ECG PROTESTS

ECG Boss, William Hutton Mensah

The Electricity Company of Ghana Ltd is protesting loudly over a report carried by “The Insight” that its workers are receiving unusual salaries and allowances.

 In an unsigned letter dated June 21, 2013 and referenced A./61/1/1.3/98, the ECG said the published salary figures published in “The Insight” are incorrect and this may be verified from statutory bodies”.

The letter did not state what the ECG considers as the correct figures or which statutory bodies May confirm the figures.

It simply said that “emoluments of different employees are negotiated with the Ghana Trade Union Congress (PUWU) and is industry specific”.

The letter also said that “As a limited liability company owned by the Government of Ghana, it has always been regulated and supervised by higher authorities”.

The strangeness of some of the claims in the letter is apparent even to casual observer.

What has the fact that the Public Utility workers Union negotiates “the emoluments of different employees” got to do with levels of enumeration in the ECG?

Which are the higher authorities which regulate and supervise the determination of the levels of pay in the Electricity Company of Ghana?

 Perhaps, the public interest will be best served if the ECG will on its own publish the levels of salary and allowance enjoyed by its different employees”.

The full text of the ECG’s letter is published below without further comments.

MEDIA RELEASE

For immediate release

SALARIES AND ALLOWANCES FOR ECG

The Insight Newspaper on Friday 21^st June, 2013 published a supposed salaries and allowances of Management and staff of ECG.

Management of ECG wishes to state with all emphasis that the salary figures stated in the Insight Newspapers are incorrect and this may be verified from the statutory bodies.

The Company wishes to add that emoluments of different employees are negotiated with the Ghana Trade Union Congress (PUWU) and is industry specific.

As a limited liability company owned by the government of Ghana, it has always been regulated and supervised by higher authorities.

We hope that the stakeholder consultations over the tariff proposals to PURC will be done with fairness to all parties. END

ISSUED BY. MANAGEMENT OF ECG

For further enquiries please call the PR Manager- 0244260252

The Managing Editor
The Insight Newspaper
Accra

Cc: All Media Houses 

VRA’S OWN REVIEW OF THE ELECTRICITY SECTOR

Kweku Botwe, VRA Boss

Executive Summary

Seven years after the passage of the VRA Amendment Act in 2005 (Act 691), hiving off VRA transmission from VRA generation to create the Ghana Grid Company, and held up as the key enabler to the competitive, deregulated sector that would then create the conditions for a more abundant supply of electricity in the country, the resultant gains have been modest.

580 MW of new capacity has been added over the last seven years, taking the country's installed capacity from 1,800 MW to 2,400 MW. Two independent power producers ("IPP"s) have commenced operation and make up half this amount: the Sunon Asogli 200 MW plant, and more recently SSNIT's CENIT 125 MW operation. VRA has provided the balance between its Tema 125 MW, and Takoradi III 132 MW projects. In the same seven year period, the country has experienced two distinct periods of load shedding, the first, more pronounced in 2006-2007 that went on for over a year; the second, less pronounced and more recent, that took place intermittently in 2012.

It is hard to see how the country will double its installed capacity in the next seven year period, 2013-2020, from 2,400 MW to 5,000 MW under the current status quo and rate of progress. There is no evidence to suggest that underlying conditions, overlaying regulatory frameworks, the capacity of implementing institutions, or the will of government, will change so markedly in the next seven years, to achieve a doubling of the country's installed electricity capacity by 2020.

Seven years after the passage of VRA Amendment Act, ending VRA's role as the monopoly generator in Ghana, VRA still holds a unique place in Ghana's energy landscape. VRA is the foundation customer of the West African Gas Pipeline; it is the foundation customer for the Ghana National Gas Company. It is a Founding Member of the Executive Board of the West African Power Pool; and it is leading the first WAPP-sponsored generation project to be built in Ghana, to deliver electricity not just to Ghana, but to Ivory Coast, Burkina Faso, Sierra Leone and Mali, over 1,000 km away.

A financially healthy, properly managed VRA can be the instrumentality not just for the provision of electricity in Ghana, but for a fully integrated energy infrastructure that serves not just Ghana's needs, but the West African sub-region. Of course, the less we ensure VRA's success, the less and slower these benefits will be spread around Ghana and the region. Specifically, there are five broad areas that must be tackled head on, if the country's electricity sector - and VRA, along with it is to flourish. These are:

·         The financial health of the utility sector

·         A plan for VALCO

·         Availability of gas supply

·         Implementation of meaningful reforms

·         Overhaul of institutional capability

While each of these areas can be handled separately, the greater dividend would be if the plans to address these areas are part of an integrated and well coordinated plan, systematically measured and monitored to ensure that set goals are achieved in the set time that we give them. Until and unless such a plan is put in place, with targets and objectives clearly delineated, and subsequently monitored, roles and responsibilities clearly assigned, adequate resources properly allocated, VRA will continue to stumble along with mixed success, along with the rest of the sector, in its quest to provide adequate and reliable electricity supply to the Ghanaian people.

The Financial Health of the VRA and the Utility Sector

Generation: VRA

As of December 15, 2012, VRA's short-to-medium (1-3 years) term indebtedness alone, all incurred within the last twelve months, exceeds US$650 million. This amount includes US$265 million of Government of Ghana Promissory Notes to VRA's banks, for crude oil supply that it is continually rolling over from initially agreed dates, causing anxiety and unease among VRA's banks, slowly drying up VRA's current lines of credit. Government of Ghana also owes VRA US$250 million in arrears, made up of unpaid MDA's stretching back to the beginning of 2011, and amounts owed by Electricity Company of Ghana ("ECG") in respect of Government's lifeline tariff.

