By Our Reporter
MONROVIA: In recent times, the Chief Executive Officer (CEO), of the state-owned Liberia Electricity Corporation (LEC), Prof. Monie Ralph Captan, has come under intense public criticism due the poor power distribution by LEC in Monrovia and its immediate surroundings.
Recently, the management of LEC announced to public that due to some technical problems, the Corporation will share power to various communities by schedule.
Since then, power outage has engulfed the entire Monrovia, and its environs, something attracted the attention of the National Legislature to invite Prof. Captan and team to explain why the said power distribution is severely impacting residents of various communities.
But, the former Foreign Minister, now LEC boss, told the Lawmakers that the Liberian government is hugely indebted to LEC and LEC is also indebted to the Ivorian Government.
However, in 2021, one of Liberia’s oldest political parties, the Liberian People’s Party (LPP), of veteran and world-class economist, Dr. Togba Nah-Tipoteh, wrote the United States then Ambassador accredited near Monrovia, Michael A. McCarthy, to use his offices to encourage the Liberia Electricity Corporation (LEC) to publish schedules and breakdown of the expenditures of the monies it received from Liberia’s development partners.
The Liberia Electricity Corporation (LEC) is a public utility entity created in 1973 by the Government of Liberia through an Act of the Legislature with a mandate to produce and supply economic and reliable electric power to the entire nation, while at the same time maintaining the corporation’s finances.
In a letter addressed to the then US Ambassador McCarthy, LPP disclosed that US$314M loan was taken from the International Development Association (IDA); US$103M from the African Development Bank (AfDB); LEC’s portion of the US$257M from the Millennium Challenge Corporation (MCC); Government of Liberia subsidies; and at least three of the most recent LEC audited financial statements of 2013 to 2020.
The LPP, in its letter then, expressed the belief that when Liberians have the opportunity to review the Corporation’s financial statements, they will fully understand the perennial issue of “Power Theft” the service provider faces that you (Ambassador McCarthy), wants to be halted.
According to LPP, then, when Liberians have the opportunity to review the Corporation’s financial statements, the population will also be able to see vividly and compare the vice to the positive narratives of the Millennium Challenge Account that managed the LEC from 2015 to 2021. At the time, there was the issue of “Power Theft” that the MCA failed to comment on, then.
However, MCA mentioned that it accomplished many things including: Improving reliability of electricity supply more than doubled the number of homes with electricity access; Mount Coffee enabling LEC to expand more reliable and affordable power supply to more than 82,000 homes, businesses, and other entities, compared to a little over 34,000; LEC becoming a viable public utility that achieved success in network reliability, availability of power-plants, collection efficiency, new customer connection, and improved customer service, among others.
The letter said the LEC’s publication of its financial statements would be in accordance with Section 1.1.12 of the 2010 Freedom of Information Act providing information on such expenditures as the subsidies government allocated in the National Budget, covering 2017/2018 to 2022/2023.
The party also called for publication of the financial statements of the LEC to explain the Agreements between LEC and the Interconnection Transmission Line running from Ivory Coast , Liberia, Sierra Leone and Guinea (TRANSCO CLSG) and thereby afford the public the opportunity to see why a section of the Agreements stipulates “…that, in the event that TRANSCO CLSG’s revenues fall short of covering the project’s debt service obligations, the four governments, including Liberia, will be responsible for making up revenue shortfall.
LPP further told the US Envoy, then, that the LEC has some information on its financial transactions included in the national budgetary documents and on its website, but the information omitted cash balances; amount of money customers owed LEC; amount of money LEC is indebted to suppliers; notes to the financial statements; etc.
The letter emphasized that LPP visited its website and read information on “Gas Pipe Contractors, Utility Cost, Electricity Prices, Electricity Suppliers, Customer Service, not schedules and breakdowns of the US$257M appropriated for the Corporation, and the management fees between MCA and the Government of Liberia.
LPP pointed out that Liberians might get information or clarity on the issues if they read and compare the financial statements of LEC prepared by previous and current managers.
LPP: “For instance, what factors affected profits/ (losses)? Was it power theft, or other issues, including salaries, fees, etc.? Or what factors increased salary from US$5m in 2018/19 to US$9m in 2019/20 as detailed in the 2019/20 National Budget?”
Howbeit, some members of the public are of the view that as “Thriving Cartel “continues to suck LEC via corruption, waste and abuse, a report released by the U.S sponsored Millennium Challenge Account-Liberia Compact Completion Report, in 2021, revealed how the Liberia Electricity Corporation (LEC) has been drawn in massive electricity theft.
