I remember writing this article almost a year ago. I thought I would revisit it and see what has changed. It is worse than it was when I wrote this. 2013-07-29 PROBLEM WITH ECG It was interesting reading an article the other day in which the Public Relations Officer of the PURC was reacting to public outcry over a publication of salaries of some officers of the Electricity Company of Ghana (ECG) by pleading with the public to be tolerant of the company. One wonders why the regulator would come to the defense of the company at a time when its services have become so abysmal, and its handling of the situation has been substandard at best. Rather than the maternal sensitivity to the public outcry, perhaps the PURC should call in the management of ECG for a chat about why the timing of its advocacy for rate increase is not appropriate. This is a brief preview of what the discussion should focus on. Some prominent politicians and members of the Government have argued that the current rate structure needs to be reexamined to see if they are economical. Even some foreign diplomats have broken traditional diplomatic decorum to jump on the bandwagon, going so far as to advocate for the removal of Government subsidies because the subsidies keep the rates artificially low. It is true, and in fact one would even posit, that these subsidies should not exist. However, this argument is moot because the Government or its agencies are the highest debtors of the company and the worst at paying their bills. Consequently, the so called subsidy only exists on paper. To raise rates in order to blunt the effects of the Government’s delinquency constitutes a form of taxation of the people and this is beyond the scope of the authority of the PURC. In addition to the issue of Government subsidy, it is apparent that ECG has not provided sufficient empirical support and adequate documentation for the request to increase rates and the magnitude of the increase is not only excessive, but also, beyond reason. Rates may need to be adjusted of course, but before that can be done, ECG management must address several strategic management problems that make a justification for increases difficult to sell. First, ECG has not done very well with the collection of funds the company is owed, not only by the Government but also several major business entities as well. If it had adequate debt management practices, and collected on its receivables timely, one would argue that there would be no need for an increase in rates of the magnitude ECG is advocating for. Secondly, ECG management has to be more efficient first before rate increases are considered. Why keep giving them more income if it is not needed. In short, if operations were more efficient, there would not be such an urgent need to constantly raise rates and by such a high margin. Not to mention the fact that similar increments over the years have not resulted in the improvement of income or the quality of service. Among some of the poignant reasons for the inefficient operations are: A low operating Capacity. As a result of constant equipment breakdown because of unwillingness or inability to implement prudent equipment maintenance procedures. It is not unusual for the company to explain power outages with excuses like the breakdown of transformers and other equipment Poor revenue collection. Billing is often done in arrears so far behind and often results in disputes with payments that have not been posted. Also, one cannot help but observe that revenue collectors can be easily paid to go away or the amounts collected do not all end up in the company’s coffers. The prepaid process has helped mitigate this problem to an extent, but that has its challenges also. There is also the fact that when prepaid cards are filled at ECG and other pay points, the amount on receipts issued for the payments is always, a few pesewas less than the actual amount paid. Over the years, this difference has added up to a huge surplus that has never been accounted for. Where does the money go? Poor marketing and development of sales. Although the company has procedures for providing electricity to its customers, the procedures are much disorganized and extremely cumbersome. It is not easy to get electric hook ups to new homes without “seeing” someone on the side or knowing someone who knows someone there. It is no surprise that people resort to illegal connections, sometimes with the connivance of ECG employees. Lack of Consideration of alternate sources of supply. There have been discussions of obtaining generators for standby supply of electricity in some communities. In some communities, like RGM Estates, nearly everyone has a generator some of them so powerful they could supply the whole estate with power if need be. ECG management has not been proactive enough in considering this option as a means of supplying power to localities when they have problems. Incompetence, corruption and poor internal controls. These are areas the company needs to improve immediately before thinking about increasing rates. Recently, the media has reported several incidents of over waste and corruption including, but not limited to waste, mismanagement of the load shedding program, inadequate or poorly managed billing, inter alia. A typical example is the reported case of about 4,000 residents at Akotoshie and its 25 surrounding villages in the Ga West Municipality who over the past six years have not been paying bills to the ECG. The company had to be ordered by its Ministry to take action on this issue before they were mapped out for payment. To their credit, some members of ECG management advocated for corrective action. One Abraham Anokye Abebresse, Acting Eastern Regional Manager of the Electricity Company of Ghana (ECG), speaking at an internal training for Heads of Heads of Departments, asked them to “to help find solutions to the myriad of challenges facing the company.” He added, “We need to be able to painstakingly change the attitude of our staff to be able to meet the challenges facing us.” Further, he encouraged regional managers to “Let us work hard to change the perception out there that we are a corrupt organization which renders its services to the highest bidder,” he added. Finally, to buttress the incompetence factor is the recent World Bank report on the energy sector in Ghana which stated that “the board members of the PURC and the Electricity Company of Ghana (ECG) lack managerial competence which has resulted in the mediocre performance of Ghana’s energy sector.” Finally, ECG has yet to provide adequate quantitative documentation to support its argument for rate increase. Financial and operating have been absent in all the discussions concerning the rate increase. Arguments have been put forth that the company might collapse under mounting losses due to, among other things, the depreciation of the dollar, cost of managing the load shedding program, and illegal connections; however, these arguments are meaningless at this time because management does not have timely, pertinent and detailed records that would depict the level and trends of operations and support reasons for any required rate increases. Since it is not a publicly held company, ECG’s financial statements are not public, yet one would think that its operating results should be of public interest and at least important highlights that show the asserted financial conditions would be disclosed. Perhaps this information, if publicized would shed light on the controversy surrounding the issue of staff salaries? Perhaps this critical information is not available timely because of the problem cited earlier and to: Poor Accounts receivable management due to inefficient collection of bills due Inadequate financial planning to mitigate the effects of the dollar and, perhaps, imprudent reliance on the dollar Very poor implementation of the load shedding program and inadequate communication thereof Replacement of equipment before they are salvageable or obsolete Corporate culture and values that sustain corrupt practices. It is not surprising to see the regulator of ECG, become so entangled in its destiny but it is odd to see the kind of maternal attention PURC is paying to the company. Is possible, as argued by K. G Apenteng, that “the electricity problem is probably much bigger than the ECG and the authorities are making it out to be; that it is a management and political problem disguised as a technical one…” Whatever the case might be, the PURC needs to start doing some serious regulating and stop babysitting. Abi? Robert Baidoo onwa1@yahoo info@wecanspeaksout @wecanspeakout We Can Speakout All rights reserved wecanspeakout
Posted on: Wed, 04 Jun 2014 08:14:26 +0000
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