Meanwhile, VRA's 2012 revenues are projected at approximately US$[700] million, by itself inadequate to meet its current commitments, and further hamstrung by non- payment of Government's arrears. Next year, 2013, VRA will post a net loss of income of US$[450] million, if the Public Utilities Regulatory Commission ("PURC") does not increase VRA's Bulk Generation Tariff ("BGT") from its current level of Ghp8.45/kWh (or US cents 4.45/kWh).

Today, given the unavailability of gas supply from Nigeria, and the heavy import of crude oil (the 2012 bill will be for 12 cargos at US$600 million), VRA is having day to day difficulty raising the necessary funds to pay for its crude oil imports. On more than one occasion this year, delay in payment of promised Government Promissory Notes ("PN"s) in lieu of tariff increases, has cascaded into delays in discharging crude oil; causing the Authority to use up its buffer stocks; to stop generating power, causing load shedding throughout the country.

The most recent discharge of crude oil by Sahara Energy Resources Limited ("Sahara" or "SERL") this December, took place without VRA raising the required line of credit, on the assurance of a signed undertaking by the Authority that we would immediately pay what was owed to Sahara once the Government of Ghana paid to the Authority a portion of promised arrears amounting to US$60 million.

Next year, 2013, the supply of gas from Nigeria through the West African Gas Pipeline ("WAGP"), is delayed most likely until late 1^st Quarter/early 2^nd Quarter, and the likelihood of gas supply from Ghana's Jubilee Fields is expected in the 2^nd Half of the year. VRA will once again require up to [12] cargos of crude oil supply to meet the electricity demand in the country, and the PURC will have to increase the BGT by over 100% to enable VRA to break even 2013.

Naturally, there is scepticism that PURC will be able to deliver such increases. After an 89% increase in tariffs in June 2010 - passed after three years of no tariff increases; they re-introduced (March 2011) and then subsequently suspended (December 2011) the Automatic Adjustment Tariff intended to provide modest adjustments to cushion the consuming public from the sudden and dramatic electricity price shocks that VRA and the rest of the industry will now be seeking again. There is also scepticism as to how quickly Government can settle its arrears.

This state of affairs all but cripples VRA from operating and maintaining its operations effectively, makes it difficult to supply electricity continually and reliably to the Ghanaian populace today, and creates an extremely challenging environment for the Authority to meaningfully plan for any medium-to-Iong term future. This state of affairs cannot possibly be the basis upon which Government hopes to double the country's electricity capacity to 5,000 MW, even after allowing for the active participation of the private sector.

Immediately, Government must settle all its arrears to the Authority - best done if provisioned in the Government's planned issuance of a bond in early 2013. Secondly, the PURC must commit to a reversal in the tariff situation over the next nine months of 2013. Three 30% increases in the BGT inclusive March 1 2013 through September 2013¹, will allow VRA to reach a breakeven tariff level, around which the modest and small (5-10%) adjustments can subsequently be made to accommodate future crude oil price changes and currency depreciations. Such a staggered approach should also mute the public outcry that often accompanies drastic increases, which this would not be.

Distribution Losses: ECG and NEDCo

In the long term, the financial health of the utility sector rests squarely on the financial performance of the distribution sector, of ECG and NEDCo. Ultimately, it is the payments received by the ECG and NEDCo for electricity delivered to the Ghanaian public that pays not just for distribution operations and investments, but
also for the operations as well as the investments required in the generation and transmission sector.

In 2011, ECG and NEDCo registered Aggregate Technical, Commercial and Collection ("ATC&C") losses of 40% and over." This means, in the case of ECG, that VRA delivered and 7,260 gWh of energy to ECG in 2011, but ECG received value for only 4,100 gWh of this energy. In the case of NEDCo, VRA delivered and sold 730 gWh of energy to NEDCo, for which NEDCo received value for only 445 gWh.

Benchmark ATC&C losses in comparable developing countries such as India and Malaysia are closer to 20%, half Ghana's numbers. Ghana's electricity sector will not meaningfully grow when 40% of all generation produced leaks out through these losses. This will be the case whether that generation is publicly owned and managed or whether it is privately owned and managed.

VRA's financial situation in 2012 is being directly impacted by the level of losses being faced by ECG and its consequent ability to pay for electricity delivered by VRA. Weekly payments from ECG dropped from an agreed GHS7 million a week, to GHS4 million, a 40% reduction in revenue, in the last few months of the year. ECG, in its turn, cites low tariffs received by the PURC; load shedding reducing their revenue streams; having to pay other customers such as Asogli, who have independently cited debts owed by ECG of over US$20 million.

Beyond VRA's own difficulties, it took ECG four years to sign its most recent Power Purchase Agreement ("PPA") with Cenpower Generation Limited for the next 340 MW of IPP-developed power. Most of that difficulty arose from ECG's inability to demonstrate its creditworthiness, and Government subsequent willingness to backstop them in the event ECG could not perform. ECG's creditworthiness and its ability to stem its losses will continue to have a direct impact on its ability to sign PPAs with non-state generators, thereby constraining the possibility of new, private-sector led generation investment. Indeed, it was this perspective that informed the Ministry of Energy's initial directive that the new CENIT project should sign a PPA with VRA rather than ECG.

ECG's financial fortunes will worsen as long as tariffs remain unchanged; but more importantly, so long as ECG losses remain unaddressed. NEDCo's fortunes will fare no different, other than the fact that NEDCo takes less than 10% of VRA's generation supply, and so, arguably, has a tenth of the impact of ECG's problems.

