• Tuesday, December 05, 2023
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NERC reviews tariff rates bi-annually as FG removes electricity subsidies

NERC reviews tariff rates bi-annually as FG removes electricity subsidies

The Nigerian Electricity Regulatory Commission (NERC) has confirmed the federal government’s removal of electricity subsidies, adding that the commission will review tariff rates every six months.

Zainab Ahmed, the minister of finance, had earlier announced the removal of the electricity tariff subsidy over the weekend.

On Wednesday, while speaking at a press briefing, Sanusi Garba, NERC chairman, said the commission played a role in ensuring that tariff rates were regulated.

“The commission’s role is to determine the rates that consumers should pay.” As a result, we strike a balance between consumers and investors,” Garba explained.

He also stated that the electricity subsidy had been reduced over the last four to five years due to its unsustainable nature in terms of investor return on investment.

“Subsidies are now a government-determined policy issue. The government will decide that the rates calculated or agreed upon by the regulator may not be passed on to consumers at this time,” he said. Adding that “it’s happened a lot.”

Garba said that over the last four or five years, the level of subsidy has gradually been reduced because the electricity market cannot be run on life support and tell investors they won’t get a return on investment until the government steps in to provide the necessary funding.

Read also: Microsoft signs two energy compacts to promote grid decarbonization

As a result, the policy decision (to discontinue electricity subsidies) has been announced by the Minister of Finance. Subsidies were once as high as N600 billion per year, but are now down to around N30 billion or so this year.

In response to the tariff increase, the NERC chairman stated that the adjustment was made in February as a result of underlying economic considerations.

“What happened on February 1, 2022, was a minor tariff review. It is very clear on our website that we will adjust rates every six months to account for the foreign exchange component of cost as well as inflation,” Garba said.

The Chairman also specified that the tariff adjustment was simple, emphasizing that distribution companies were required to notify their customers of the changes.

Concerning the recent blackouts and repeated failures of the national electricity grid, the NERC chief stated that vandals rupturing gas pipelines and routine maintenance work on some power plants contributed to the country’s power system’s instability.