The Minority in Parliament has taken issues with the government’s position that the country has excess power, causing the termination of some contracts.
The Finance Minister, Ken Ofori-Atta, in his presentation of the mid-year budget review to Parliament Monday, noted that the country is paying for power that it doesn’t need.
This, he said, caused them to terminate some Liquefied Natural Gas (LNG) contracts in 2017 to save the taxpayer some cash.
Finance Minister’s argument
“Currently, according to the Energy Commission, our installed capacity of 5,083 MW is almost double our peak demand of around 2,700 MW. Notably, 2,300 MW of the installed capacity has been contracted on a take-or-pay basis. This means that we are contractually obliged to throw away money for this excess capacity which we do not consume. This has resulted in us paying over half a billion U.S. dollars or over GHS 2.5 billion annually for power generation capacity that we do not need.
Ofori Atta presented the mid-year budget in Parliament on Monday.
Similarly, for gas, Ghana has contracted for around 750 mmscf per day by 2023. This is even after this government terminated two other LNG contracts in 2017. Current demand is around 250 mmscf per day, and this is projected to rise to between 450 and 550 mmscf per day by 2023. About 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning we have to pay whether we use it or not. From 2020, if nothing is done, we will be facing annual excess gas capacity charges of between US$550 and US$850 million every year.”
But reacting to the Finance Minister on Tuesday, Member of the Mines and Energy Committee of Parliament, John Jinapor said, the excess capacity is a result of government’s failure to significantly increase electricity access.
The Yapei Kusawgu MP said according to the 2019 budget, the NPP government has “increased access to electricity by a paltry 1% in the two years in power.”
“And you have the audacity to say that you have too much power,” Jinapor quizzed.
He added: “…growing at this snail pace, you will have excess capacity and not know what to do with it.”
The legislator, who was Deputy Power Minister in the erstwhile administration boasted that the John Mahama-led government expanded access to electricity across the country by 5% per annum; this, he said can be confirmed from the 2017 budget presented by the current administration.
NDC’s position on the Take-or-pay contracts
National Democratic Congress member and former CEO of the Ghana National Petroleum Corporation, Alex Mould faulted government in his reaction to the Minister’s presentation.
Ofori-Atta said the government intends to renegotiate all take-or-pay contracts to take-and-pay.
But according to Mould, this would scare off investors since the government can unilaterally reduce its demand and the providers would make losses.
Also, he said, “government would have to provide even greater security support packages to make the financing of the development of these gas fields intended for Gas2Power possible.”