Why Your Electricity Bills Are Rising Despite a Stronger Cedi and Lower Petrol Prices

Introduction

Many Ghanaians are asking a familiar question: if the cedi is strengthening and fuel prices at the pump are coming down, why are electricity bills still going up? The answer lies in how the power sector actually works, what the new tariff decision is designed to pay for, and who we have decided should not be left behind.

This article breaks down the key reasons behind the 9.86% average increase in electricity tariffs effective January 1, 2026, as outlined in the Public Utilities Regulatory Commission’s (PURC) 2025–2030 Major Tariff Review Decision.

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Key Points

Background

The Public Utilities Regulatory Commission (PURC) recently announced a 9.86% average increase in electricity tariffs, effective January 1, 2026. This is not a routine quarterly adjustment but a major five-year tariff review covering 2026–2030. The review is designed to ensure the power sector has enough predictable revenue to invest in new infrastructure, maintain existing assets, and remain financially viable over the medium term.

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Analysis

1. A Five-Year Investment Tariff, Not a Quarterly Adjustment

This tariff review is fundamentally different from the usual quarterly adjustments that track short-term changes in inflation, exchange rates, and fuel prices. Instead, it is a comprehensive, multi-year assessment that sets the framework for the next five years.

PURC’s decision is based on evaluating the “regulated asset base” of utilities such as GRIDCo, ECG, NEDCo, and VRA. The new tariffs are intended to ensure these utilities can meet their asset management requirements over the next five years. In simple terms, this assessment is about giving power companies enough predictable revenue to invest in new lines, substations, meters, field programs, and maintenance so that the lights stay on over the medium term, not just this quarter.

These investments do not disappear just because the cedi has had a good run for a few months; they are long-term, lumpy costs that must be planned and recovered over several years.

2. More Thermal, Less Hydro – And That Mix Is Costly

A second, often misunderstood factor is the changing generation mix. Ghana’s cheapest bulk power traditionally comes from hydro (Akosombo, Kpong, Bui), while thermal plants that burn gas or other fuels are more expensive per kilowatt-hour.

Current planning figures show that Ghana is relying much more on thermal generation (71%) than before, with thermal expected to provide the bulk of total generation over the control period, while the share of hydro declines (28%).

Many of the thermal plants are owned by Independent Power Producers (IPPs) under medium- to long-term contracts that include “take-or-pay” and capacity-rate clauses. That means the system operator must pay these IPPs for available capacity, whether or not every unit of energy is actually used.

In practice, this pushes the system to dispatch more thermal power to avoid paying for unused contracted capacity, and that raises the average cost of electricity even when the cedi is relatively stable, and headline inflation is down.

So while macroeconomic indicators are improving, the structural reality is that we are leaning on a more expensive generation portfolio, and those contractual obligations have to be honored.

3. Pump Prices Are Not the Same as the Power Sector’s Fuel Cost

Many people reasonably link “fuel prices are down” with “electricity should be cheaper,” but the two fuel stories are not identical.

For transport, we look at the price you pay at the gas station for petrol or diesel. For power generation, the key variable is the weighted average cost of gas, often called WACoG.

WACoG is a composite number that blends:
– Gas from different upstream sources (domestic fields, imports from Nigeria via the West African Gas Pipeline, LNG, etc.)
– The transport and processing costs involved in delivering that gas to the power plants
– The contractual obligations (minimum offtake volumes, penalties, currency of payment) attached to each gas source

Because of this, the gas used in power plants can remain relatively expensive – or at least not fall as fast as pump prices – depending on the mix of contracts, the volumes actually taken, and the foreign exchange terms.

PURC’s framework allows quarterly reviews to reflect changes in WACoG, exchange rate, and inflation, but in a major five-year review, the Commission must also take a conservative, forward-looking view of gas prices to avoid under-recoveries that could throw the sector into debt again.

So a lower price at the pump does not automatically translate into a proportionate drop in the cost of generating electricity.

4. Clearing Legacy Debts and Keeping Utilities Financially Alive

Another uncomfortable but significant reality is the accumulated debt across the power sector. Over years of tariff under-recoveries, delayed payments, and political interventions, arrears have built up between the government, utilities, and IPPs.

