Prepayment as a Liquidity and Revenue-Adequacy Reform in Ghana's Electricity Market

A Prepaid-by-Default Framework with Creditworthy Industrial Postpaid Exceptions

Abstract

Ghana's electricity market faces a structural cash conversion problem: electricity is procured and delivered continuously, yet a material share of customer revenue is billed late, collected incompletely or allowed to accumulate as receivables. This timing and collection mismatch weakens the Electricity Company of Ghana's (ECG) capacity to remit sector revenue through the Cash Waterfall Mechanism, increases reliance on fiscal transfers, contributes to arrears accumulation and transmits distribution sector weakness to generators, fuel suppliers and lenders. This paper evaluates the economic, financial, regulatory and operational case for making smart prepaid service the default settlement class, while retaining postpaid service for demonstrably creditworthy industrial and strategic customers under a tightly governed exception regime. The analysis draws on audited financial statements, official energy statistics, regulatory instruments, Ghana's Energy Sector Recovery Programme, international evidence on prepayment and utility reform, and a transparent scenario model. ECG's 2024 accounts report revenue of GHS 19.03 billion, trade and other receivables of GHS 15.14 billion, trade and other payables of GHS 54.50 billion, cash of GHS 0.59 billion and a net loss of GHS 8.26 billion. Under low, base and high conversion scenarios, the model estimates recurring annual cash recovery gains of approximately GHS 1.41 billion to GHS 2.17 billion, together with a separate, non-additive working capital acceleration of GHS 1.02 billion to GHS 1.33 billion. The central policy proposition is therefore “prepaid by default, postpaid by qualified exception.” Ghana's telecommunications market demonstrates the commercial scalability of this model: prepaid mobile voice subscriptions accounted for 98.92 percent of the market in 2024 and 98.81 percent in the third quarter of 2025, while postpaid accounts remained a small exception (National Communications Authority, 2026a, 2026b). Although the sectors differ technically, the underlying commercial rule, fund first, consume within an authorised balance, reconcile digitally and reserve credit for qualified accounts, can be adapted to electricity distribution and retailing. The framework assigns distinct responsibilities to the Public Utilities Regulatory Commission, the Ministry of Energy and Green Transition, ECG, the Energy Commission, the Ministry of Finance, payment service providers and consumer protection institutions. It also specifies industrial postpaid eligibility criteria, smart meter and data architecture, social safeguards, procurement controls, key performance indicators and a phased 48-month implementation plan. The paper concludes that default prepayment is an essential revenue assurance reform that can materially strengthen liquidity and payment discipline, but cannot by itself correct tariff inadequacy, technical losses, foreign exchange exposure, inefficient procurement or legacy debt. Its value lies in converting retail electricity from unsecured involuntary credit into a digitally governed, transparent and financeable settlement system.