Merger: Too many concerns
THE proposed merger of key energy institutions in Ghana — Volta River Authority (VRA), Bui Power Authority (BPA), Electricity Company of Ghana (ECG), and Northern Electricity Distribution Company (NEDCo) — has sparked concern, with the Institute for Energy Security (IES) and the Africa Sustainable Energy Centre (ASEC) warning of potential risks.
Both organizations argue that the merger could lead to higher electricity tariffs, destabilize energy supply, and create financial strain on the sector.
The VRA’s portfolio, which includes hydro, thermal, and renewable sources, is crucial for maintaining stable power supply. Disrupting this balance, particularly by divesting thermal assets, could compromise grid stability and lead to frequent outages.
These thermal plants are also key revenue generators, and any loss of these assets could increase costs for consumers, further burdening an already strained economy.
Financial concerns are central to the opposition. VRA’s thermal plants generate significant revenue, helping fund maintenance and future projects. IES warns that without these assets, VRA’s financial health could suffer, worsening operational efficiency and ultimately leading to higher electricity costs.
Moreover, ECG and VALCO’s debts to VRA under the Cash Waterfall Mechanism remain unresolved, raising fears that merging these institutions without addressing financial gaps could exacerbate liquidity issues.
ASEC also points out that VRA’s financial performance remains solid, with a GHC156 million profit in 2020. Privatization or restructuring is typically applied to struggling institutions, yet VRA has proven to be financially sound.
Consolidating VRA and BPA, two major hydropower players, could lead to monopolistic control over limited water resources, stifling competition and innovation in the sector.
The merger of ECG and NEDCo, both loss-making entities, could worsen their financial challenges rather than solve them. Instead of creating a larger problem, the government should focus on addressing the inefficiencies plaguing these companies.
Overall, while reforms in Ghana’s energy sector are necessary, merging these institutions without resolving underlying issues may lead to unintended consequences like tariff hikes, power outages, and financial instability. A thorough impact assessment, consultation with stakeholders, and a transparent approach are essential to safeguard the country’s energy security and protect consumers.
