• Friday, December 08, 2023
businessday logo


Electricity subsidy tripled to ₦135 bn in Q2 — NERC

Electricity subsidy jumped by 275% to ₦135 bn in Q2, 2023 — NERC

The federal government, in the second quarter of 2023, paid a total of ₦135.23 billion for electricity subsidy, the Nigerian Electricity Regulatory Commission (NERC) report has revealed.

According to the report obtained by Businessday, the sum translates to a 275 percent increase from ₦36.02 billion paid in the first quarter.

The Commission stated that the subsidy was due to the absence of cost-reflective tariffs across all Distribution Companies, adding that the increase recorded in the period was a result of the government’s policy to harmonise exchange rates.

“In the absence of cost-reflective tariffs, the Government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding.

“The government incurred a subsidy obligation of N135.23bn in 2023/Q2, which is an increase of N99.21 billion (+275 percent) compared to the N36.02 billion incurred in 2023/Q1; this increase is largely attributable to the government’s policy to harmonise change rates.

Read also: Businesses bleed as electricity gulps N221bn in H1

“On average, the subsidy obligation incurred by the Government per month was ₦45.08 billion in 2023/Q2,” it stated.

The report also showed that seven DisCos recorded over 100 percent remittance performance in the period. These DisCos include Ikeja (115.21 percent), Ibadan (112.86 percent), Benin (111.32 percent), Eko (111.20 percent), Enugu (108.52 percent), Jos (108.48 percent) and Yola (102.44 percent).

This indicates that the DisCos had improved remittance to NBET when compared to 2023/Q1, which according to the Commission can be explained based on the exchange-rate harmonisation-induced increase in Government subsidy.

“To sustain power sector operations, the Commission recognises the significance of enhancing market remittances and is providing DisCos with revenue-boosting initiatives. The introduction of the SBT and opportunities for DisCos to improve customer service through better energy supply quality is a clear path to increased revenue without broad-based tariff increases.

“The ongoing DisCos investments in infrastructure and metering initiatives will result in a greater volume of reliable energy supplied to customers, improved revenue assurance, collections, and market remittances,” it stated.

Total electricity generated in the period dropped to 8,867.05 Gigawatt per hour (GWh), translating to a decrease of -5.17 per cent (-483.19GWh) from the 9,350.24GWh generated in 2023/Q1.

Read also: Nigeria’s electricity sector performance in four charts

The decrease in electricity generation in 2023/Q2 was due to a decrease in the available capacity of the power plants.
According to the report, sixteen of the twenty-six grid-connected power plants recorded decreases in total generation in 2023/Q2 compared to 2023/Q1.

“The decrease in electricity generation in 2023/Q2 was due to a decrease in the available capacity of the power plants.
“Two of the top performing power plants in 2023/Q1 – Olorunsogo and Alaoji NIPP were both unavailable for 84 days (approximately 91 percent of the quarter) in 2023/Q2 due to gas constraints and mechanical faults.

“Furthermore, all the hydropower plants recorded decreases in their average generation in 2023/Q2. Shiroro hydro plant recorded a decrease in generation due to the shutting down of one (1) of its four (4) units/turbines for minor maintenance as well as water management caused by the depletion of its dam reserves since the end of the rainy season in 2022/Q3.

“Jebba had 50 percent of its turbines (~289.2MW capacity) shut down in 2023/Q2 to allow them to undergo total overhaul and replacement of key components including generator rotor, winding and Automatic Voltage Regulator (AVR). Dadin Kowa was unavailable for 50 percent of the time in April and May due to low gross operating head.”