From December 1, this year, electricity consumers in Nigeria would pay more for what they consume in spite of the worsening electricity situation in the country. Nigerian Electricity Regulatory Commission, NERC, the nation’s electricity regulator, has approved a review of multi-year Tariff Order, MYTO. The new tariff with effect from December 1. The adjustment was intended to meet the demands of the generation companies which stated that the increase in gas price by $1/mmbtu would warrant a rise in electricity bills.
According to them, the gas component in the power value chain is a major factor that cannot be ignored. “I doubt if a rise in gas price by about 40 per cent per mmbtu won’t warrant a corresponding increase in tariffs considering the significance of gas to power plants in Nigeria. This is because most power plants in Nigeria today are gas-fired,” one of them said.
NERC approved the increase in electricity tariff notwithstanding the fact that electricity supply in the country has continued to be poor since the privatisation of the power companies. Explaining the rise in gas price while giving the presentation at the commission’s head office, Roland Achor from Tariffs and Rates, NERC, said gas prices had been regulated since the adoption of the MYTO in 2008. Achor said that the regulated prices were applied in the 2012-2016 price regimes. “However, the federal ministry of petroleum resources in collaboration with NERC has agreed to a gas price of $2.5/mmbtu and transport cost of $0.8 effective December 2014,” he said.
On the rate of inflation, Achor said that what the commission received from the Central Bank of Nigeria showed a figure of 8.3 percent as of September 30, while the inflation rate at last minor review was 7.8 percent. “However, MYTO-2 had an assumption of 13 percent inflation rate and the effective rate is now 8.3 per cent.”
Achor noted that the data received from the CBN and the Nigeria Bureau of Statistics showed an exchange rate of N154.75 to $1 as of September 30, while the figure for the last minor review was N158.57. “MYTO-2 was benchmarked at N178 to $1. It is, however, important to note that MYTO-2 also allows a charge of one per cent above the CBN rate to cover letter of credit and other bank charges. The effective exchange rate is now N156.29 to $1 over the next six months.”
Data from the systems operations of the Transmission Company of Nigeria, TCN, showed that available generation on six months average ending September 30, was 3,675.41 megawatts. The gross capacity was therefore estimated to be 5,556MW but the last available generation capacity was 3,424MW. “Throughout the period from December 1, 2014 to May 31, 2015, the retail tariff will be based on generation of 3,675MW,” Achor said.
Meanwhile, stakeholders in the industry have decried the proposed increase in electricity tariff, saying it was a mockery of the federal government’s avowed commitment to the welfare of the people. Ganiyu Makanjuola, president, National Association of Electricity Consumers of Nigeria, NAECN, said government should first address the fundamental issues of infrastructure, generation capacity and transmission. He said the association and electricity consumers were totally against the proposed tariff increase. According to him, it is wrong for NERC to have concluded plans to increase electricity tariff without first addressing the epileptic power situation in the country.
Makanjuola said several complaints by consumers and the non-availability of prepaid metres should be tackled first by NERC before proposing tariff increase. “NERC should have first addressed the power situation by improving capacity before deciding to increase tariff. We are really concerned about the proposed tariff increase; consumers cannot just continue to pay for what they do not consume. Power should be made available first before NERC can think of tariff increase. We are concerned because any increase in tariff should match increased power supply,” he said.
