ASEC raises alarm over proposed VRA-BPA merger, citing serious risks to Ghana’s energy security

The Africa Sustainable Energy Centre (ASEC) has voiced strong opposition to the proposed merger of the Volta River Authority (VRA) and Bui Power Authority (BPA), as well as the creation of an independent Thermal Power Authority, raising concerns over potential threats to Ghana’s energy security.

The bill, currently before Parliament, also seeks to merge the Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCo).

In a statement released on 8 September 2024, ASEC expressed dissatisfaction with the proposed restructuring, echoing sentiments shared by staff groups within VRA who have also opposed the move. ASEC outlined several key concerns regarding the potential risks associated with the mergers.

One of the primary objections raised by ASEC is the potential for massive electricity price hikes.

ASEC argued that VRA has historically acted as a safeguard for Ghanaians, protecting consumers from steep price increases, particularly by shielding the market from the influence of Independent Power Producers (IPPs).

According to ASEC, the privatisation of thermal assets would leave the country vulnerable to price manipulation by Independent Power Producers (IPPs), leading to an increase in electricity tariffs.

ASEC also highlighted VRA’s strong financial performance, including its impressive GHC156 million profit in 2020, stating that there is no justification for the merger.

“There is no need to fix what is not broken,” the statement noted, pointing out that privatisation is typically considered only for underperforming public entities, which is not the case with VRA.

Further, the Centre warned that removing thermal assets from VRA’s portfolio could compromise the Authority’s ability to guarantee a reliable energy supply. VRA’s thermal energy generation plays a critical role in stabilising its revenue streams, particularly in light of the low-priced hydro energy it supplies to large industrial consumers like VALCO.

Moreover, ASEC raised concerns about the potential monopolisation of Ghana’s hydropower sector, should the merger of VRA and BPA proceed. They noted that hydropower naturally functions as a monopoly due to its reliance on centralised water resources, and consolidation could stifle innovation and competition.

The Bui Power Authority, in particular, has made significant contributions to Ghana’s renewable energy targets with its floating solar and other solar technologies.

ASEC also pointed to historical examples of privatisation failures, referencing the collapse of the electricity market in California in the early 2000s as a cautionary tale. They urged Ghana not to follow a similar path that could lead to catastrophic consequences.

The Centre further emphasised the risks posed by droughts and water shortages, which already account for 28% of Ghana’s energy generation mix. A merger between VRA and BPA, which both rely heavily on the Volta River, could exacerbate these risks, potentially leading to national power shortages in times of drought.

Additionally, ASEC strongly opposed the proposed merger of ECG and NEDCo, noting that both entities are currently loss-making. Combining two struggling organisations, they argued, would only serve to distract from addressing their core issues and make it harder for the new distribution company to become profitable.

In conclusion, ASEC called for transparency and further consultation on the matter, urging the government to reconsider the proposal to protect the stability and future of Ghana’s energy sector. “Any action that threatens the independence of VRA and BPA could delay the country’s renewable energy drive and impact our contribution to the SDGs,” the statement read.

ASEC remains firm in its position, insisting that the mergers and restructuring plans would not serve Ghana’s best interests, and any proposal that disrupts the current balance should be rejected.

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