Empowering ECG, NEDCO in electricity supply without privatization

The power distribution sector in Ghana is at a crossroads since the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCo) are beset by increasing problems. They are both principal suppliers of power to industries, businesses, and residences but are hampered by operating inefficiencies, financial shortages, as well as infrastructural inadequacies which jeopardize their sustainability. The argument in favour of or against the privatization of these state-owned institutions has been gaining traction, with some calling for private sector involvement to ensure that they become more efficient. Privatization poses real risks, such as increased tariffs, retrenchment, and cession of government ownership of a strategic national asset. Short of selling off these essential utilities, Ghana can implement strategic reforms that foster efficiency without privatizing ECG and NEDCo.
ECG and NEDCo serve different but equally significant sectors of the country. ECG, which was created in 1967, operates mainly in the middle and southern parts of the country, supplying power to key urban areas like Accra, Tema, Kumasi, and Takoradi. It has become the nation’s biggest power distributor, with responsibilities ranging from infrastructure maintenance to ensuring revenue collection and enhancing service delivery. Yet, despite its pivotal role, ECG is beset by old equipment, an unpredictable power supply, and financial losses caused by inefficiency and unpaid bills.
Conversely, NEDCo, which is a subsidiary of the Volta River Authority (VRA), deals with the northern regions of Ghana, spanning more than 64% of Ghana’s geographical terrain. In contrast to ECG, NEDCo works in largely rural and low-density areas with increasing electricity demand but underdeveloped infrastructure. Though NEDCo is key in increasing coverage of electricity in rural communities, its profitability is undermined by low customer density and high costs of expanding Grid infrastructure. Whereas Ghana’s overall national electricity access rate stands at about 88.85% as of June 2023, NEDCo’s areas of operation are behind, with an access rate of about 68%. Bridging this gap is critical to national development since electricity continues to be a prime driver of economic activity, healthcare, education, and industrialization, among others.
Despite their importance, both ECG and NEDCo are struggling to cope with increasing electricity demand due to several challenges. One of their greatest concerns is that they have an ageing infrastructure. Parts of their transformers, power lines, and substations were installed decades ago and never properly maintained, thus frequent power outages. In the NEDCo areas, the situation is deplorable with unstable grids rendering access to power irregular. In addition, both utilities experience excessive technical losses in transmission and distribution, largely because of low-quality lines, broken meters, and overall inefficiencies within the system. These losses also sap revenue and render operations non-sustainable.
Both ECG and NEDCo are financially strained. Tariffs frequently fail to cover the actual cost of generation, transmission, and distribution of power, resulting in revenue deficits. Hand in hand with this is the fact that these companies also have legacy debts owed to power generators and the Ghana Grid Company (GRIDCo), which makes it hard for them to raise extra funding for needed infrastructure investment. The other great challenge is government agencies’ inability to pay their electricity bills, which imposes further financial pressure on ECG and NEDCo. If such debts are not recovered, these two companies will still be operating under financial pressure, and service improvement will be nearly impossible. Issues with customer service also account for public discontent with ECG and NEDCo. Billing errors, over-billing, and delayed repairs are consistently reported by consumers and impact customer satisfaction and revenue collection. The ageing metering system also worsens the issue, resulting in disputes over electricity consumption. Utilities’ failure to communicate with consumers has also contributed to public disillusionment, as outages and service interruptions are not responded to when consumers report them. Resolving such customer service challenges requires a paradigm shift in operational efficiency, infrastructure creation, and technological integration.
Due to these issues, some have suggested privatization as a way of enhancing efficiency, effectiveness and profitability. However, this has some risks that will be detrimental to Ghanaians. One of the greatest risks of privatization is that profit overrides public interest. Private entities would raise tariffs to optimize profit, which will render electricity too expensive for poor households and small businesses. Additionally, privatization can result in job loss since private companies will reduce operations to save on costs. There is also the matter of national security. Ceding the electricity sector to private or foreign operators may expose Ghana to vulnerability, especially during periods of economic or political crises. Private companies can also target urban and commercially viable regions and leave rural citizens behind, exacerbating regional inequalities in access to electricity.
Instead of privatization, other measures can be adopted to assist ECG and NEDCo. A suitable measure is public-private partnerships (PPPs) where private investors receive capital and technical skills but not government ownership of the utilities. This has been achieved in Kenya and the Philippines, where private entry encouraged infrastructure and service provision without exposing the entities to the risks of complete privatization.

Another alternative that can be effective is the institution of performance-based contracting. In this case, the government maintains ECG and NEDCo under its ownership but opens to the private sector to manage certain parts of their businesses under strict efficiency objectives. Uganda utilized this to improve its electricity distribution sector without sacrificing public ownership. Reforms in leadership and governance are also needed to enhance the efficiency of ECG and NEDCo. The government should ensure that political considerations do not creep into appointments to the management and boards of the two companies but are on merit. Establishing key performance indicators (KPIs) and making leadership accountable for outcomes is key to ensuring these companies can be rendered more transparent and performance-oriented.
Decentralization and local ownership could also be options. In some countries, cooperatives and local authorities have been given increased management of electricity distribution, promoting responsiveness and accountability of the service. This option, which has been successful in the United States (US) and some regions of Bangladesh, can be followed and modified to fit the Ghanaian context to accord rural communities the much-needed focus. To promote financial sustainability, ECG and NEDCo can also be listed on the Ghana Stock Exchange (GSE). Private investment could be mobilized through the flotation of shares without reducing majority public ownership. The move would deepen financial transparency, in addition to raising much-needed capital for developing infrastructure. Foreign exchange risks in the power sector must also be tackled by the government. This can be done by requiring that purchases of power from the VRA and IPPs be made in Ghana cedis rather than in U.S. dollars. This would insulate ECG and NEDCo from exchange rate volatility and make financial planning more certain.
Finally, another crucial step in the direction of financial stability is ensuring all government institutions settle their electricity bills. The persistent failure of Ministries, Departments, and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs) to settle their debts weakens ECG and NEDCo, making them incapable of functioning effectively and efficiently. The government needs to implement stringent payment policies to prevent further financial losses.
Conclusively, privatization is not the sole remedy for ECG and NEDCo’s issues. Rather, Ghana can embrace a blend of public-private partnerships, governance and decentralization reforms, listing on the stock market, and financial restructuring to consolidate the electricity sector into a stronger and more resilient public institution. In so doing, ECG and NEDCo can become efficient, financially viable, and customer-oriented utilities that supply dependable electricity to all Ghanaians.

Williams Boye
Energy Economist/Accountant
Accra
Email: williams.boye86@gmail.com
Tel: +233 276 423336

Williams Boye is a seasoned energy economist, accountant, and analyst with over 13 years of experience in petroleum, power, and financial analysis. His expertise covers energy economics, policy formulation, petroleum fiscal regimes, public financial management and analysis as well as research. Recognized for his strong leadership, negotiation, and analytical skills, he is proactive, results-driven, and deeply committed to honesty, accountability, and transparency.
Williams possesses in-depth and broad knowledge of Ghana’s upstream petroleum sector which includes financial oversight and regulatory compliance within Ghana’s petroleum sector.