In a recent announcement that has implications for households and businesses across the nation, the Public Utilities Regulatory Commission (PURC) has declared an upward adjustment in the tariffs for both electricity and water. According to a press release issued on April 11, 2025, the average end-user tariff for electricity will see an increase of 14.75%, while the tariff for water supply will rise by 4.02% across all categories of consumers.
This decision by the PURC comes as a result of the conclusion of their regulatory process for the quarterly adjustment of electricity and water tariffs for the first and second quarters of 2025. The commission emphasized that this process aligns with their established Quarterly Tariff Review Mechanism, which is detailed in their Rate Setting Guidelines for Quarterly Adjustment of Natural Gas, Electricity, and Water Tariffs. This mechanism is designed to track and incorporate fluctuations in four critical economic variables: the Cedi/Dollar exchange rate, the rate of inflation, the electricity generation mix, and the cost of fuel, primarily natural gas, used in electricity generation.
The PURC elaborated on the rationale behind this quarterly review system, stating that its primary aim is to prevent both the under-recovery and over-recovery of revenues by utility companies. Under-recovery, the commission explained, can severely hinder the ability of these companies to consistently supply electricity and water to consumers, potentially leading to disruptions and outages in both services. Conversely, over-recovery would place an unnecessary financial burden on the consumers of these essential utilities. Therefore, this periodic adjustment mechanism allows the PURC to maintain the real value of the tariffs over the adjustment period, ensuring the financial stability of the utility providers while safeguarding consumer interests against excessive charges.
Delving into the specific factors that influenced the latest tariff adjustments, the PURC highlighted the economic conditions prevailing in the second quarter of 2025. A weighted average exchange rate of GHS15.6974 to the USD was utilized in the computation of the tariffs for this period. This rate indicated an under-recovery of Ghs0.1700 from the preceding quarter in 2024, underscoring the impact of currency fluctuations on the operational costs of the utility companies, many of whose inputs are priced in US dollars. Furthermore, the commission factored in an average three-month projected inflation rate of 22.49% for the second quarter of 2025. High inflation erodes the real value of revenues, necessitating tariff adjustments to maintain the purchasing power of the utility providers and enable them to cover their operational expenses effectively.
In terms of the energy sector, the PURC noted that the applicable Weighted Average Cost of Gas (WACoG) for the second quarter of 2025 stood at USD 7.6289/MMBtu. This figure represented a decrease from the USD 7.8368/MMBtu applied in the third quarter of 2024. Natural gas is a significant fuel source for thermal power generation in the country, and fluctuations in its cost directly impact the overall cost of electricity production. The projected hydro-thermal generation mix for the quarter under review indicated a reliance of 28.80% on hydroelectric power and 71.20% on thermal power. This mix is a crucial factor in determining the average cost of electricity generation, as different sources have varying operational and fuel costs.
A particularly significant element contributing to the 2025 quarterly tariff adjustment was the unavoidable decision to address a substantial outstanding revenue of Ghs976 million carried over from the previous three quarters of 2024. In this adjustment, the PURC has allowed for the recovery of half (50%) of this amount, with the remaining 50% scheduled to be spread over the subsequent quarters of the year. This accumulated under-recovery highlights the financial pressures faced by the utility companies and the necessity for these adjustments to ensure their continued viability.
The PURC emphasized that the combined effect of the cedi/dollar exchange rate, the prevailing inflation rate, and the partial payment of outstanding revenues from the previous year has resulted in a situation where utility companies are experiencing significant under-recovery. Drawing an analogy with other businesses, the commission pointed out that utility companies, just like any other enterprise, require periodic reviews of their pricing structures (tariffs) to maintain their operational capabilities and ensure the consistent delivery of essential services to the populace. This adjustment, while potentially impacting consumers' budgets, is presented as a necessary measure to safeguard the long-term sustainability and reliability of the nation's electricity and water supply.
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