Mahama’s take-or-pay PPAs tantamount to causing financial loss to the state – Atta Akyea

Power Purchase Agreements (PPAs) signed by the former John Dramani Mahama government have been the subject of controversy for some weeks now.

World Bank Country Director Pierre Frank Laporte stirred controversy when he called on the Akufo-Addo led government to review some of the PPAs as part of the International Monetary Fund (IMF) bailout to revive the ailing economy.

The Country Director attributed the country’s debt situation to the expensive contracts that were signed Independent Power Producers (IPPs).

He also added that the kind of PPAs Ghana signed means the country is paying more for power generation when it is not supposed to be so.

Those claims prompted a fiery and spirited response from the NDC who accused him of engaging in local partisan politics.

But as people thought the controversy on the subject had been put to rest, it has resurfaced again with the Majority in Parliament jumping on the bandwagon.

At a press breifing in Parliament House on Wednesday, June 14, 2023, a report filed by Yesmeen Abubakar Tetteh our Parliamentary Correspondent noted that Chairman of the Mines and Energy Committee, Samuel Atta Akyea went a notch higher and accused the Mahama government of causing financial loss to the state.

Regarding capacity charges, he referred to the Ghana Integrated Power Sector Master Plan (IPSMP) and the Energy Commission’s work, which showed significant over-capacity in the country’s energy sector. The report further highlighted that the reserve margin in 2018 and 2019 exceeded the planned margin of 20%.

“Under Generation and Demand of the 2019 IPSMP, the modelling results confirm that there is significant overcapacity in Ghana, that this overcapacity was expected to continue for 5-7 years when the power plants under construction are commissioned. The report further noted that the reserve margin in 2018 and 2019 were significantly higher than the planned reserve margin of 20%. Furthermore, the overcapacity challenge is expected to continue into the mid-2020s.”

This the Abuakwa North MP said, emphasized that the issue of excess capacity is well-established.

“On the issue of idle capacity, between 2017 and 2020, the annual cost of idle capacity ranged between US$ 105.4 million and US$ 373.7million per year. Over the period, a total amount of US$ 368 million had been paid for idle capacities and a further US$ 600 million had been paid for the cost of reserve margins totalling US$968million.”

He said the take or pay PPA contracts are so oppressive to the Ghanaian state, they could be struck down by a court.

Touching specifically on the AKSA Emergency Power Agreement (EPA, he said a renegotiation of the terms by the Electricity Company of Ghana (ECG) with improved terms for 15 years had resulted in lower tariffs compared to the previous agreement.

“We note that the AKSA Emergency Power Agreement (EPA) after expiration on 31″ July, 2022 was renegotiated by ECG with better terms for 15 years, with a dispatch guarantee of 40%. This is far better than the full take-or-pay arrangement under the expired EPA.”

On the 205MW AKSA PPA, he noted that the introduction of a dispatch guarantee had gone a long way to help reduce the cost of excess capacity payments associated with tjhe previous agreement.

” It is meant to provide system reliability in the middle and the northern belts of the country based on a system reliability study by the Ghana Grid Company (GRIDCo). To achieve the objective of reliability, there is the need to have a level of guaranteed dispatch of the plant. The dispatch guarantee provided for in the new terms for contracting PPAs is also a gradual means of reducing the cost of excess capacity payment that has plagued the sector from the numerous take or pay agreements. The non-dispatch of this plant will save the country 60% of the cost compared to the original contract,” he noted.