VRA's ability to collect its revenues from ECG will also worsen as more private- sector, non-state generation players enter the market that will require iron-clad performance commitments from ECG in respect of their obligations. It is with some unease that the Authority looks out into 2013, as it sees ECG rationing its meagre revenues between VRA, Asogli and CENIT, a situation that is currently only bound to get worse if the current fundamental problems in the distribution system remain unaddressed.

ECG, along with NEDCo, must embark on a clearly laid out strategies that reduces their ATC&C losses by 50% over the next five years. There is no way new and on-going generation investment can be secured and/or assured without measurable and substantial improvements in the distribution sector. No industry in the world can be sustained at 40% losses. ECG is understood to be embarking on such a project; and NEDCo must do the same. It begs the question as to why we have not made such efforts in the past. One suspects that this latest initiative will be one of many that we have tried before, if resources are not properly allocated, and progress to targets is not clearly monitored, measured and integrated into an overall larger plan for the success of the electricity sector.

A Plan for VALCO

As of December 15, 2012, VALCO is operating one potline, and producing about 40,000 metric tonnes of a year, approximately 20% of overall plant capacity. It is forecasting a net loss of US$[16] million for 2012 and a similar level of loss in 2013 if it continues to operate only one potline. Meanwhile, VALCO has accrued debts to VRA in the amount of US$37 million, despite the fact of receiving a favourable tariff of US cents 5.1kWh, for which VALCO unilaterally declared it could not honour so long as it was operating less than two potlines.

Progress towards an integrated aluminum industry, the justification of the special dispensation for VALCO, is not in evidence. A Chinese company is understood to have taken over the development of one of the major bauxite concessions; how and in what manner it is tied to VALCO's future is not clear. Equally, the plan to provide the required 350 MW of electricity required to run VALCO at a 100% capacity is yet to be delivered. VALCO appears torn between insisting on its special place in Ghana's industrial development landscape for some portion of the country's meagre electricity capacity, and developing and building its own dedicated power plant that will ensure that VALCO does not have to compete with the needs of the rest of the country.

Regardless of the intentions for the future, VALCO's current impact on VRA's operations and finances is unequivocally negative. 70 MW of baseloaded power supplied to VALCO eroded reserve margins below 10% in 2012; it was a matter of course that there would be nation-wide load-shedding once the WAGP pipeline was damaged taking out 200 MW of power supplied by the Sunon Asogli plant. The exercise needs to be performed to verify whether the Consumer Reliability Cost ("CRC,,)³ from the nation-wide load shedding more than offset the benefits, such as can be described, from running one potline at VALCO in the same period.

GRIDCo's 2011 Reliability Report estimated the CRC in 2010, when Akosombo/Kpong registered its highest operating level, there was no load shedding, and generation was thought to be adequate, at US$113.5 million, less than 0.5% of the country's GDP, versus a CRC in 2007 when the country faced significant load shedding, of US$3.3. billion, or 22% of the country's GDP.⁴

Unfortunately, the generation picture for 2013 does not provide the reserve margins that were originally hoped for. First of all, Asogli's 200 MW power capacity will not be available until late 1 st Quarter/early 2^nd Quarter, which means system reserve will remain below [5%] for the first quarter of 2013. The Bui hydro plant, originally expected to come on schedule in the 4th Quarter 2012, is now expected to come on over the course of 2013; the first 133 MW by the 2^nd Quarter, and then the full complement of 400 MW by September/October assuming appreciable inflows into the Black Volta. No other new capacity is expected in 2013; the earliest new capacity will be VRA's 200 MW Kpone Thermal Power Plant ("KTPP") which is expected sometime in the 2^nd Half of 2014.

VRA therefore does not see a supply situation in 2013 that would warrant VALCO operating at more than one line for at least the first three quarters of the year; any more would erode system reserve margins further, and put the entire system at increased supply risk. At the same time, VALCO does not believe it can pay its rapidly mounting bills to VRA if it does not increase production to more than one potline. This essential conundrum suggests a radical solution is required for the successful resolution of the VALCO problem.

VALCO's expanded operation to more than one potline, then, should be determined by Government's strategic commitment to it. Strictly, Government should shut down VALCO, if the CRC for a one-line VALCO operation can be demonstrated to outweigh the benefits of a one-line VALCO operation for the first nine months of 2013. If such a scenario is deemed unfeasible, then Government must make a specific subsidy provision for VALCO until such time it can run profitably, and pay up the US$37 million in arrears to VRA, and provision to subsidise it until such time VALCO can expand beyond a one potline operation.

In parallel and as soon as practicable, VALCO should complete the development and commence the implementation of a dedicated power plant that supports 100% VALCO operation and provisions for its future expansion, one that would complement rather than compete with the needs of a rapidly growing economy.

VALCO has two options in respect of choice of fuel to power its plants. The first would be to receive a portion of Akosombo/Kpong's hydro resource, which would have the net effect of raising electricity tariffs to the general populace, who will no longer benefit from low-cost hydro blended into the wholesale tariff. The second is the more feasible option: VALCO would receive a special dispensation on price and quantity on gas received from Ghana's gas fields. A 60 mmmscfd allocation of gas supply, possibly from the first tranche of gas supply from the Jubilee field, would also allow VALCO to run three potlines. Ghana gas delivered at any price up to US$4/mmbtu to a combined cycle power plant should yield an electricity price of less than US cents 6/kWh to VALCO, and allow it to comfortably run its operations at two lines or more.

