TOR, VRA, ECG Warned Over High Costs

The Ministry of Energy has directed all state-owned energy institutions to, as a matter of urgency, provide it with specific plans to reduce their cost of operations and improve the quality of service they render to customers. This, the Ministry says has become necessary because the sector has been plagued by accumulation of huge debts, higher than normal technical losses, high cost structures, poorly implemented projects leading to financial losses and management problems among others.

The affected institutions are the Ghana Oil Company Limited, GOIL; Tema Oil Refinery, Electricity Company of Ghana, the Volta River Authority, Bulk Oil Storage Limited, Ghana National Petroleum Corporation and the Ghana Cylinder Manufacturing Company.

A statement signed by Energy Minister, Dr Kwesi Nduom said a number of projects initiated by these institutions have remained uncompleted while some have resulted in expensive litigations forcing government to fund some of their liabilities from tax revenues. “Over the past ten years, the energy sector has been considered by many to be a negative factor in the Ghanaian economy. Its financial requirements have from time to time overburdened the government treasury”, the statement said.

The statement says although the petroleum and power sectors have enjoyed significant increases in tariffs, customers who have endured the high increases continue to suffer low quality of service. The Energy Ministry says it cannot allow the sector institutions to grant high wages, undertake ill-conceived projects and incur unnecessary costs, which are finally passed on to consumers under the guise of achieving full cost recovery.

“Reviews performed by the Ministry point clearly to the need for energy institutions to ‘look within’ to ensure cost effectiveness and long-term financial sustainability ... Full cost recovery cannot be achieved through tariff adjustment alone. Therefore all energy institutions must provide to the Ministry by October 10, as a matter of urgency, specific plans to reduce cost and improve customer service".

"These plans must include specific cost reduction targets, assignment of responsibilities and completion dates. Every attempt should be made to cut costs in all areas including travel, raw material procurement, entertainment and fringe benefits”, the statement said.

The Ministry says it has embarked on a reform programme to improve the performance of the sector. “We are committed to becoming to the goal of becoming a net exporter of fuel and power within the next five years”.