As Ghanaians are up in arms against proposals by the utility companies for steep upwards tariff adjustments, some stakeholders of the Ghanaian economy are all out for the hikes, although not being specific with the rate.
The International Monetary Fund has described the proposal as vital to fixing inefficiencies and attracting investment into the country’s electricity sector.
At a media event in Washington, D.C., last week, the IMF’s Director of Communications, Julie Kozack, said the Fund’s backing is linked to the broader goal of restoring financial stability in the energy sector.
“What is essential from our perspective is that any tariff adjustments in the electricity sector aim to address longstanding inefficiencies in the sector, importantly, that they support much-needed investment in the electricity sector, and also that they are aimed at preventing the accumulation of arrears in the energy sector,” she explained, adding that, the IMF’s support goes beyond tariff reviews.
“More generally we are continuing to support broader sector reforms including private sector participation in ECG operations,” she noted.
According to her, these reforms are part of ongoing efforts to improve the performance of state-owned enterprises and reduce fiscal risks.
The Public Utilities Regulatory Commission (PURC) is considering new tariff adjustments, expected to take effect from October 1, 2025. Currently, the Commission is engaging stakeholders on proposals submitted by utility providers, including the Electricity Company of Ghana (ECG), which has requested for about 225% increase in tariffs.
ECG has requested a hike in its Distribution Service Charge (DSC1) from the current GHp19.0875/kWh to an average of GHp61.8028/kWh, citing inflation, foreign exchange volatility, interest rates, and the need to recover investment costs as drivers for the proposed adjustment. Also, Ghana Water Company Limited (GWCL) has requested for a 281% increase in its water tariff, proposing a jump from GH¢5.28 per cubic metre to GH¢20.09 per cubic metre
The proposed electricity tariff review is intended to help restructure the energy sector’s growing debt burden and strengthen the long-term sustainability of electricity supply.
The proposal has drawn criticism from consumers, who argue that the increases are disproportionate to the quality of service delivered.
Meanwhile, a Board Member of PURC and Presidential Staffer, Nana Yaa Jantuah, has assured Ghanaians that it will safeguard consumer interests as utility providers push for substantial tariff increases.
“The cost of energy is expensive, so we need to keep the lights on. We must ensure that energy is available for industry, for the economy to run, and to guarantee consumer comfort.
“The quality of service is key, but we also have a very difficult job—to ensure improved service delivery while keeping the utilities financially viable. Ultimately, we must find a win-win situation,” she said.
However, Energy Analyst, Kwesi Yamoah Abaidoo, has strongly criticised the proposals, arguing that ECG has failed to tackle inefficiencies such as technical and commercial losses, poor governance, and wastage, which he said continue to drain the company’s resources.
“Requesting such an increment will yield no results until these inefficiencies are addressed. ECG seems to take pleasure in increasing the burden of Ghanaians instead of fixing its structural problems,” he said.
While acknowledging recent improvements in power stability, the analyst insisted that repeated tariff hikes were unfair to ordinary citizens. He recalled that the Public Utilities Regulatory Commission (PURC) only approved a 14.75 per cent tariff increase in July, yet consumers are now being asked to brace for another sharp adjustment.
Mr Abaidoo also noted that gains from recent currency appreciation, which should have cushioned consumers through reduced tariffs, were not passed on.
“The average Ghanaian hasn’t seen any increase in disposable income. Salaries remain stagnant, yet electricity costs keep rising. This proposal risks pushing low-income households, especially those in rural areas, off the national grid,” he warned.
He further cautioned that such steep hikes would also hurt businesses, forcing them to pass costs onto consumers, thereby worsening economic hardships.
An Energy Economist, Ebenezer Baiden, has explained why the ECG is requesting a 225% tariff increase, arguing that its current 11% share of tariffs is far too low to sustain operations.
Mr Baiden, in a radio interview said the request falls under the multi-year tariff review cycle.
“So we normally go through minor adjustments, which we call automatic adjustments. There are parameters to consider. So, for example, it looks at some macroeconomic adjustment variables and then also it looks at variation in dispatch and then the varied fuel used,” he explained.
He added that Ghana is currently at the stage of a major review.
“Now we are looking at a multi-year order, which is a major tariff review. Normally, it takes five years for that to happen. So, we have been working through this from 2022 to 2025, and the multi-year order ends.
“Then 2026 to 2030, another multi-year order begins. Now this looks at structural issues, works that may have happened within the period, how we finance them, and then how to recover those costs.”
Mr Baiden said that ECG has had to pre-finance projects before seeking tariff adjustments, leaving the company heavily indebted.
“Currently, the ECG tariff structure is such that, or the PURC tariff structure is such that, you have to pre-finance projects, bring them into service before you can now ask for a tariff adjustment. They should visibly see that whatever you invested in is working, and customers are benefiting from it, before you can apply for that.
“So we’ve gone through some facilities, supplier credits, taking loans from banks and all that. Today, our books are all in the red. And it is to say that all those works that we committed to across the ECG operational areas, commencing from Techiman to down south, which control over 75% of electricity consumption in Ghana, we’ve been able to expand networks. We’ve been able to do network intensifications where we have low voltages. We’ve injected transformers and all that. Today, generally, the supply quality is better than before.”
He said it was now necessary for ECG to recover the investments made.
“Now it’s time we’ve gone to the PURC to say that these are the costs that we have incurred, let’s sit and discuss. But what we have incurred in our books, we need to now pay for it, empower us to now be able to go back and do more.
“About digitalisation, today you sit in your room and you can now buy credit. You can pay your bills. You can report a fault, and technical men are on their way to your place. You don’t need to come to the district office to queue for electricity.
“These are some of the interventions that have been done to improve supply services, and based on that, the cost we have incurred with the PURC, it’s time to communicate that to seek customer support and then get that as part of the electricity (tariffs). So this is why we have a proposal before the PURC, and we are asking for a stretch adjustment.”
Breaking down the numbers, Mr Baiden revealed that ECG currently retains only 11% of total electricity revenue, with about 65–70% going to generation and another portion to the transmission company GRIDCo.
“Currently, our tariff is 19%. In fact, it dropped in the last quarter review to 17%. Customers are paying 17 pesewas, the total is about 1 cedi 59 pesewas. A bigger chunk of it, about 65 to 70% goes to generation, then transmission, which is GRIDCo, will take a portion of it. Now ECG’s portion is 11% and it is the ECG portion that we are talking about that has to be rebased.
“Standard utility operation, we have it between 30 to 35%. We are working with 11%. You collect the revenue and you pay all out.”
Using an illustration, he explained the company’s challenge:
“If it costs 10 cedis to purchase power from the power producer, and then let’s say GRIDCo adds 1 cedi to it, let’s say ECG adds 2 cedis to it, we have a build-up, total build-up of 13 cedis. And your cost or my price to the customer should be around 13 cedis. Today our number is somewhere around 8 cedis.
“So what this means is that if, by even looking at paying for power producers only, we go into the red, this is a challenge for us. So that’s how come we are talking about that number, the 61 pesewas,” he explained.
By Adnan Adams Mohammed