This latter scenario suggests 3-4 years before VAL CO's combined cycle operation is available, assuming it is a greenfield operation; less, if existing capacity is acquired or expanded. Until then, VALCO should not operate beyond 1¹/₂ -2 lines, at all times ensuring that the system reserve margin is 10% or more. If generation supply is not adequate to run VA LCO at 1¹ /₂ or more, it should be shut down, or Government must make explicit provision to subsidize it until it can run at those levels. Further, Government should layout a feasible timeline with clear milestones for how the development of the country's bauxite mines will tie into the construction of an alumina refinery, and the operation and consequent expansion of the VALCO smelter. Absent that, the current operation of VALCO at any level is moot.

Finally, it is not clear that Government alone can successfully motivate a long-term solution for VALCO: the dynamics of the aluminium industry; its capital intensive nature; the nature of supply contracts required, all suggest that a private sector investor with a substantial balance sheet, would better optimize VALCO's current assets than the Government of Ghana itself.

The Availability of Gas

The current damage to the West African Gas Pipeline and the subsequent fatalities that occurred in late October while the pipeline was being commissioned, has further delayed the eventual commissioning of the pipeline until late 1 st Quarter/early 2^nd Quarter 2013. 

Supply of Ghana gas from the Ghana National Gas Company (GNGC" or "Ghana Gas") is now projected for the 3^rd Quarter, even though official pronouncements suggest otherwise.

VRA projects to use 90 mmscfd from Nigeria commencing 2^nd Quarter and 60 mmscfd from Ghana commencing 3^rd Quarter. However, VRA's total gas requirement in 2013, when aggregated with Sunon Asogli's, will amount to 220 mmscfd and increase to 240 mmscfd after the conversion of the Mines Reserve Plant to take gas as well as diesel is completed in the 3^rd Quarter 2013. Given this assumed deficit of between 70-90 mmscfd in gas requirement after the recommencement of gas supply from Nigeria and Ghana, VRA is projecting to use up to [twelve (12)] cargos of crude oil in 2013 at an incremental cost of US$300 million over what it would have cost assuming gas was available.

There is the possibility of obtaining up to 70 MW of "non-firm" supply of natural gas from Nigeria. This would be available above the contractual level of the 123 mmscfd supply, and priced more expensively. VRA has already commenced those discussions with Chevron and the West African Gas Pipeline Company ("WAPCo") though the outcome is less than certain. Ghana Gas has also indicated that it would be able to supply up to 90 mmscfd (versus the 60 mmscfd currently assumed) from Jubilee once operations start. Both of these developments would have a substantial positive impact on VRA's operations and finances.

However, the likelihood of positive outcomes is offset by an equal or greater likelihood of negative outcomes. There is still no official schedule for the return to service of the West African Gas pipeline, and on-going audit and safety work may push the date out even further to May or June. We have even less certitude on the dates for Ghana gas supply.

The uncertainty in gas supply from both Nigeria and Ghana has made more feasible the possibility of gas supply through the re-gasification of liquefied natural gas ("LNG"). 

Approval is being sought to tender for a bankable feasibility study for the development of an offshore LNG receiving terminal in the Takoradi area. Once that work is complete, a tender will be issued for the procurement of specified volumes of LNG over a minimum 5-10 year contract period. A project company will then have to be identified to build the required LNG receiving terminal.

The potential benefits of a supplemental source of gas, supplied through LNG, are several. First, such a source of supply would immediately substitute for the next disruption in supply of gas from Nigeria (or Ghana), were it to occur. VRA's incremental fuel bills just in the four-month period September to December exceeded US$[120] million, and by itself would substantially offset, if not completely justify, the cost of building such a terminal.

The further benefit is that, in the absence of assured volumes of gas from either Ghana or Nigeria, any ·new generation investor, public or private, can immediately lock into an assured supply of re-gasified LNG, and use that as a basis to develop new generation projects. This is exactly the case for Sithe Global Energy Limited ("Sithe"), the independent power producer that won the West African Power Pool ("WAPP") concession to develop 450 MW in Ghana for the ECOWAS region.

The potential availability of assured volumes of re-gasified LNG means that Sithe can contract its entire 20-year requirement of fuel, and use that as basis to further develop and subsequently finance this regional initiative. Without this possibility, though Sithe's project would be dual-fuelled, using both crude oil and gas, the project would take much longer to develop and finance.

VRA believes that a public-private partnership would best execute the required FSRU/LNG receiving terminal. This should comprise the key stakeholders interested in sourcing gas, including the VRA, possibly WAPCo, and Sithe Global, in its capacity as WAPP's partner in the 450 MW Domunli project. Once complete, however, it would benefit any project, public or private, wishing to develop a power project in Ghana, and needing to source gas to do so.

Finally, assured volumes of LNG can only be contracted after the gas supply profiles from Ghana in particular, and Nigeria, to a lesser extent, are identified with the best technical and economic information available. VRA has made this request to the Ministry of Energy and the Energy Commission for an independent, industry- recognized company to develop such a study, but the request remains outstanding, and a missing piece in the development of the all-important LNG solution.

Implementation of meaningful reforms

Legislative Instruments (“Ll”s) 1934 and 1937 were developed by the Energy Commission (“EC" or the "Commission") and promulgated into law in 2008 to provide the further underpinnings of the deregulated electricity sector anticipated by the passage of Act 691 in 2005. LI 1934, the Grid Code, provides the technical specifications and standards anticipated for the transmission network operational for the deregulated supply of electricity. It is a mostly technical document, and uncontroversial.

LI 1937 stipulates that the electricity market shall be governed by electricity market rules to be written by GRIDCo and approved by the Commission. Its most controversial provision is in respect of the non-inclusion of hydro energy in future bilateral contracts to be signed between generators and customers. This is intended to create a level playing field for new private sector generators who would be likely providing thermal-fired power and competing with VRA's much lower cost Akosombo and Kpong hydro power. However, it has implications for the resultant potentially high cost of power signed bilaterally between VRA and ECG that are yet to be resolved.

