The Government of Ghana’s public utilities regulator has announced increases in tariffs for both electricity and water effective from the start of 2026.
However a debate rages as to whether the hikes are necessary to improve service quality or whether they are counter-productive for businesses and unfair to consumers. TOMA IMIRHE examines the issues and likely outcomes
The Public Utilities Regulatory Commission (PURC) last week announced the results of its Multi-Year Tariff Review (MYTR) for 2026–2030: average electricity tariffs will rise by 9.86% and water tariffs by 15.92%, with new rates taking effect on January 1, 2026. The decision follows months of investment hearings, regional public forums and stakeholder consultations and—according to the regulator—reflects utilities’ investment needs and macroeconomic realities such as inflation, exchange-rate pressure and fuel and gas costs.
The decision has been welcomed by some investors and utility managers as a long-overdue adjustment that restores the revenue base necessary for capital investment and service reliability; but not by business groupings, labour unions and consumer groups who warn they will erode the international competitiveness of businesses and the real incomes of households by pushing up costs across the economy.
PURC’s Multi Year Tariff Review, sometimes referred to as MYTO in Ghana, is a forward-looking, comprehensive exercise that sets the revenue requirement and tariff path for a regulatory control period (in this case: 2026–2030). It models projected generation and supply inputs, capital expenditure needs, non-revenue generating electricity and water distribution, expected sales volumes, and macroeconomic assumptions for inflation, foreign exchange rates, and liquid fuel and natural gas prices. Because it sets the regulatory baseline for several years, it can incorporate planned investment and sector reform measures that cannot be accommodated in short, tactical reviews.
By contrast, PURC’s regular quarterly reviews are tactical adjustments: they respond to shorter-term shocks such as sudden fuel-price swings, short-run exchange-rate volatility, or one-off supply disruptions. Quarterly reviews smooth over immediate volatility but lack the horizon needed to fund multi-year capital expenditure or to restructure tariffs to reflect long term assets and network expansion. The MYTO therefore functions as the strategic backbone, while quarterly reviews are the fine-tuning mechanism. The 2026–2030 MYTO explicitly folds in items not previously captured — for instance for the first time PURC has incorporated mini-electricity grid tariffs serving islands and other remote communities into ECG’s revenue requirement.
Why the tariffs are being hiked…
The PURC frames the increases as a pragmatic response to a persistent gap between utility costs and revenues. The tariff modelling reportedly assumes higher capital spending to reduce power outages, expand networks and tackle non-revenue water. It has also projected power generation inputs and the cost of natural gas and foreign exchange effects on imported inputs such as diesel oil and natural gas received through the West African Gas Pipe Line. Indeed, without increased revenues generated from higher tariffs, the public utilities providers would struggle to secure financing for their direly needed investments in network upgrades, which risks a vicious cycle of poor service, lower collections and even higher future costs. Instructively, the PURC stresses that the review was evidence-based and based on wide consultations with stakeholders.
…and the likely impacts
From the Ministry of Finance’s perspective, higher regulated tariffs can be both a blessing and a challenge. On the upside, higher tariffs reduce the need for direct or contingent subsidies to loss-making utilities — a common drain on public finances in many emerging-market utilities sectors. If the tariff rise translates into higher collections and lower arrears, the state can see improved fiscal space and reduced contingent liability from guarantees and bailout requests.
But the immediate fiscal dynamics are mixed. Higher utility prices feed into headline inflation and can erode real wages, which in turn affect income tax receipts and social transfers. They can also increase the cost base of state-owned enterprises and public services that purchase electricity and water — raising operating budgets unless the state compensates them. The net fiscal effect depends on how much of the revenue increase accrues to utilities versus changes in government take via taxes, and on whether subsidies or compensatory spending are required to protect vulnerable households.
For the public corporations along the public utilities supply chain — the Electricity Company of Ghana (ECG), the Volta River Authority (VRA), Ghana Grid Company (GRIDCo) and the Ghana Water Company (GWC) — the increases should improve the headline revenue-to-cost ratio and create breathing room for investment. PURC’s decision explicitly factors in planned capital expenditure by those corporations and seeks to make the sector investment-grade over the medium term to attract the capital they need. Utilities companies argue this is necessary to address chronic under-investment, reduce outages and tackle non-revenue water, a specific affliction of the water utility.
But higher tariffs do not automatically translate into better service. Public utilities companies still face operational constraints — ageing networks, accumulated financial losses, billing and collection inefficiencies, and governance challenges. If these are not fixed, higher tariffs will simply increase cash flows without materially improving supply, and could sharpen political backlash against the respective managements of the utility providers, PURC as their regulator, and ultimately government itself. Implementation integrity and transparent use of incremental revenues for capex will therefore be decisive.
Manufacturers and service firms will feel the effect immediately through higher power bills and, for water-intensive sectors, higher water charges. Several business commentators and industry voices have warned that the tariff increases will push up production costs at a time when competitiveness is a policy priority — particularly for import-substitution and export-oriented manufacturers. Indeed, manufacturing sector commentators have suggested electricity cost pass-through could raise production costs materially for energy-intensive firms.
Firms will respond in several ways. They could decide to absorb the cost thus squeezing their net income margins, or pass it to customers, thus fueling price inflation. Alternatively they could invest in greater efficiency in the use of power in particular, and even on-site generation, or in worst cases relocate or scale down. How much is passed through will depend on market structure, product demand elasticity, and firms’ ability to substitute inputs. For small and medium enterprises with limited pricing power, the shock will be harder to absorb, more so if the impending multi-year tariff increase is followed by further hikes through quarterly upward adjustments.
The political economics of the decision
Supporters of the impending tariff hikes — including investor-oriented analysts and the public utilitiy providers themselves— argue the MYTO provides predictability and the revenue to shore up networks and fund projects that ultimately lower costs and losses in the long run. They warn that under-pricing utilities perpetuates blackouts and water shortages, through under-investment and chronic fiscal risk.
Opponents of the increases— ranging from unions, some consumer groups and parts of the business community — see the timing and pace as unfair to workers and households. The TUC has publicly rejected the increases and called on government either to top up the planned salary increments or to withdraw the tariff decision, arguing workers are already under strain.
So what happens next?
Will increased revenue be ring-fenced and spent on the capital expenditure and network fixes the MYTO assumes? Transparent reporting by utilities and the regulator will be crucial.
For businesses, manufacturing cost pass-through, investment decisions and competitiveness indicators will reveal whether the tariff path undermines industrial policy or catalyzes investments aimed at enhancing operational efficiency to offset the tariff hikes.
The 2026–2030 MYTO is a classic trade-off: short-term pain for potential medium-term gain
Whether Ghana reaps the benefits or pays the political and economic costs will depend less on the size of the headline tariff hikes and more on governance – how the utilities providers spend the money, how the state cushions vulnerable groups, and whether the quarterly review machinery and inflation dynamics are managed credibly. The coming months will show whether this MYTO was a responsible reset or a missed opportunity to combine price realism with consumer protection.
