The Policy Lead for Petroleum and Conventional Energy at the Africa Centre for Energy Policy (ACEP) has lamented the Energy Sector Levies Act’s (ESLA) ineffectiveness in addressing energy sector debt.
The levy, which is imposed on petroleum consumers, is intended to be used by the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA), among other debt-attracting organizations, to defray such debts.
The energy analyst stressed that certain debts do not come easily with attractive recovery structures, and further explained that the present form of being encumbered by debts of ESLA was not performing as intended.
The energy analyst emphasized that some debts lack attractive recovery mechanisms and stressed that the current burden of ESLA debts is not functioning as originally intended.
Kodzo Yaotse was speaking during a one-day capacity-building workshop to enhance media advocacy towards finding financial solutions in the power sector.
With the implementation of ESLA, there is an increased public outcry as it was designed to help pay off the old debt within the power sector.
Yaotse remarked that many issues have been cleared up through considerable exercises of discussion surrounding ESLA with a goal of relieving the power sector of the legacy debts but emphasized this is not the case.
“People are asking, ‘What is happening to ESLA and the debt that’s supposed to be freed,” said Yaotse.
The government in 2017 came up with a new scheme that involves the establishment of ESLA PLC and the ESLA Bond Programme through the issuance of bonds to help settle the sector’s legacy debts.
This was for quick repayment of these debts through fresh bonds by effective securitization of the receivables of the levies.
According to him, ESLA raised about GH¢8.7 billion to pay some of the energy sector debts but this just moved the debt from ECG and VRA to the bond market.
He raised concerns that the levy’s current revenue is now being directed toward servicing bond coupons rather than addressing new debt accumulations.
He further cautioned that the levy’s current revenue is now being directed toward servicing bond coupons rather than addressing new debt accumulations.
“The original idea was to have this in place for five years, not for the long term. Now, we are at a point where if we don’t take care, we may need to issue new bonds to retire the old bonds under ESLA,” he warned.
Yaotse emphasized that the levy is no longer performing its intended function of reducing debt and instead, the public continues to bear the financial burden of the Energy Debt Recovery Levy, while the energy sector’s debt stock keeps increasing.