Power Sector challenges require more than tariff increases – Experts

The latest utility tariff increase has renewed debate over sustainability of pricing reforms in the power sector, with energy policy experts arguing that repeated adjustments are failing to address deep-seated inefficiencies in the system.

The Public Utilities Regulatory Commission (PURC) has approved a 3.49 percent increase in electricity tariffs and a 0.85 percent rise in water rates effective July 1 – citing movements in key macroeconomic indicators including exchange rates, inflation, gas prices and the country’s hydro-thermal generation mix.

Inflation eased to 3.43 percent for the review period from 4.17 percent in the previous quarter, while natural gas prices declined by 1.58 percent and the cedi remained broadly stable, according to PURC data.

The regulator however said the combined effect of these variables still necessitated upward tariff adjustments to preserve the real value of revenues and sustain service delivery.

But experts say the adjustments reflect a deeper structural problem that tariff reviews alone cannot resolve.

The Policy Lead for Climate Change and Energy Transition at the Africa Centre for Energy Policy (ACEP), Dr. Charles Gyamfi, said the automatic tariff adjustment mechanism is designed to respond to macroeconomic shifts but does not address operational inefficiencies in the sector.

“These adjustments deal with exchange rates, inflation, gas costs and the power mix. Those are known variables,” he said. “But they will not solve the power sector challenges if we are not deliberate in retooling the sector.”

He said persistent transmission and distribution losses, alongside inefficiencies across generation and billing, continue to undermine revenue recovery despite periodic tariff increases.

“Automatic adjustment does not deal with recurring losses in transmission and distribution or inefficiencies along the value chain,” he said.

“We can increase tariffs significantly and still not solve the problem. Even past increases have not translated into expected revenue performance.”

Dr Gyamfi therefore called for targetted reforms to reduce system losses, improve collection efficiency and address the sector’s growing debt burden.

“Beyond tariffs, we need deliberate action to cut inefficiencies and deal with debt in the sector. Otherwise, the conversation will remain stuck on cost-reflectivity without fixing the underlying issues,” he said.

Raising similar concerns, the Executive Director-Centre for Environmental Management and Sustainable Energy (CEMSE), Benjamin Nsiah, said the latest tariff adjustments appear to prioritise the financial position of utility providers over consumer relief.

He argued that prevailing economic indicators would ordinarily have supported a reduction in tariffs, but PURC opted for an increase due to liquidity constraints in the power sector and a need to mobilise revenue for debt servicing.

“From a fairness perspective, the indicators were largely in favour of consumers. One would have expected a tariff reduction,” Nsiah said.

But he reckoned that given the distressed financial position of utility providers, PURC appears to have prioritised revenue mobilisation over consumer relief.

Nsiah warned that higher tariffs could also undermine revenue performance, as affordability challenges may push up system losses through non-payment and evasion. He said the core challenge remains high cost of power generation, driven largely by reliance on thermal energy and volatile fuel prices.

“Power generation in Ghana remains expensive because of our dependence on thermal sources and fluctuating fuel costs,” he said. “If generation costs are not addressed, tariffs will remain high and system losses will persist.”

Nsiah called for renewed negotiations with independent power producers (IPPs), arguing that legacy contracts continue to inflate generation costs and ultimately end-user tariffs.

“Further renegotiation of some IPP agreements is necessary to reduce generation costs. If we bring down costs at the source, tariffs will ease and more consumers will be able to pay,” he added.

Prince Antwi

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