The Energy Sector

With an expanding economy and a growing population, Ghana faces major challenges in providing the required energy in a reliable, affordable, and sustainable manner. The sector faces a significant financial deficit, limiting the expansion of electricity services.

Ghana currently has over 4,000 megawatts (MW) of installed generation capacity, dominated by hydropower and crude oil-, gas-, or diesel-fueled thermal energy. However, actual availability rarely exceeds 2,400 MW due to changing hydrological conditions, inadequate fuel supplies, and aging infrastructure. Ghana is working to leverage its plentiful natural gas and renewable energy resources to overcome these constraints.

While Ghana boasts significant private sector involvement in energy generation, enhancing its energy regulatory frameworks will be essential to encouraging increased private investment, bringing energy generation projects online, and facilitating new, safe connections to the electricity grid.

 

Our Work

The Ghana Regulatory Partnership Program (RPP) was part of the Regulatory Strengthening and Capacity Building Project, one of the four main projects under the Millennium Challenge Compact. The “Ghana Power Compact” took place from 2014-2021 based on agreement between the governments of the Republic of Ghana and the United States of America, acting through the Millennium Challenge Corporation (MCC). The Millennium Development Authority (MiDA) was established to manage the Compact’s implementation, and NARUC was accountable to MiDA for the implementation of the RPP.

The RPP was a technical assistance and capacity-building program between NARUC, the Public Utilities Regulatory Commission of Ghana (PURC), and the Energy Commission of Ghana (EC) held from 2019-2021. The program supported the broader goals of the Power Compact’s Regulatory Strengthening and Capacity Building Project – enhancing regulatory capacity and processes at PURC and the EC – through targeted interventions across a range of priority topics.

The RPP was designed to enable partnership arrangements with qualified organizations comprised of United States State, national, or international regulatory practitioners and technical experts. These arrangements facilitated the exchange of technical expertise, international best practices, and lessons learned to identify areas for improvement within PURC and the EC’s regulatory structures. Specifically, the RPP aimed to strengthen regulatory frameworks and enhance technical capacity related to reviewing and approving tariffs, ensuring quality of service, and overseeing the operation of a wholesale electricity market (WEM) in Ghana.

 

Focus Areas and Selected Engagements

Reviewing and Approving Tariffs

Through a technical training on tariff setting in May 2021, NARUC worked with PURC to revise and update its tariff models (i.e., revenue requirement model, cost allocation model, and end-user tariff model) to improve transparency, flexibility, and user-friendliness. These changes will better enable PURC to assess the impact of various regulatory decisions on consumers and make further adjustments to the models as necessary. This training built upon a peer review of PURC’s tariff methodologies in November 2019, during which NARUC experts provided expert recommendations and capacity building support for implementing PURC’s 2018 Tariff Study and Tariff Plan.

These activities furthered PURC’s primary objective to ensure that its tariff setting methodologies and practices are forward looking, efficient, transparent, and adaptable in order to send appropriate price signals to utilities, customers, and other energy sector stakeholders. Effective tariff setting is critical to supporting the financial viability of the sector and attracting investment while incentivizing improved performance and protecting consumers.

Quality of Service

In early 2021, NARUC reviewed PURC’s Key Performance Indicators and the EC’s System Reliability Indicators to assess scope, definitions, targets, and benchmarks. Through the peer review, PURC and the EC gained a deeper understanding of best practices in performance monitoring and identified potential strategies for consideration by both commissions based on international experiences. For instance, based on the U.S. experience with phasing in mandatory and enforceable service standards, NARUC experts recommended that Ghana take a stepwise approach to phasing in enforceable service standards, beginning with voluntary guidelines and criteria and assessing benchmarks and targets on a regular basis to ensure applicability prior to establishing incentives or penalties for non-compliance.

If implemented, this approach would allow PURC and the EC to gauge the most feasible approach given the current state of the market and availability of data, while continuing to monitor progress. Participants also discussed issues related to ensuring data quality, collecting live data, and increasing the speed of verification. By improving benchmarking and performance monitoring practices, PURC and the EC can incentivize improved performance and target investment more effectively where it is most needed, enabling system efficiency and improved quality of service in the long-term.

 

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Photo Credit: © Stefanie / Adobe Stock

 

With the support of the United States Agency For International Development (USAID), NARUC facilitated a regulatory partnership between key energy stakeholders in Ghana and the Public Utilities Commission of Ohio with the goal of improving regulatory practices for both U.S. and Ghanaian regulators.

Through seven activities, expert volunteers from Ohio as well as other U.S. State Commissions provided perspectives on tariff setting, regulatory frameworks in electricity and natural gas, and many other issues. Through training and collaboration, officials in Ghana established a new law on natural gas, improved oversight and coordination of gas and electric infrastructure, prepared licensing manuals for natural gas transmission and distribution utilities and other results.

Through the partnership, regulators in Ghana were able to create a licensing and permitting regime, better coordinate siting of electricity and natural gas infrastructure, and draft regulations for natural gas transmission, distribution, and sale. Ohio regulators highlighted how the partnership helped them learn new techniques and methodologies as well as gain an understanding of the international regulatory environment.