Within six months of the promulgation of LI 1937, Ghana Grid Company was supposed to prepare the electricity market rules to govern wholesale market procedures, including invoicing payments, adjustment of payments with interest for late or over payments, and monetary penalties; the market manual; and procedures for settling complaints and disputes among market participants; all procedures and manuals subject to the approval of the Commission.

Despite the provisions stipulated in the LI, the Commission itself had gone further to develop a draft set of market rules, available in June 2009 to be initially implemented in January 2011 after appropriate consultation. It is not surprising, then, with the subsequent ambiguities in roles and responsibilities between the EC and GRIDCo, in the lack of clarity around precise but far-reaching principles that, four years later, the sector is still waiting for a set of market rules that will govern the operation of the anticipated future market. Instead, GRIDCo has published a further draft set of rules, not for the fully functioning market eventually envisaged, but rather for a gradually phased approach, starting with a "Data Exchange" phase between market participants. There was minimal consultation on this document; market players had little time to provide their input; and in it, there are no discernible time limits or targets, no sanction for non-performance during this phase, and no clues for how we progress from this first phase to the next.

While the development of a phased approach seems intuitive, the lack of a road map for reform with identifiable targets, intermediate metrics, and developed after considerable stakeholder participation, leaves one wondering just where and when electricity sector reform is headed. The lack of a roadmap is picked up in a November 2011 World Bank memo sent to the Ministry of Energy that pointed out a number of non-trivial issues that needed to be addressed for the successful development of a wholesale electricity market.

These non-trivial issues include the size of the market ("Is Ghana's electricity sector big enough?"); the number of players ("VRA and who else?"); the lack of an electricity surplus, among others. Unfortunately, the non-resolution of these issues now justifies a "do as little as possible" approach, as these issues question the very path Ghana embarked upon almost twenty years ago, suggesting that extreme caution is implied and advised. However, Ghana is also "half way across the river", already separating out transmission from generation, one of the very few African countries to do so; already actively soliciting private sector participation in the generation of power. The cost of going forward, and implementing feasible solutions is likely to be less, not more, than the cost of going backwards and reverting to what may now be an unthinkable status quo.

Government's record of the past thirty years, from the year 1983-5 when Akosombo inflows recorded its lowest level in recorded history, and the country experienced its first, and most significant load shedding episode of that period, has been extremely poor. Substantial load shedding occurred fifteen years later, in 1997-8; and then ten years later, in 2006-7, to re-occur five years later, in 2012. While each load shedding episode appears to be diminishing in amplitude, the episodes have begun to re-occur with increasing frequency. This record does not suggest that Government is able, by itself, to create the electricity surpluses required for Ghana's rapidly growing economy. However, if Government is equally unable to set the rules to properly attract and govern private sector participation; a double catastrophe will surely occur, where neither the public sector, led by VRA, nor the private sector, led by IPPs, will provide the necessary generation investment Ghana requires.

However, new generation investment has to be motivated by a variety of factors that include cost-reflective tariffs; a distribution sector that contains its losses, among others. Multiple players in the deregulated generation sector also need a set of transmission rules that will ration out scarce and, in some cases, old transmission capacity among competing generators. This latter fact provides the premise and rationale for the electricity market rules that GRIDCo needs to develop.

These transmission rules, technically termed "Open Access Transmission Rules" ("OATR") , to connote the participation of several generators, will allow GRIDCo to reliably balance supply and demand while managing transmission constraints; will be non-discriminatory and transparent, allowing participants to understand GRIDCo's actions in real time; will allow generators to be fairly compensated for supplying capacity, ancillary services and energy; and should be developed through a transparent stakeholder process with a robust governance structure.

The Power Purchase Agreements ("PPA"s) that are required in the new, regulatory environment will have to be substantially different from those that have been signed in the past. Current contracts are for provision of energy only, where new contracts should be unbundled and provide for capacity and energy. The new PPAs cannot provision for ancillary services which will have to be administered by GRIDCo; generators can no longer deliver energy to a customer's bus; VRA can no longer unilaterally provide more, or less, electricity when there are deviations from the contracted amounts; PPAs will need to contain credit and collateral requirements; and so on.

VRA is bearing the cost of most, if not all, the costs and inefficiencies of this undeveloped market where the rules of engagement are not yet clearly spelled out. For instance, VRA provides all the reactive power required when the system needs it, at no benefit to itself, while the Sunon Asog/i plant has no contractual obligation to provide any reactive power, when the system requires it.

Currently, PURC is understood to be publishing the costs of ancillary services soon; it is not clear who or when the rules for the capacity market that attracts new investment will be developed; and GRIDCo is operating the Data Exchange with no clear coordination with the other regulatory agencies. Unless leadership is provided by the Ministry of Energy (?), this vacuum and lack of leadership in the development of the wholesale electricity market will become an ever increasing constraint, with every passing day, to the creation of the hoped for large electricity sector, with equally large reserve margins, that this country hopes for.

Overhaul of Sectoral & Institutional Capability: Planning, Systems & Culture
The VRA, ECG, and recently established GRIDCo are, at heart, three monopolies that have operated for decades in a space where they faced no competitive pressures to update and upgrade their technology, systems, and operating procedures; no competitive pressures to innovate, train, and acquire new skills; no competitive pressures to seek after and satisfy their end-use customer. Because these companies have been prestigious and highly sought-after places of employment in a country where good jobs for qualified professionals have been hard to find, these companies often provided the first job out of school for the typical senior manager, who now has worked for twenty-five years with only one company. These companies have become ossified in their structures, processes and thinking.

