The controversial Energy Sector Levies raked in a whopping GH¢3.3 billion last year, against a projected total amount of GH¢3.2 billion, an indication that its effective utilisation could help retire the legacy debt that has bogged down power utilities and the banking industry.
But the Finance Minister, Ken Ofori-Atta, hinted yesterday that “a few challenges have been encountered in the utilisation of the proceeds,” and that “we will have to come to this august House for an amendment of the Act.”
Power sector state-owned enterprises are entangled in a web of debt of about US$2.4billion, ranging from debt owed power generators by the ECG, and debt owed gas suppliers like the West Africa Gas Pipeline consortium and the Ghana Gas Company.
In a bid to retire the debt, part of which is owed by the government itself, through its agencies which use power without paying, the erstwhile NDC administration enacted the Energy Sector Levies Act, 2015 (Act 899).
The aim, it said, is to “consolidate existing energy sector levies to ensure efficient utilisation of proceeds generated from the levies, impose a price stabilisation and recoveries levy to facilitate sustainable long term investments in the energy sector, and to provide for other related matters”.
The law requires the utilisation of the levies mainly for the clearance of legacy debts of State Owned Enterprises operating in the energy sector, to support power generation and power sector infrastructure, subsidy for premix fuel, and the stabilisation of petroleum prices.
Under the new regime, the long-lasting TOR Debt Recovery Levy has been subsumed under a broader Energy Debt Recovery Levy, part of which will go into settling debts owed Bulk Oil Distributors.
Other levies include Price Stabilisation and Recovery Margin, the Public Lighting and National Electrification Scheme Levy, and an increase to the existing Road Fund from GHp7.3 to GHp40 per litre.
Whilst in opposition, the NPP came down heavily on the then government, accusing it of being insensitive in imposing the new levies, but the new Finance Minister, Ken Ofori Atta, has said the levies will be crucial to “gradually extinguish” the debts.
The Volta River Authority alone is indebted to about 11 commercial banks to the tune of more than GH¢4 billion.
The NDC government, which came under pressure from the IMF to retire the debt, reached an agreement with VRA’s creditors to retire the power generator’s debt in phases.
A key feature of the deal agreed with the banks saw the reduction of the interest rate on the cedi component of the VRA debt from 30 percent to 22 percent, whereas interest on the foreign debt component was successfully negotiated from 11 percent to 8.5 percent.
The then Finance Minister, Seth Terkper, explained that: “Repayments will be funded from a debt service account which will receive cashflows from the energy debt recovery levy and a debt service reserve and a proportion of VRA’s receivables. Also, proceeds of the energy debt recovery levy which are applied to VRA debts will be converted into equity on VRA’s balance sheet or could be subject to an on-lending arrangement with the government.”.