• Thursday, February 29, 2024
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FG to pay N1.6trn electricity subsidy in 2024 as NERC’s new tariff debuts

NERC mulls prepaid meter price hike citing forex

The Nigerian Electricity Regulatory Commission (NERC) has introduced a new electricity cost reflective tariff plan which has been effective since January 1, 2024.

According to the Sanusi Garba, the chairman of the Commission, the tariff order which reflect over 30 percent increase in tariff, contains the appropriate tariff that Distribution companies (Discos) should charge if they are to remain in business.

Garba who addressed journalists in Abuja on Wednesday stated that the Commission in compliance to the Federal government’s directive, also published the allowed tariff, which is the amount Discos are allowed to charge based on government’s policy.

“The tariff order contains the appropriate tariff that Discos should be charging if they are to remain in business and the rates are very clear. Some N110/kWh, N120/kWh, N130kWh and so on, because Discos as distinct legal entities have different operating parameters, different efficiency levels and so on.

“So on that basis, they also have different tariffs. So for the first time, we have published what they should charge. We have also published the amount they are allowed to charge based on government policy.

“Because government has decided for now arising from cost of living crisis to continue subsidizing electricity. So tariff are not going up but you will see what the Disco should have been charging and you will see the amount of subsidy that government will be paying to cover the gap of what they should be charging,” he said.

According to the order, tariff payable by Abuja Electricity Distribution Company customers under band A-Non-MD was increased from N88.47/kWh to N124.42kWh, but the allowed tariff for these customers remained at N68.20/kWh being same as 2023.

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For customers under band A-MD1 and A-MD2 the tariff was increased from N105.30 to N152.67 but the allowed tariff remained at N81.18.

Also, customers under band B – Non-MD, the tariff was increased from N82.17 to N119.82 with an allowed tariff of N63.35.

The Commission noted that with this policy, the estimated subsidy benefit for customers under AEDC franchise in 2024 is approximately N233.26bn (i.e, N19.44bn monthly}. The allowed tariff is with effect from 1 st January 2024 and shall remain in force, subject to further policy direction of the Federal Government.

“Pursuant to Section 116 of the EA and extant regulations, the Commission considered and approved for AEDC the cost-reflective tariffs with effect from 1st January 2024 and shall remain in force subject to automatic monthly adjustments on passthrough indices including Nigerian and US Inflation rates, Naira/US$ exchange rates and gas to power tariffs,” it stated.

According to Garba, with the tariff allowed, the federal government will be expected to pay as high as N1.6trillion to subsidise electricity for the year 2014.

Garba speaking fuether, disclosed that the Commission’s mobile app for power outage reporting has gone live, urging customers to leverage the app to report their concerns on power delivery.

“We intend to roll out this outage reporting system over the next few months, to all the distribution companies, because we need to get closer to electricity consumer and know how the utilities are handling customers complaints.

“There is another portal that will soon be talking about Call Centre, where you can also use the call centre to access your service provider, and for the call centre is not just outage.

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The chairman also noted that achieving 100 percent metering of customers was being challenged by the inability of Discos to raise capital from the banks.

“On metering, we have clearly identified that the challenge and matrix is financing. It’s not really rocket science. So, the rate of metering has been so far, adversely impacted by the inability of Discos to raise capital from the banks.

“Another challenge has been that metres are part of the assets of a distribution company with a lifetime of at least 10 years, so even more than 10 years, so if you’re going to match the revenues for the life of the asset, also the bank may not provide long term finances.

“So in recognition of that, we now decided that from the market revenues, set aside a fixed amount that now is ring fenced and dedicated for the provision of metering. So we’re not saying that the money that are gotten from the market on a monthly basis, is the money you’re going to take away to buy metres, it is to show potential lenders that there is a pathway to paying whatever loan the Disco were going to get,” he said.

In his remarks, Dafe Akpeneye, NERC Commissioner, Legal, Licencing, and Compliance said that state governments including; Ondo, Ekiti, Enugu, and Anambra, has domeaticated the electricity Act which empowers state on electricity generation and distribution.

He said that Lagos, Edo, Kaduan and Osun were still in the process. “But all the states are keen to proceed as the Chairman said we have been having engagements, we are supporting the transition to having their own laws to regulate their markets.”