It is vital that the systems and processes get renewed and overhauled, and that new blood and new thinking is brought in to refresh these organizations. This can be done with either new leadership, preferably from outside these companies, or with strategic partners, who bring with them a more performance-oriented, customer-focused culture.

Further, it is hard to make the case that the regulators, in particular PURC, have lived up to their initial mandates. PURC has not been able to deliver cost-reflective tariffs to VRA for twelve of the last fifteen years. They do not appear to be independent of the political process - the very rationale used to set them up as an independent regulator, in the first place. They have also not demonstrated transparency in the administering of the setting of electricity tariffs: fifteen years after the PURC's set-up, the utilities are still asking how their tariffs are precisely set.

The Energy Commission, on the other hand, has been proactive in developing and promulgating Ministry of Energy/Government policy, but has often done so with little consultation with key stakeholders. EC has also struggled to provide clarity and leadership around the controversial provisions in Ll 1937, four years after its passage, in respect of the separation of the hydro and thermal in bilateral contracts. Both agencies, from their respective vantage points, appear more as administrators of the system, rather than enablers of the system.

Despite the Government's laudable objective to increase Ghana's electricity capacity by 2015, the Ministry is providing few of the means by which these objectives will be met; not through supporting cost-reflective tariffs; not through the payment of Government arrears; not through the provision of a coherent plan for VALCO. Government also continues to send mixed messages: on the one hand, it is seeking a deregulated generation sector with a level playing field; on the other, it is seeking donor assistance for the generation sector. This lack of consistency clearly suits its purposes, allowing it not to pay VRA's arrears, and withholding the proper tariff, when they are due.

What the sector most needs, that the Ministry would seem best placed to provide, is the provision of an overarching plan for the entire sector, developed after a comprehensive diagnosis of the challenges facing the entire sector by world recognized industry consultants, dispassionately interrogated, that would require agreed metrics and timelines, to achieve the objectives that the sector has set itself, and forcing the making of hard choices and trade-offs between sector agencies and resources. The Ministry has to effectively "step back", and take a comprehensive view of how best to address the current and future challenges, instead of the current headlong rush to meet today's problems with no discernible road map for the future.

Conclusion

Today, there is a fundamental disconnect between the Ghana Government's goals of achieving 5,000 MW by 2015 and the means by which those objectives should be achieved.

One can only assume that the Ministry of Energy, Government's sector agency, will provide the leadership to connect means to objective. Until and unless that happens, the electricity sector - and the country - will muddle along; down a road that is taking us nowhere in particular.

We should take comfort in the fact that there are many empirical examples of well functioning electricity sectors, of countries where power sector reform has been successfully implemented. An abundant electricity future is well within the country's grasp if we choose to reach out for it. 

Capitalism Kills: The Bangladeshi Garment Factory Disaster

The collapse of the Rana Plaza garment factory building in Savar, near Dhaka, capital of Bangladesh, on 24 April this year was another example that the global economic system that we live under, known as capitalism is injurious to the health of the working class. Actually, capitalism kills people; it kills the working class of this world in its pursuit of profit through commodity production. The week before, on the other side of the world, a fertilizer plant had exploded in Texas on 17 April killing 14 workers.

The day before the collapse a crack had been detected in the building’s structure and the workers had been sent home, halting production. The next day the workers returned in the morning to be informed the building had been inspected and declared safe and the workers were ordered by managers to return to work. The initial death toll under the 600 tonnes of rubble was 76 workers but after three weeks of recovering bodies the death count had climbed to over 1,000workers, mainly young women. Around 2,500 workers were injured in the building collapse and 34 bodies were too damaged or decomposed to be identified.

The Rana Plaza building housed the garment factories of manufacturers New Wave Style, New Wave Bottoms, and others. These garment capitalists employed 3,122 workers. The lives of the garment workers are a cheap commodity for the garment capitalists as their labour power is purchased cheaply. The garment workers are paid $38.50 (£24) per month. According to the International Trade Union Confederation, a Vienna-based labour rights group, garment workers in Bangladesh are among the lowest-paid in the world.

New Wave supply clothing retailer Primark (2010 revenue £2.7 billion) who are owned by the FTSE 100 food processing company Associated British Foods (2012 profit: £583 million). New Wave also supply Italian clothing retailer Benetton (2011 revenue: €2 billion). The Rana Plaza manufacturers also supplied garments to Mango (owned by the Andic brothers; net worth: $4.8 billion), and Matalan (founded in Preston in 1985 and now with a revenue of £1 billion).

The Bangladeshi garment industry is worth $20 billion (£13 billion), employs close to 4 million workers and accounts for 80 per cent of Bangladesh's exports. Sixty per cent of the garment exports go to Europe and 23 per cent to the USA. Bangladesh has the second largest garment industry in the world after China. Following the building collapse there were protests on Workers’ Memorial Day and May Day. The President of the Bangladeshi Garment Manufacturers and Exporters Association expressed the concerns of the capitalist class when he worried about 'the disruption in production owing to unrest,' but the Bangladeshi Finance Minister said about the garment building collapse: 'the present difficulties... well, I don't think it is really serious – it's an accident.’

The Rana Plaza building collapse follows recent incidents in which workers have been killed in the Bangladeshi garment industry. In April 2005 the Spectrum sweater factory building collapsed killing 64 workers; in December 2010, 27 workers were killed in a fire in a factory that made clothes for Gap; and in November last year a fire at the Tazreen Fashion Factory which produced garments for Walmart and IKEA killed 117 workers. The Rana Plaza disaster even outstrips the devastation of the Karachi garment factory fire in September last year which left 289 Pakistani garment workers dead. Since the disaster there has been another fire, at the Tung Hai Sweater factory in Dhaka on 8 May, killing 8 people.