The new tariff path is also about “taking the pain early” so that utilities can:
– Meet their payment obligations to IPPs and gas suppliers
– Service loans taken for network and generation investments
– Regain enough financial health to maintain infrastructure and invest in upgrades

PURC stresses that tariffs must cover the true cost of revenues over the control period, otherwise inflation will quietly eat away the utilities’ ability to operate, even when the nominal tariff looks unchanged.

If the sector cannot pay its bills, we risk a return to curtailments, load shedding, and stalled development – outcomes that are far more damaging to households and businesses than a single-digit percentage increase in tariffs.

5. Mini-Grids, Island Communities, and the Cost of Solidarity

Perhaps the least understood – but morally vital – driver of the new tariffs is Ghana’s push for universal electricity access, especially for remote island and lake communities.

Dozens of communities on the Volta Lake and along remote stretches of river were, until recently, entirely off-grid. Reaching them with conventional grid extension is technically difficult and very costly, so Ghana has deployed solar-battery mini-grids in places like:
– Atigagorme and Wayokope on the Volta Lake
– Aflivie, Azizakpe, and Alorkpem in the Ada area
– Other small island and lakeside communities only accessible by boat

These mini-grids have transformed life in these communities – enabling lighting, refrigeration, water pumping, small businesses, and better social services – but their cost per customer is far higher than in dense urban areas.

Here is the key policy choice: PURC has decided that consumers in these island communities should pay the same national uniform tariffs (lifeline and domestic) as other Ghanaians, rather than a much higher “true cost” tariff that would price them out of basic electricity use.

To make that work, the extra cost of supplying these communities has been added to the revenue requirement of the Volta River Authority (VRA) and spread across the general tariff paid by everyone else.

In other words, part of the increase on your bill is effectively a cross-subsidy – a small contribution each of us makes so that families living on remote islands can also enjoy reliable power for their homes, schools, and clinics.

You can think of it as a solidarity surcharge built into the national tariff structure: invisible on the bill, but very visible in the lives of people who used to live in the dark.

6. Why Tariffs Rise Even When the Headline Economic Environment Improves

Putting all these factors together explains why electricity tariffs can rise even when some macro signs look positive:
– A five-year tariff review must lock in enough revenue for long-term sustainability, not just reflect this quarter’s good news.
– The generation mix has shifted toward more expensive thermal power, with contractual obligations that limit how far costs can fall in the short term.
– The fuel cost that matters for power (the weighted average cost of gas) follows its own dynamics and contracts, and does not track pump prices one-for-one.
– The sector has legacy debts and ongoing obligations that must be honored to keep the system solvent and the lights on.
– As a country, we have chosen to extend modern electricity to remote island communities at the same tariff everyone else pays, meaning the extra cost is quietly shared across all users.

These are not always comfortable truths, but they are essential for a fair conversation about electricity pricing. Citizens are right to demand transparency and efficiency from utilities; government and regulators must continually push for value for money.

At the same time, understanding the real cost drivers helps us see that not every tariff increase is a sign of hidden agendas; sometimes, it’s the price of maintaining a reliable system, honoring signed contracts, and making sure no part of the country is permanently left in the dark.

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Practical Advice

– **Monitor your consumption:** Use energy-efficient appliances and adopt habits that reduce peak-time usage.
– **Explore solar options:** For households able to invest, rooftop solar can offset some grid dependency.
– **Stay informed:** Keep up with PURC announcements and understand the reasons behind tariff changes.
– **Advocate for transparency:** Support calls for clearer reporting on how tariff revenues are used.

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FAQ

Conclusion

The recent electricity tariff increase is driven by a complex mix of long-term investment needs, changing generation costs, legacy debts, and social equity goals. While it may seem counterintuitive given recent improvements in the cedi and fuel prices, the reality is that sustainable, reliable electricity for all Ghanaians requires predictable funding and a fair distribution of costs. Understanding these factors helps foster a more informed and constructive dialogue about the future of Ghana’s power sector.

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