The US Government’s “Compact Completion Report” underscored the need to look at both institutional and environmental sustainability issues.
For the institutions, the report stressed that the long-term success of Mount Coffee is dependent on a few key factors.
According to the report, while the Compact’s projects have made a number of achievements, there are many concerns about the sustainability of these achievements over both short-term and long-term.
It named the success of the Liberia Electricity Corporation (LEC), which is in turn dependent on good governance and sound economic management and the Political and Financial Support and Commitment of the Government of Liberia (GOL).
While the Management Services Contractor has been able to bring some operational stability to LEC, it lacks capital expenditure (CaPEx) and operational expenditure (OpEx) funds that would enable it move to the next phase of the business plan.
According to the Compact Completion Report, the January 2021 update of LEC business plan shows that the utility needs US$109 million of Capital Expenditure (capex) funding for its turnaround.
The Report, however, added that the World Bank is in position to fund at least US$42 million of that amount, leaving a gap of US$65 million that needs to be funded through external sources by April 2024.
Moreover, LEC’s current financial projections also show a net operating cash flow deficit of US$16 million. Because of the lack of capitalization, LEC is not able to expand its customer base in response to output and that people who cannot get connected resort to illegal connections, thereby exacerbating the utility’s losses.
According to the report, LEC is therefore still caught in a spiral of commercial losses which at one time was as high as 74% of power produced.
The reports added that because GOL has not been able to capitalize the utility, it is not certain if the MSC contract will be picked up after the contract ends though it appears the World Bank may fund an extension of the MSC under new terms and conditions.
According to the report, when the utility lacks funds to provide or maintain even basic services like meters, more people go unserved, resulting in more illegal connections. This leads to more equipment blowing, thereby repeating the cycle.
Commenting on bringing LEC technical and commercial losses under control, the report indicated that an evaluation study by Mathematica found that while LEC has had an almost fourfold increase in MCHPP’s total electricity supply (in MWh per month) from 2015 to 2019, total electricity sold only doubled.
Similarly, the report says technical losses increased from about 500,000 megawatt hours (Mwh) in January 2015 to 1.9 million MWh in September 2019.
More strikingly, commercial losses increased from 1 million MWh in January to 10.8 MWh in January 2019. Since 2018, commercial losses have steadily risen and stabilized around 58 percent, for a total loss rate of about 70 percent.
The study concluded that Liberia presents the exact context in which corruption proliferates: weak governance, poverty, poor utility management, high energy demand, and high tariffs.
“As a result, LEC has one of the highest rates of commercial losses in the world, with thriving cartel responsible for grand electricity theft and small-scale, but widespread power theft in communities,” the Compact Completion Report revealed.
It added that LEC is beset by technical inefficiencies, an ability to connect customers despite excess generation capacity, expanding corruption, and unsafe infrastructure.
The report made it clear that utility requires increased funding for operations and capital expenses, a systemic response to theft and corruption, and support from the Government of Liberia and donors to implement the reform needed to sustain the utility.
It may be recalled that in October 2015, the US and Liberian governments signed an agreement to establish Millennium Challenge Account in Liberia (MCA-Liberia) as the legal, independent and autonomous agency of the Government of Liberia responsible for the implementation and oversight of the Millennium Challenge Corporation’s Liberia Compact.
The five-year Compact was in the amount of US$256,726,000.
Its goal was to reduce poverty through economic growth, and it was designed to address two binding constraints to economic growth currently existing in Liberia including lack of access to reliable and affordable electricity, and an inadequate road infrastructure.
The Compacted entered into force on January 20, 2016 and expired on January 20, 2021. The objectives of the two projects were to access more reliable and affordable electricity; and to improve the planning, and execution of routine, periodic and emergency road maintenance.
The energy project had a budget of approximately US$201 million and was implemented through four interconnected activities, each with sub-activities: Mt. Coffee Rehabilitation Activity, Mt. Coffee Support Activity, Liberia Electricity Corporation (LEC) Training Center Activity and Energy Sector Reform Activity.
LEC has been allegedly implicated in similar cartel during the administration of former President Charles Taylor when the Liberian government, through the Ministry of Finance, purchased four generators for electricity. But reports had it that when the Taylor-led asked LEC officials to purchase the generators, then LEC executives bought refurbished generators from Chez Republic, which angered Taylor to dismiss both the management team and board of directors.