Doug Miller at Northumbria University said 'Factory owners can't make money on the original order – the price has been set too low – so will therefore find someone who can – subcontracting to producers of ever-declining standards. In Bangladesh you have a glut of buyers in search of a cheap product wanting to place enormous orders; and capacity is built hurriedly. Factory installations are shoddy; workers locked in and lead times are too tight.’

Brad Adams at Human Rights Watch said: 'Given the long record of worker deaths in factories, this tragedy was sadly predictable. The government, local factory owners, and the international garment industry pay workers among the world’s lowest wages, but didn’t have the decency to ensure safe conditions for the people who put clothes on the backs of people all over the world.'

Trade unions are almost non-existent in Bangladeshi garment factories. Aminul Islam, a trade unionist who worked for local labour groups affiliated with the AFL (American Federation of Labour), had his phone tapped, was subject to police harassment and was once abducted by state security agents and beaten. In April 2012 he was trying to solve a labour dispute at factories that produced shirts for Tommy Hilfiger when he disappeared and has not been seen since.

The history of capitalism is littered with the deaths of the working class: 146 garment workers were killed in the New York City Triangle Shirtwaist factory fire in 1911; the Senghenydd Colliery disaster in South Wales in 1913 killed 439 miners; but nothing we hope can surpass the devastation at the Bhopal Union Carbide Plant in India in 1984 when between 4,000 and 20,000 people died. Warren Anderson, CEO of Union Carbide, never faced prosecution because the US government refused to extradite him to India, citing lack of evidence.

Mount Everest: Top of Whose World?

‘Because it is there’ was the unbending response of mountaineer George Mallory when he was asked why anyone would want to climb Mount Everest. In that sense Everest had been ‘there’ since the 1850s, when it was first identified in the Great British Trigonometric Survey of India as ‘singularly shy and retiring.’ The fact that this was something extraordinary – the highest in the world, then measured at 29,002 feet – was acknowledged in 1856 when it was considered proper to name it after the retiring Surveyor General of India. Not that Sir George Everest, infamous for his volcanic temperament, was especially impressed. And Mallory? His body was left on the mountain in 1924, tantalisingly close to the summit. Thereafter Everest was inviolate until June 1953, when Edmund Hilary and Tenzing Norgay allowed themselves to spend just fifteen minutes there, burying in the snow some small tokens of their achievement. The news of their triumph was delayed so as to arrive here on the same day as the coronation of queen Elizabeth, resulting in coinciding sixtieth anniversaries which may be used by crazier patriots in a campaign of delusion to play down the fact that neither of those two pioneering climbers was British.

Curzon

It was some time after Everest had been noted and measured that the prospect of climbing it, which involved first crossing the formidable surrounding landscape, was seriously discussed. And when there was such a discussion, it originated among an expensively exclusive elite that prided itself on being driven by what was known as a ‘mystic patriotism’ – but which in reality had notably less exalted motives. This was a cause enjoying the passionate support of Lord Curzon, supremely imperialist Viceroy of India: ‘It has always seemed to me a reproach ... that we, mountaineers and pioneers par excellence of the universe, make no sustained and scientific attempt to climb to the top...’ In 1906 the proposal was taken on by the Alpine Club on the assumption that the cost would be borne by its more prosperous members who in return would qualify for a place on the expedition. In the event, the entire concept was swamped by the outbreak of war in 1914, when many of the aspiring conquerors of Everest – including Mallory – were persuaded by what they regarded as their obligation as Englishmen to the essential idealism of the human spirit to take their place in the trenches, where they witnessed such horrors as would prepare them for the worst that Everest could offer.

Bell

The foredoomed peace of 1918 allowed the surviving climbers to turn their obsessive attention to the detailed organisation of an Everest expedition. One immediate problem was to ensure that a party would be allowed by the surrounding countries to get at the mountain. This was complicated by the question of whether the British would send arms to Tibet for that country's continuing dispute with China. There were also religious objections to the invasion of sacred ground. An influential figure in settling this problem was Charles Bell, the British political officer at Sikkim, whose knowledge of Tibet, its people and their traditions was impressively extensive. He reported: ‘...there are several sacred places in the vicinity of Mount Everest...Tibetans would not like Europeans moving about those places...(and) do not believe that explorations are carried on only in the interests of geographical knowledge and science... Until the Tibetan question is settled with China these expeditions to Mount Everest should not be allowed.’ Eventually Bell's considerable influence persuaded the British government to supply arms, ammunition and the necessary training and technical advice to the Tibetan army. In December 1920, as part of a more complex initiative in diplomacy, this brought Tibetan agreement to a British Mount Everest expedition.

Hinks

The plan was to send a party in 1921 to assess whether it would be possible to climb Everest and get down again safely and to settle on the most likely route for doing so. This would be followed by yearly expeditions from 1922, setting up a chain of camps from which a select pair of climbers could strike out for the summit and quickly return. Among the most urgent matters for the Committee was to select the mountaineers. Arthur Hinks, one of the joint secretaries, was responsible for this although his temperament was not the most promising for so delicate a task. Among an ocean of volcanic eccentrics he was a sarcastic, intolerant, vituperous bully contemptuous of anything he considered ‘modern’ such as a telephone in his home. There was a strict requirement for all members of the expedition to be British, which allowed Hinks to compose a response to an ex-officer of the German Army: ‘I have hitherto put straight into the wastepaper basket all applications from ex-enemies.’ Not that all cases were judged on climbing ability: in 1923, Richard Graham who offered pretty well everything needed to commend him and who had a number of influential supporters – including Mallory – was at first accepted but then quietly rejected when an anonymous Committee member objected to him on the grounds that during the war, as a Quaker, he had been a conscientious objector.

