ELECTRICITY

Q.1.

a) Your case study team solves a problem in a rate of return regulation setting.

The problem requires you to set priorities in a price review.

The problem

You are conducting a price review for a new vertically integrated electricity company. The following issues arise:

1. The plant service is GBP 24 million. The company had projected GBP 23 million, but says that political unrest resulted in damage during construction.

2. Maintenance expenses include GBP 1 million transactions with the Energy Ministers business, which provides agricultural supplies. The invoices do not specify what was purchased.

3. Management bonuses are being given for increasing profits.

4. Salaries and wages include GBP 1 million to union pension fund to get union to agree to a wage freeze.

5. Other Operating Expenses include GBP 1 million sponsorship of a trade show held by the Infrastructure Ministry.

You are a new agency with only three staff and limited time who can work on these issues. Issues can only be worked on concurrently due to limited time.

The staff requirement for each issue is:

Issue

Number of staff

1

Cost overrun

2

2

Energy Minister transaction

2

3

Management bonuses

1

4

Payment to union pension fund

1

5

Trade fair sponsorship

1

The decision

If you reject any issue without investigation, the operator will appeal to the Ministry and claim that you did not even look at the substantial evidence that it provided.

If you accept any proposal without investigation

the media is watching.

What you need to do.

1. Decide how to use your staff resources to investigate claims.

2. Decide whether to accept or reject any issue that you do not investigate.

b) List one (1) advantage and disadvantage of both rate of return and incentive regulations and enumerate the alternatives to these two.

Q.2

a) With five (5) key reasons, justify the Regulation of the Electricity Sector.

b) With specific references to the Ghana Power Sector, justify the level of involvement of the Economic Regulator (PURC) in the Wholesale Electricity Market.

c) Differentiate between a Regulated and a De-regulated Electricity Market.

d) Differentiate between Take-or-Pay and Take-and-Pay contracts in Electricity markets.

e) Differentiate between the role of the Electricity Market Oversight Panel (EMOP) and that of the Electricity Transmission Utility (GRIDCo) in the Ghana Wholesale Electricity Market.

Oil and GAS

Q. 3.

Do you agree or disagree with the statement that, Ghana gets only 10% of the petroleum revenues due to the nature of the fiscal regime?

Q. 4.

(a)Is the cartelization of the natural gas market possible? Please explain your answer.

(b) Do you believe Ghana has been affected by the Dutch Disease? Explain you answer. How will the country prevent or overcome the Dutch disease?