Exclusive: Crippling financial crisis at VRA; tariff increment imminent

radio.com can exclusively report that the Volta River Authority (VRA) is in deep financial crisis, but Ghana’s Parliament is hesitant to let journalists know the full facts of the crippling challenges sinking the national power producer.

Desperate for a way out of the dire cash problems, the national power producer is pushing “for an immediate upward Tariff adjustment to improve its finances.” This means that Ghanaians ill soon be asked to pay more for power, the supply of which has been irregular.

On Thursday, journalists were asked to leave an emergency meeting called by the Parliamentary Committee on Mines and Energy to interrogate VRA and other actors in the nation’s power sector on the ongoing killer power crisis.

Chairman of the Committee, Dr Kwabena Donkor, asked members of the Parliamentary Press Corps attending the meeting to leave, fearing that their presence might cause discomfort for power sector officials summoned for questioning.

“The press will leave us so that some of you will feel more comfortable for us to discuss the challenges but we will brief the press after the meeting,” Dr. Kwabena Donkor said shortly before asking Journalists to leave the venue.

The development came as a big blow to journalists who were frantically hunting for detailed information to feed an increasingly desperate and frustrated population of power consumers who have for months been sleeping without power in their homes, with many major industries shutting down some of their operations.

Thursday’s meeting –– attended by top officials of ECG, GRIDCO, VRA and the Energy Commission –– came just a day after President John Mahama called the prevailing power problem a “crisis,” but reassured Ghanaians that every effort was being made to fix the problems.

Meanwhile, Citi News Parliamentary Correspondent has laid his hands on the details of a power point presentation made to the committee by the VRA. In the said document, the national power producer listed a long list of crippling challenges, including high fuel cost, as reasons for the ongoing power problems.

The document painted a dire financial distress at VRA, blaming the prevailing inadequate power generation partly on “[the] poor financial health of VRA.”

“It costs the VRA close to 3 Million US dollars a day to run its thermal plants, using Light Crude Oil (LCO). This is double the cost of using natural gas,” the document said, adding: “A cargo of LCO is used for thermal generation every 20 days at a cost of about 55 Million dollars.”

“From September to December 2012, a total of about 340 Million US Dollars (6cargoes) was used to generate thermal power using LCO. Government intervened by purchasing 5 cargoes of crude oil,” it said.

The document added, “For the first quarter of 2013, VRA expects to purchase 6 cargoes of LCO (about 340 Million USD) to power available thermal plants. Government has purchased 3 cargoes of LCO to help the situation.”

VRA said, “Lack of gas supply has limited generation from available thermal plants” while the “rate of fuel shortage is higher than fuel treatment rate due to capacity limitation.”

The ailing power producer said although “major tariff reviews” are required to be carried out every two years, “quarterly adjustments to account for changing crude oil prices, currency fluctuation and other parameters are not forthcoming.”

It said, “Considering the volumes of crude oil VRA purchases, a small change in the price of crude oil could result in a huge disparity between income and expenditure (e.g. 1 dollar increase in crude oil price could lead to a cost increase of between 1-3 million dollars in a quarter).

“This trend has adversely affected VRA’s balance sheet and ability to Fund or attract funding for our expansion projects.”

The power producer says, the challenges notwithstanding, there was light at the end of the tunnel and mentioned a number of medium term efforts to ease the stress on households and industries. It said 133.3 megawatts of power will come from the 400 megawatts-capacity Bui Power Project by April this year with an additional 200 megawatts of power from the Sunon-Asogli plant beginning May 2013 when the West African Gas Pipeline resumes operation.

“VRA is currently embarking on a lot of projects to ensure adequacy of supply over the medium to long term. These projects can only be completed in a timely manner if VRA has the right financial backing,” it said.

“To secure future gas supply reliability and reduce cost of generation, VRA has started a feasibility study for the use of Liquid Natural Gas to generate electricity,” it added.

The VRA document also said “efforts should be made to reduce distribution losses and improve reactive power generation within the power system.”

“Demand side management is necessary; public cooperation is required” it said.

 

Source: Citifmonline