Finch

When the mammoth task of organisation was completed the expedition arrived at its base camp early in May 1921. Among the matters to be settled was whether the use of oxygen should be allowed or whether it would be ‘unsporting.’ Especially keen on oxygen, making himself somewhat unpopular in the process, was George Finch, an accomplished climber who in the next expedition in 1922 reached to a record 27,300 feet – during which he saved the life of his partner. A party led by Mallory then failed to improve on this and as they were descending they were hit by a massive avalanche in which Mallory narrowly escaped death but seven native porters were killed. A lack of money prevented another effort in 1923, but on the following year two climbers – Norton and Somervell without using oxygen – reached 28,126 feet, less than 1,000 from the summit. But they were in a very bad state, with Norton snow blind and Somervell fearing he was on the point of death. They both survived and Mallory prepared himself with Andrew Irvine for his third attempt on 8 June, leaving the geologist Noel Odell at Camp V to keep observation.

Odell

Early on 9 June as the mist cleared Odell saw, on a ridge near the base of the final peak, what he later described as ‘two black spots.’ As he watched, the two figures surmounted a great rock step before the mist clamped down again and they were lost to sight. ‘There was but one explanation,’ he later wrote, ‘It was Mallory and his companion moving, as I could see even at that great distance, with considerable alacrity...’ He kept watching and hoping for some hours before he gave up. But Mallory and Irvine were never seen again, and the climbers assembled below had to face the agonising truth that they had perished somewhere on the slopes. In effect it was the end of the expedition. But a great deal, in several senses, had been invested in its result, which stimulated some reluctance to admit to failure. So Odell was subjected to strong pressure to refashion his memory of what he had observed, even to supply evidence that the climb had been successful. But what concession he made on this was no more than vague and conditional. Subsequent events offered nothing more: for example when Hilary and Tenzing got to the top they did not find anything to suggest that anyone had been there before.

With the return of the expedition the angry frustration at the failure did not prevent an awareness that this was a potentially profitable situation. Odell was promoted as a rising star, soon speaking at as many as three lectures a day, which yielded him some £700. A lot was expected of the film The Epic Of Everest, made by the official photographer John Noel, on which rode an investment of £8000. Noel was not optimistic about the prospects for the film and questioned whether these might have been more promising had there been a female star to inject a romantic interest. Already it featured a type of carnival including dancing and seven performing Buddhist monks, which caused the Dalai Lama to ban Noel from Tibet and forbid any more plans to climb Mount Everest.

Crime

In what are known as these more enlightened times the travel industry has expanded into mountaineering, with offers to conduct willing tourists to the summit – at a suitable price. One agency promises to provide ‘...the very best leadership, equipment, oxygen systems, comfort, food and Sherpa support...’ for some £35,000; another charges $65,000 because it claims to be better than cheaper companies. One effect of this is to create serious congestion on the route up the mountain; recently one experienced climber took a photograph of a huge queue standing for hours on the slopes, waiting its turn. In all he summarised the situation as ‘mass hysteria.’ There have been accounts of the mountain being disfigured by masses of litter including empty oxygen cylinders and of hurrying climbers in the Death Zone stepping around others who have been overcome. And crime flourished in a setting where it would once have been inconceivable. In his book High Crimes Michael Kodas, who had climbed the mountain twice, listed a series of thefts from the tents of climbers, in many cases involving equipment which was life-preserving, later to be found hidden among other team members' property: ‘...some of my own teammates... in their efforts to stand on top of the world and make money doing it, behaved more like mobsters than mountaineers.’

It was consistent with these events that in 1999 a party from the Mallory and Irvine Research Expedition should find, at 27,000 feet, Mallory's frozen body. Photographs were then on sale for considerable sums of money; at one stage the price for a single shot reached $40,000. As Mallory's body was hacked and levered out of the ice the clothing was torn, yielding artefacts which were later catalogued as rare specimens. From the diggers could be heard comments such as, ‘There's still some more shit here’ and ‘This is something...I think it's fucking closed.’ One vastly experienced climber who gave vent to his feelings at this was Chris Bonington: ‘Words can't express how disgusted I am. These people don't deserve to be called climbers.’

Priorities

After the failure of the 1924 expedition, leaving its bodies out on the frozen slopes, there was a suspension of any more such ventures until 1933. In the meantime there was the preoccupation with glorifying it all as an historic example of purely British endeavour. At the memorial service in St. Paul's cathedral the bishop of Chester intoned about ‘…the last ascent, with the beautiful mystery of the great enigma... stands for more than an heroic effort to climb a mountain.’ These words may have defiantly soothed some ruffled patriots but said nothing about the essentials of what had happened. The drive to climb Everest was at first energised by the pressure to compensate for the failure of British expeditions to be the first to reach either of the Earth's poles. And then, in what was called, after 1918, The Silence as the world was in preparation for another great war, there was the need to assuage the grief over senseless disasters such as the Somme, Passchendaele, Gallipoli... Behind it all the political and military urgency of the tensions in the area sprouted from the priority to assert the British rule of India and stifle any potential threat from Russia. These matters were not unrelated to the fact that marketing the opportunity for people to climb Everest emerged as another investment, essentially no different from all the other degrading examples of the commodity demands of capitalism. In face of that, no human being, no mountain, can stand free.