inflows consolidated from the bank account statements shared.

This comes as PURC continues to accuse ECG and its management of refusing to comply “with the guidelines of the new CWM as directed by the President, Nana Akufo-Addo, in August 2023.

“This defeats the principle of fair and equitable allocation of revenue to sector players under Level B as approved by the CWM Standing Committee in line with the revised CWM guidelines. The Commission wishes to state that ECG should co-operate and allow the CWM to function as directed by the President. Additionally, MoF should also take the necessary steps to honour its obligation by paying for the shortfalls.”

In the audit report, PricewaterhouseCoopers expressed frustrations, citing a lack of cooperation from ECG management during the audit process. The report noted that the state company often refused to provide requested information, particularly documents, and did not respond to queries regarding identified infractions.

Conducted at the request of the Ministry of Finance, the audit recommends the strengthening of the current CWM and enhancing ECG’s compliance with its directives. Proposed measures include process improvements in billing and invoicing, as well as the implementation of technology-enabled platforms to enhance transparency and accountability.

The audit report stated, “We have identified and described in detail our recommendations for strengthening the current CWM and the inputs from ECG going forward.” It added, “It is imperative that ECG and other stakeholders work collaboratively to implement these recommendations and uphold the integrity of the CWM.”

This includes: Establishing billing and invoicing process improvements at ECG; Key considerations for the CWM disbursement process; Key considerations for the management of non-tariff revenue by ECG; Medium-term redevelopment of the CWM onto a technology-enabled platform to strengthen the fundamental objectives of the mechanism; Key considerations for cybersecurity and data protection measures at ECG (including implementation of a disaster recovery plan or framework, integration of cyber defence mechanisms and processes at ECG, and considerations for managing third-party solutions and collaborations).

It suggested engaging with the Ministry of Energy, PURC, and other relevant stakeholders to establish the critical process of retrieving the required data/information to complete our tasks. This will also establish the foundation for the relevant processes and information requirements going forward for the quarterly reviews.

“We also look forward to discussing our recommendations as PURC, ESRP, and the other stakeholders plan to work with ECG to implement them to help restore confidence and promote a transparent and strengthened CWM.”

As part of achieving financial sustainability in Ghana’s energy utilities and value chain, the Government of Ghana (GoG) initiated the Energy Sector Recovery Program (ESRP) in May 2019. The ESRP is a comprehensive recovery program that sets out a roadmap of policies and actions required for financial recovery in the energy sector.

In April 2020, the Electricity Sector Revenue Protection (ESRP) implemented the Cash Waterfall Mechanism (CWM) to ensure transparent, fair, and timely payment of all revenues billed and collected by the Electricity Company of Ghana (ECG) on behalf of the entire electricity generation value chain.

The CWM, along with the Natural Gas Clearinghouse (NGC) mechanisms, was established to promote fairness and transparency in the disbursement of energy revenues and the equitable allocation of tariff revenue collected by ECG to all parties in the energy value chain.

This validation exercise aims to verify electricity sales in terms of kilowatt-hours (kWh) and the amount billed and collected by ECG over a specified period. It seeks to confirm whether these sales, billings, and collections align with the requirements and outcomes of the Cash Waterfall Mechanism and its related payments. The assessment will also validate the cycle of power delivered, corresponding billing, and collection, as well as the full transfer of these collected funds from regional collection accounts into the Single Collections account.

Issues related to ECG’s revenues/collections and the broader energy sector debt have contributed to Ghana’s economic challenges. Therefore, this engagement is crucial in identifying and addressing these challenges to strengthen the power sector value chain.

Amongst other things, it demanded some detailed revenue assurance and validation, an understanding of the key sources of revenue for ECG, i.e., tariff and non-tariff, and their detailed composition /breakdown; a review of revenue/cash collections from the district level and how this flows to the Head Office from the customers’ billings.

It also recommended stakeholder engagement and buy-in to align with key stakeholders (IPPs, ECG, PURC, MoEn, GoG) on the reconciliation/validation exercise’s outcome and key actions required.

The CWM report does not state clearly why this happened, and the PURC notes that the CWM Standing Committee indicated how this defeats the purpose of the CWM.

“We generally agree with this position, as the guidelines for the CWM are quite clear.

It will be important to understand, from ECG’s perspective, why there is a continuous lack of cooperation in following the guidelines, which is raising many questions about its use of its collections.”

It was also identified that ECG used an unprotected Microsoft Excel spreadsheet (Data Integrity and Model Security).

