Tuesday, 29 September 2015 15:28

5 reasons NPA remains important in the downstream petroleum sector



We often tend to assume that all that the National Petroleum Authority (NPA) does is fixing prices of petroleum products. Of course that is the aspect of the several mandated functions it performs that immediately catches attention. It is therefore not surprising to sometimes hear calls for its dissolution, especially when petroleum price increases are announced.

Contributing to discussions at a forum in Accra organised by the Natural Resource Governance Institute (NRGI) and International IDEA in February this year, the Chairman of the Peoples National Convention (PNC), Mr Bernard Mornah indicated that the “NPA has lost its usefulness”. His grievance was that the NPA has failed to maintain fairness in the fixing of petroleum prices. Mr Mornah's call followed a 27% increase in the price of petroleum products following the passage of the energy sector levy.

It is perhaps important to point out that, the level of petroleum price increases in this particular instance was brought about by the imposition of the new tax (the Energy Sector Levy) introduced by the government. While the NPA could do nothing about government's decision to introduce the tax, the move by government in itself can be interpreted as interfering in the automatic price adjustment regime that the government claims it has established. Again, the levy itself is unjustifiable, as most of the accrued debts in the energy sector have been occasioned by government's own failure to honour its subsidy obligations to the Bulk Distribution Companies (BDCs). This is also true in the specific case of the other energy sector players, such as the Electricity Company of Ghana, where as a result of unpaid subsidies the company's ability to pay its debts to VRA and to some of the Independent Power Producers (IPPs) has been compromised. Indeed, unpaid subsidies are not the only reason for the crisis in the energy sector. Several MDAs, educational institutions, prisons, hospitals etc owe the power retailer for power consumed.

The Energy Sector Levy is therefore intended to offer a bailout to a government unable to honour its obligations to the power distributer in full; and the NPA has nothing to do with it.

But, granted, without admitting, that the NPA is complicit in the decision to inflict unjustifiably high prices of fuel on consumers, there still will be good reasons why consumers and Ghanaians for that matter cannot do without the downstream regulator.

Here are 5 reasons why we need the regulator:

1. NPA has a mandate to ensure the credibility of companies providing goods and services in the downstream sector.

Section 2.2 (b) of the National Petroleum Authority Act of 2005, Act 691 provides that the NPA shall grant licenses to applicants under the Act; and (c), that the NPA shall maintain a register and keep records and data on licenses, petroleum products and petroleum marketing service providers;

2. The NPA exists to streamline petroleum marketing activities and to ensure sanity in the sector. Section 2.2 (d) of the NPA Act requires the regulator to provide guidelines for petroleum marketing operations;

3. The NPA has responsibility to protect consumer interests, as well as those of service providers. This implies ensuring, among others, that consumers get value for their money. This mandate is drawn from Section 2.2 (e) of the NPA Act, which mandates the Authority to protect the interests of consumers and petroleum service providers;

4. NPA offers quality assurance through the maintenance of standards. Section 2.2(f) of the Act of its establishment requires the Authority to monitor standards of performance and quality of the provision of petroleum services; and (g), to initiate and conduct investigations into standards of quality of petroleum products offered to consumers;

5. The NPA has a mandate to prevent monopolistic tendencies in the sector. Section 2.2(i) of the NPA Act requires it to promote fair competition amongst petroleum service providers;

Independence of the Authority

Section 4 of the NPA Act grants the Authority independence. It provides that:

“The Authority shall not in the performance of its functions under this Act, be subject to the control or direction of any person or authority other than the Minister, who gives policy directions.

Clearly government's policies executed through the instructions of the Minister overrides the independence of the regulator.

This explains why a government policy decision to impose an energy sector levy on petroleum products could not be resisted by the NPA.

To the extent that the NPA independence ends where the Minister's policy directions begin, government is answerable for those policy decisions that undermine consumer interest.

Issued by the Civil Society Platform on Oil and Gas (CSPOG), as part of its public education activities.

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