The Akufo-Addo government is at its wits end over what to do with excess power that is being generated for the country by independent power producers (IPP) and as a masterstroke solution, has devised a levy to enable the government pay US$500million every year for the excess power that is generated and wasted.
Caretaker Finance Minister, Osei Kyei Mensah-Bonsu, justified the strange proposition presented in the 2021 Budget statement, by blaming the erstwhile Mahama government which ended Ghana’s perennial power deficiencies by shoring up generation for signing in place contracts that result in the excess production of power.
“Despite the substantial progress made by the Akufo-Addo Government, there is the need to find additional resources to cover the excess capacity charges that have resulted from the Power Purchase Agreements (PPAs) signed by the previous Government which required payments for capacity charges even when the plants involved were idle or unutilized.”
“Mr. Speaker, it has become very necessary for Government to consider a review of the energy sector levies. The Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA is hereby submitted to this House for approval”.
In 2016. Ghana was as usual caught in the doldrums of power outages, derogatorily referred to as “dumsor.”
John Dramani Mahama, who was President at the time, vowed that he would not allow ‘dumsor’ to defeat him like it did all other Presidents before him, since Acheampong.
To win the dumsor battle once and for all, President Mahama came up with a robust program to line up a number of independent power producers to shore up the country’s generation mostly under Build Own, Operate and Transfer Arrangements.
The arrangements proved a masterstroke and John Mahama indeed ended dumsor by the time of the 2016 elections which his party lost.
The Akufo-Addo government, since coming into office has somehow not been able to make the excess power that is coming from the arrangement useful and has rather been complaining that Mr. Mahama signed too many agreements and also at prices that are not competitive.
In attempt to deal with the issue, the government has tried to vandalize the contracts of some IPPs, but the move has led to Ghana burning its fingers at least in the case of one IPP which secured a whopping US$164million judgment at the international court of arbitration.
Apparently, after realizing that contract vandalism is not going to favor it, the government has now resorted to adding on to already existing high petroleum levies just so it can raise money to waste on paying the IPPs for the excess power that they generate and waste.
According to Kyei Mensah-Bonsu, the throw-away money levy is the only choice, “due to the difficulties faced by our economy arising from higher excess capacity payments in the energy sector, which have not reflected in electricity tariffs.”
He also told Parliament that the 20 pesewas taxation on the price per litre of petrol/diesel, representing a 5.7% increase of petroleum product prices at the pump is inclusive of a sanitation and pollution levy.
“Mr Speaker, I should note that on the basis of existing world crude oil prices, the implementation of the two proposed levies for sanitation and pollution as well as to pay for excess capacity charges, would result in a 5.7% increase in petroleum prices at the pump.”
