The Volta River Authority (VRA), a key player in Ghana’s power sector, has initiated a process that could significantly reshape the country’s electricity landscape. The Authority has formally requested a substantial 59% increase in its Bulk Generation Charge (BGC), the cost associated with generating and supplying power to distribution companies. This proposed hike, from 45.0892 pesewas to 71.8862 pesewas per kilowatt-hour, seeks to address what the VRA describes as a critical funding shortfall impacting its operational sustainability. The VRA justifies this request as essential for covering the full costs of power generation, supply to distribution companies, transmission, and associated services. Senior Economic Analyst at the VRA, Evans Somuah Mensah, emphasized the need for additional annual revenue of $30.49 million to maintain the Akosombo Dam’s operations and an additional $30,000 for the Kpone Thermal Plant. He argues that the existing compensation mechanisms are inadequate to meet the financial demands of supporting the national grid.
The VRA’s request unfolds against a backdrop of similar tariff increase applications from other prominent utilities in Ghana. The Electricity Company of Ghana (ECG), responsible for power distribution to a large portion of the country, has requested a revised tariff of 55.7671 pesewas per kilowatt-hour. Meanwhile, the Northern Electricity Distribution Company (NEDCo), serving the northern regions, has put forward an even higher request of 92.7333 pesewas per kilowatt-hour. Leading the pack with the most significant proposed increase is the Enclave Power Company Limited (EPCL), which has requested a new tariff of 147.1775 pesewas per kilowatt-hour. These concurrent applications from multiple utilities signal a potentially significant shift in Ghana’s electricity pricing structure.
Adding to the potential financial burden on consumers, the ECG has submitted a separate request for a staggering 224% increase in its Distribution Service Charge (DSC1), a component of the overall electricity tariff, for the 2025-2029 period. This proposed adjustment seeks to raise the DSC1 from 19.0875 pesewas per kilowatt-hour to an average of 61.8028 pesewas. ECG contends that this drastic increase is unavoidable to stabilize its financial standing, citing several economic pressures, including persistent inflation, volatile exchange rates, and escalating interest costs. The company projects an average annual revenue requirement of GHS 9.1 billion over the next five years, a figure driven by operating expenses, staff costs, depreciation, capital recovery, and taxes.
The combined potential impact of these proposed tariff increases has raised concerns regarding the affordability of electricity for both households and businesses in Ghana. If approved by the Public Utilities Regulatory Commission (PURC), consumers could face significantly higher electricity bills, potentially straining household budgets and impacting the operational costs of industries. This has reignited the ongoing debate surrounding cost recovery mechanisms within Ghana’s power sector and the long-term sustainability of electricity supply.
The confluence of these tariff increase requests underscores the complex financial challenges facing Ghana’s power sector. Balancing the need for cost recovery by utility companies with the imperative of maintaining affordable electricity for consumers remains a critical policy challenge. The PURC now faces the difficult task of evaluating these proposals, taking into account both the financial health of the utilities and the potential impact on the Ghanaian economy. This decision will likely shape the trajectory of Ghana’s power sector in the coming years.
The implications of these proposed tariff increases extend beyond immediate affordability concerns. The potential ripple effects on economic activity, household budgets, and industrial competitiveness are significant. The PURC’s decision will require careful consideration of the broader economic context, balancing the need to ensure a viable and sustainable power sector with the equally important goal of enabling economic growth and protecting consumer welfare. The discussions and deliberations surrounding these proposals are likely to be closely watched by stakeholders across the Ghanaian economy.
