Ghana’s Energy Crossroads: When Generation and Distribution Costs Rise Together

Ghanaians are once again bracing for higher electricity bills as two of the country’s most important power institutions; the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA)  seek sharp tariff adjustments from the Public Utilities Regulatory Commission (PURC).

• ECG has proposed a 225% increase in its Distribution Service Charge (DSC1).

• VRA has applied for a 59% increase in its Bulk Generation Charge (BGC).

Individually, each hike would be painful. Together, they represent a significant escalation in the cost of electricity across the entire supply chain  from generation, through transmission, to distribution and finally to the pockets of ordinary Ghanaians.

Generation Costs: The VRA Factor

The Volta River Authority is responsible for producing electricity, mainly from hydro and thermal sources. Its request to raise the Bulk Generation Charge from 45.0892 pesewas per kWh to 71.8862 pesewas per kWh reflects the mounting costs of:

• Fuel procurement for thermal plants.

• Maintenance and infrastructure upgrades to sustain reliable generation.

• Ancillary services and operational costs that keep the grid stable.

A 59% jump means the cost base of power producers will rise sharply, inevitably cascading down the value chain.

Distribution Costs: The ECG Factor

The Electricity Company of Ghana, responsible for distributing electricity to homes and businesses, has submitted one of the steepest proposals in recent memory  a 225% increase in its Distribution Service Charge.

This adjustment would move tariffs from about GH₵0.19 per kWh to GH₵0.619 per kWh over the 2025–2029 tariff period. ECG justifies this by citing:

• Severe revenue erosion due to the depreciation of the cedi (about 74% between 2022 and 2024).

• Massive operational losses, both technical and commercial.

• Ongoing investments in substations, smart metering, and network upgrades  more than US $408 million spent since 2022.

While ECG argues this hike is essential to prevent collapse, consumers see it as an unbearable load on top of already high costs of living.

The Combined Burden on Consumers

The end-user electricity tariff is built from three parts:

1. Generation (VRA and independent producers)

2. Transmission (GRIDCo)

3. Distribution (ECG/NEDCo)

With generation up 59% and distribution up 225%, the cumulative effect is steep. Households will feel the pressure directly on their monthly bills, while businesses will struggle with higher production costs  often passing them onto consumers through rising prices of goods and services.

This isn’t simply an accounting exercise. It’s a direct squeeze on the Ghanaian economy:

• Families already battling food inflation will cut back further.

• Small businesses may downsize or shut down due to rising overheads.

• Larger industries may shift operations or delay expansion, stifling growth and job creation.

A Debt Crisis in Disguise

These tariff hikes are not happening in a vacuum. Ghana’s energy sector has been suffocating under debt for years. Instead of being used to pay down liabilities, funds raised through the Energy Sector Levy (ESLA)  once a promising mechanism  were misappropriated and collateralized.

Today, the energy sector’s debt has ballooned beyond GH¢38 billion, with projections warning it could reach nearly $9 billion by 2027. The hikes by VRA and ECG are therefore less about new investments and more about survival; plugging financial holes that should have been sealed years ago.

The Road Ahead: Hard Choices

While the PURC deliberates, one thing is clear: Ghana must confront its energy sector crisis with honesty and bold reform. Simply passing costs onto citizens is unsustainable.

What must change:

• Transparent accounting for how ESLA funds were used.

• Aggressive reduction of ECG’s technical and commercial losses.

• Diversification of the generation mix, with real investment in renewables.

• A clear framework for private participation in revenue collection and infrastructure upgrades.

Conclusion

The simultaneous rise in generation (59%) and distribution (225%) costs underscores the fragility of Ghana’s energy sector. Instead of being the engine of economic growth, electricity risks becoming a drag on households, businesses, and national competitiveness.

The question for policymakers is no longer whether tariffs should increase — but how to ensure that these increases actually solve the underlying crisis, rather than merely postponing the inevitable.