Ghana's Power Generation Faces Collapse Unless...

The Volta River Authority (VRA), the sole body that produces electricity in Ghana, warned on Saturday that it faces imminent collapse unless consumers pay realistic tariffs for its power.

It said the company is in a deep financial crisis as tariffs are only a fraction of the cost of production and urged the Public Utilities Regulatory Commission (PURC) to award it a steep tariff increase from 95 cedis a unit to 432 cedis to save the situation.

"The VRA has never faced this (bleak) situation before," Eric Yankah, Acting Deputy Chief Executive in charge of Finance and Corporate Affairs, said.

"If we do not receive the tariff increment, your flagship company will go bankrupt and the economy will go bankrupt," he told journalists who visited the Takoradi Therman Power Project at Aboadze, near Takoradi, in the Western Region.

He explained that the 432 cedis is still below what the VRA should be charging the Electricity Company of Ghana (ECG) which is the distributor of electricity in the southern half of the country.

VRA, which started operations in the mid-1960s when the late President Kwame Nkrumah built the Akosombo Dam, has hit hard times because of low power tariffs paid by consumers.

It owes about 34 million dollars to Cote d'Ivoire from where it buys power during peak periods, especially from 1800 to 2200 hours, and during times of crisis. It also owes several millions to commercial banks for fuel to operate the Takoradi plant.

In the meantime, ECG owes it a whopping 325 billion cedis (1 USD = 7,000 cedis). Yankah said about 90 per cent of VRA's operations are funded from foreign exchange, adding that in 1998 when the PURC granted it 95 cedis per unit, it was worth four cents.

Now, he said, the equivalent of amount is worth only one cent because of the depreciation of the cedi currency.

"We cannot supply power at that price," he said.

Yankah said although production of hydropower is cheaper now from Akosombo, at the time the Takoradi plant was being considered the construction of a dam at Bui was definitely higher.

"While Takoradi was 5.6 cents per unit, Bui was 7.2 cents per unit," he explained. He said the VRA considers the best option at a particular time and the Bui Dam is still under consideration.

At the moment, the production cost of power from Akosombo is 177 cedis per unit, the Takoradi plant running only on fuel is 507 cedis, the Takoradi plant using fuel and steam generation is 343 cedis while import from Cote d'Ivoire is 357 cedis.

J. Amissah-Arthur, Deputy Chief Executive, Engineering and Operations, said domestic consumption of power has increased sharply since the Akosombo Dam was commissioned with Greater Accra - mainly Accra and Tema - taking a huge chunk.

He said Akosombo produces about 63 per cent of power, Kpong 13 per cent, the first Takoradi plant 19 per cent, the second Takoradi plant one per cent and imports four per cent.

Amissah-Arthur said it is cheaper to import from Cote d'Ivoire at peak times and during crisis but it is unreliable as it depends on what happens in that country.

VRA conducted journalists round the Takoradi plant and the local community where schools, roads and other social amenities have been provided.

The officials said that as part of the implementation of the Takoradi plant, the Authority has provided a compensation package for the land comprising cash of 5.5 billion cedis for loss of crops and other properties.

It also provided 1.9 billion cedis for schools and biogas latrines, 4.3 billion cedis for roads, 13 million cedis for town planning layout and 185.7 million cedis and 70,000 dollars for a cold storage since the mainly fishing community.

The schools and cold storage would be handed over to the local communities soon.

VRA stressed that it owes compensation packages for its operations but added that the government also owes huge sums of money in compensation as agreed on in the 1960s.

It said that it is environmentally conscious and puts its operations through rigorous checks. It has been clearing water hyacinth from the Volta Lake and is also conscious of the health needs of the people, especially around Takoradi where there could acid rain and the lake where there is dredging to prevent bilharzia.