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The Public Utilities Regulatory Commission (PURC) has issued an urgent call for a revision of the Cash Waterfall Mechanism (CWM) to avert a looming financial crisis in Ghana's energy sector.

The Commission in a letter addressed to the Presidency, Energy and Finance ministers, and other key stakeholders, highlights the potential collapse of the energy sector due to financial instability if immediate actions are not taken.

The PURC's concerns focus on key energy sector players such as the Ghana Grid Company (GRIDCo), Volta River Authority (VRA), Bui Power Authority, and independent power producers. These entities are struggling financially, primarily because the current CWM framework, revised in August 2023, is not functioning as intended. The mechanism, which requires the Electricity Company of Ghana (ECG) to collect and distribute a minimum of GHȼ1 billion monthly, has fallen short, with ECG failing to comply with the guidelines.

According to the letter, ECG's inability to meet its financial obligations has led to significant revenue shortfalls, further exacerbated by exchange rate discrepancies and the Ministry of Finance's (MoF) failure to consistently make the agreed-upon $10 million monthly top-up payments. The result is a severe financial strain on Tier B companies, including VRA, GRIDCo, and Bui, which receive only 20% to 45% of their invoiced amounts.

The PURC's letter calls for comprehensive stakeholder input to address the challenges and improve the mechanism. Key areas for feedback include the adequacy of the current assumptions underpinning the CWM, implementation challenges, particularly those related to exchange rate discrepancies and revenue collections, and recommendations for enhancing the mechanism to better meet sector demands.

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