The power sector in Ghana is at a turning point. Tariffs are viewed by consumers as a clear indicator of fairness; low prices are perceived as relief, while high prices are perceived as punitive.
Tariffs are a tool used by utilities and regulators to keep the books balanced and the lights on. When those two points of view diverge, there is not only financial strain but also a decline in public confidence, which makes reform both technically and politically difficult.
The current situation
In order to maintain cost recovery without unexpected shocks, Ghana has established a quarterly tariff adjustment mechanism designed to keep tariffs responsive to inflation, changes in exchange rates, and fuel prices.
However, the utility frequently fails to convert approved tariffs into cash due to distribution and collection realities. According to recent analyses, the Electricity Company of Ghana (ECG) has been losing a significant portion of the power it purchases due to resale losses that are caused by theft, technical issues, and inefficient billing.
Tariffs only make up half of the revenue story, so those losses are significant. Internal arrears, unpaid fuel suppliers, and legacy debts to independent power producers (IPPs) have all skyrocketed, compelling the government to find significant fiscal solutions and absorb or restructure obligations. The energy sector has substantial legacy arrears, according to the Ministry of Finance’s 2024 public debt review and related government reports, even as authorities work to resolve verified claims. State initiatives to lower outstanding debt to IPPs and suppliers have been frequently emphasised in international coverage as a crucial priority for reestablishing sector stability.
Why tariffs, cost recovery and trust interact badly
- Pain is visible. Tariff increases are a major concern for all households and businesses. They are immediately noticeable on bills and come to represent the effectiveness of the government. Anger is heightened, and trust evaporates when customers pay, and the lights continue to go out, as was the case when the supplier momentarily cut power to parliament due to unpaid bills in 2024.
- The disparity in accountability. Regulators have the authority to impose cost-reflective tariffs, but they have no control over distribution companies’ operational performance, theft, meter tampering, or political meddling in collections. The public understandably views tariffs as a blunt tool that serves no purpose if they increase while loss-reduction and collection efficiency continue to be subpar.
- The issue of a financial backstop. Governments frequently fill in the gaps left by unpaid invoices or arrears from suppliers. In addition to preventing an immediate collapse, this short-term rescue tells investors and consumers that inefficiencies and nonpayment escape full consequences, which reinforces a weak payment culture and makes it more difficult to establish future tariff credibility.
Policy implications and immediate priorities
The technical design of tariffs matters, but design alone will not fix the system. Policymakers should tackle three interlinked areas.
First, make tariff changes transparent and predictable. Only when citizens are aware of the factors influencing the change and can see the calculations in public records will quarterly tariff adjustments be effective.
In order to make changes appear more like a technical necessity than a political preference, the regulators published decision papers and the quarterly cash-allocation reports must be easily accessible, succinctly summarised, and regularly explained in public briefings.
Also, stop the leaks that penalise honest payers. The most politically acceptable method of improving finances without constantly raising tariffs is loss reduction. This calls for investments in smart metering and meter rollout, more robust anti-theft enforcement in conjunction with community involvement, and operational changes within ECG or any future distribution structure. Tariff increases should be contingent upon audited progress targets for loss reduction.
Again, keep ongoing cost recovery and legacy debt resolution apart. Cost-reflective tariffs are an operational exercise, whereas restructuring or validating past arrears is a fiscal one. When the lines are blurred, tariffs come across as punitive for past errors. The impression that tariffs are funding past mismanagement will be diminished by a clear legacy-debt schedule that includes explicit fiscal impact statements and contingent safeguards to protect lifeline consumers. An essential first step in that direction is government reporting on restructuring plans and arrears in the energy sector.
Rebuilding trust: practical measures
Trust is earned through predictable policy and visible outcomes. A short, action-oriented program could include:
- A quarterly public “tariff explainer” campaign that releases basic infographics that illustrate the adjustment model, inputs, and distributive impacts.
- Binding performance agreements for distribution firms that connect tariff permits to quantifiable reduction in technical and commercial losses.
- Targeted protection for the impoverished, such as means-tested or automatically applied lifeline tariffs and subsidies to low-consumption meter readings, so that reform is perceived as equitable rather than regressive.
- A third-party, independent audit of billing and collection systems with public follow-up on recommendations, so that parliament and civil society can monitor improvements.
- Testing short-term contracts and performance-based payment in private-sector partnerships for meter reading and billing in areas with the worst ECG performance.
Risk and Political economy
None of these actions is free. Short-term disruptions are caused by meter rollouts and anti-theft campaigns; strong means-testing is necessary for targeted subsidies; and restructuring legacy debt necessitates financing. However, inaction exacerbates the issue: ongoing losses, frequent emergency bailouts, and haphazard tariff politics will increase public mistrust and make subsequent reforms more difficult.
Where to begin
Start with the low-hanging, high-impact items: a clear public timeline for resolving legacy debt, a visible commitment to lower distribution losses, and quarterly public explanations that connect tariff changes to concrete reforms. People’s willingness to pay and trust will increase when they can see that higher tariffs are linked to fewer outages, better billing, and protections for the poorest.
The power sector in Ghana is not irreparably damaged. However, it lacks credibility because tariffs are frequently blamed for the issue when operational inefficiencies, inconsistent cost recovery, and opaque arrears handling are the true problems. Rebuilding the relationship between utilities, regulators, and customers is essential to fixing the finances. Although that path is politically delicate and technically challenging, it is the only one that will provide affordable, sustainable power for both households and businesses.
The writer is Kwesi Yamoah Abaidoo,
Policy lead for Climate finance and Energy Transition at the Institute of Climate and Environmental Governance (ICEG)
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