It will be more prudent to use the mooted US$2billion Energy Sector Fund to finance capacity charges rather than re-financing the existing debt of Independent Power Producers (IPPS), the Chamber of Independent Power Producers, Distributors and Bulk Consumers (CIPDiB–Ghana) has said.

The Chamber wants the Fund to be used for addressing a critical and lingering challenge plaguing the sector – the current Public Utilities Regulatory Commission (PURC) electricity tariff methodology – rather than government’s intended plan of re-financing the existing debt of IPPs, or outright purchasing of some Independent Power Producers (IPPs) within the country’s energy sector.

It said the methodology neither includes the legitimate and undeletable capacity charges, nor any financing cost for any revenue shortfall; or the 20 percent National Reserve Margin which must be paid for at all cost.

CIPDIB’s CEO, Elikplim Kwabla Apetorgbor, said this in a release titled ‘Be strategic in restructuring the energy sector’, and added that the proposed plan is not strategic enough because excluding these costs from the tariff calculation adds to the sector’s shortfall, as they are actual costs incurred by the commitment holder for which there is no anticipated revenue, which government or the off-taker must by all means pay.

Explaining further, he said: “Thus, an expert analysis of this situation would have revealed that the most logical thing to do is to use the US$2billion Energy Sector Fund to finance the Capacity Charges if government doesn’t want to recover this through the tariff.  This is simple”.

He fears that lowering tariffs unnecessarily, which is what government’s plan seeks to achieve, will cause more harm to the sector. Rather, he says, government must take the bold step to negotiate for a reduced gas price and leave the capacity charge competitiveness to competition among the IPPS, or generators, and enforce strict implementation of the Economic or Merit Order Dispatch.

“Government must rather focus on competitiveness, reliability and efficiency, as lowering tariffs unnecessarily will cause more harm to the sector,” he warned.

Although he said the sector is fluid and responds quickly to various dynamics, and that restructuring per se is not a bad idea, he noted that what is key, however, is that “any and every form of restructuring the sector must be geared toward making it fit for purpose and workability.

“It against this backdrop that we ought to critically evaluate one of government’s key policy interventions in the sector. And that is the plan to create a US$2billion Energy Sector Fund to re-finance existing debts of the IPPs.”

To find an ideal solution for the matter, Mr. Apetorgbor believes that conversation around energy issues should be devoid of partisan politics or undue political interference, because of the sector’s importance to the country’s economic fortune.

Buttressing his point, he said: “Energy studies is an important discipline in any economy because of the commodity’s vital nature, and cannot be underestimated. Power business is not a business for the politicians and social commentators – ‘studio energy experts’, most of whom have not worked in or run any power plant, and lack the understanding of power business. Sincerely, unless politicians and other party apparatchiks and hangers-on take their hands off the sector, its problems will remain unsolved while we continue to dance around the challenges every year”.

Source: Thebftonline.com