“We observed that most of the submitted CWM models did not have protected cells to limit users’ ability to interfere with allocation formulas either intentionally or by error.”

It was advised that PURC will need to reconsider using Microsoft Excel-based spreadsheets for the CWM going forward. The integrity of the data entered into the spreadsheet must be safeguarded to promote transparency and efficient management of the mechanism.

Key cells must be locked with control access features and enhanced access log features programmed into the spreadsheet to track any attempted changes to the inputs in the model.

“As suggested in our recommendation, PURC, together with ESRP, should consider a shared platform approach to enhance oversight and accountability from ECG, beneficiaries, and the key stakeholders of Ghana’s value chain to promote confidence in the CWM and its ability to meet its objectives.”

“Currently, ECG is required to submit the CWM to PURC for review and validation. As mentioned earlier, the allocations and subsequent disbursements often do not completely follow the requirements of the guidelines. It will be useful for PURC to take advantage of technology-enabled solutions to facilitate a system that provides real-time data, independent validation, and a stronger reconciliation system to support a more efficient monitoring and evaluation process in the CWM declaration process.

On validation of payments to CWM beneficiaries, the report said that “from our review of payments made to CWM beneficiaries, we noted that some payments were made through ECG’s operational accounts, margin accounts, and escrow accounts (ADB, Consolidated Bank, Fidelity Bank, GCB, Access Bank, Zenith Bank, Bank of Africa, First Atlantic Bank, GT Bank, Omni BSIC, Republic Bank, Ecobank, ABSA, Stanbic Bank, Societe Generale, CAL Bank, and Universal Merchant Bank). As of the date of this report, the bank statements for these accounts have not been made available to us to validate these payments. As such, the validation of these payments could not be performed.

The Public Utilities Regulatory Commission (PURC) has demanded that the Electricity Company of Ghana (ECG) provide it all the requested data, allow access to its bank statements for auditing.

Vice president of IMANI-Africa, Bright Simons, made this known when he shared portions of the PURC’s statement on the matter on his platform on X.

After ECG, Ghana's state owned electricity utility, snubbed auditors appointed to collect critical data about ECG's operations, the powerful regulator, PURC, has stepped in. PURC says ECG must produce all the data, allow access to bank statements, & publish a dumsor timetable. pic.twitter.com/QFuZOvbi4d

— Bright Simons (@BBSimons) March 19, 2024

In early March this year, Bright Simons, provided documents that indicate that the Electricity Company of Ghana withheld information from Pricewaterhouse Coopers (PWC) tasked with validating ECG’s revenue accounts.

“PWC, the auditors tasked by govt of Ghana to check if the under-pressure state electricity utility, ECG, is handling its finances properly is struggling to get data from ECG. Its ledger of monies paid out by ECG in Sept 2023 doesn’t even list the big private power producers,” he wrote in a post on X.

Per the document shared, PWC admitted that it reached out to the ECG for its customer billing and collections, and the bank statements for the Single Collection Account but failed to receive them.

The December 8, 2023, press statement released by PWC indicated that they were informed on November 30, 2023, by the General Manager for Financial Planning and Revenue Assurance that the Managing Director of ECG had instructed that they attend a meeting on December 7, 2023, at 10 am at ECG so that the data that they had requested, including the customer billing and collections, and the bank statements for the Single Collection Account for the period of their review, would be provided to them.

On December 7, 2023, PWC met the Managing Director of ECG as requested, however, “he stated during the meeting that ECG is unable to provide customer billing and collection data to a third party as this will contravene the Data Protection Act, 2012 (Act 843).”

“As such, we were not provided with any data or information at the meeting and to date we do not have any customer billing and collection data, nor do we have any of ECG’s bank statements for the Single Collection Account for any of the periods to be covered by our review,” the statement added.

The lack of this data and information, PWC said presented a significant limitation to the conduct of our work and without it they will be unable to perform any meaningful analysis towards the overall objectives of the assignment.

Accordingly, they requested an urgent meeting with the Chief Director at the Ministry of Energy, Mrs Asamoah, at her earliest convenience to discuss the next steps for the engagement.

PWC, the auditors tasked by govt of Ghana to check if the under-pressure state electricity utility, ECG, is handling its finances properly is struggling to get data from ECG. Its ledger of monies paid out by ECG in Sept 2023 doesn't even list the big private power producers.🤦🏽‍♂️ pic.twitter.com/5MUkNbBTvX

— Bright Simons (@BBSimons) March 1, 2024