Nigerians to pay more for electricity as new gas price takes effect December 1

Electricity prepaid meters used to illustrate the story.
Electricity prepaid meters used to illustrate the story.

Nigerians are likely to pay more for electricity when the new gas price recently approved by the Nigerian Electricity Regulatory Commission, NERC, for power generation takes effect December 1, just a little more than week away.

NERC said on Thursday in Abuja that the review of the regulated price of $1.8 per Million British Thermal Unit (MBTU) for natural gas in 2014 to power plants would definitely take off on December 1.

The vice chairman of the electricity regulatory authority, Mohammed Bello, told a meeting of industry officials on the bi-annual minor review of the Multi Year Tariff Order-2 that the upward review of electricity tariffs was inevitable despite the continued poor electricity supply in the country.

Mr. Bello said apart from gas price, NERC took into consideration other factors such as inflation, foreign exchange rate and power generation capacity, before approving the recent tariff review.

“From what I have seen in the initial report, not much has changed,” Mr. Bello told participants at the meeting.

He described tariffs review as a sensitive issue to electricity consumers, who are always opposed to any tariffs increment without improvement in electricity supply.

The situation at the moment, he said, was that there was a general consensus that the upward review of electricity tariffs now was inevitable and the best way to go.

He said it was agreed that regular payment of electricity charges by consumers when they are due was the only way power would begin to improve.

But, power distribution and generation companies say the increase in the price of natural gas price would definitely necessitate an adjustment on the charge to electricity consumers, as that is a key component in computing tariffs in the power value chain.

A senior official of one of the electricity generation companies who participated in the meeting, who asked that his identity be protected, said it was highly impracticable that an increase in gas price by about 40 per cent per MMBTU would not warrant a corresponding increase in tariffs.

According to the official, in view of the crucial role of gas in power generation, as most power plants current operational in the country were gas-fired, it would be impossible to talk about electricity generation without gas.

A member of NERC’s Tariffs and Rates department, Roland Achor, said the new gas price would come into effect as the regulated gas price was adopted along with the multi-year tariffs order (MYTO) in 2008.

Mr. Achor said key industry regulatory authorities, including the Federal Ministry of Petroleum Resources and the Federal Ministry of Power in collaboration with NERC, have agreed to a gas price of $2.5 per million MBTU, in addition to transport cost of $0.8 effective December 2014.

On inflation, he said the figure presented by the Central Bank of Nigeria (CBN) showed a rate of 8.3 percent as of September 30, 2014, with the rate at last review put at 7.8 per cent.

He said though MYTO-2 had assumed that inflation rate would be about 13 per cent, the effective rate today was 8.3 per cent, adding that the data received from the CBN and the Nigeria Bureau of Statistics (NBS) also gave the Naira exchange rate of N154.75 to $1 as of September 30, 2014, as against N158.57 during the last minor review.

“MYTO-2 benchmarked at N178 to $1 allows a charge of one per cent above the CBN rate to cover letter of credit and other bank charges. The effective exchange rate now is N156.29 to $1 over the next six months,” he explained.

Available data from the Systems Operations of the Transmission Company of Nigeria (TCN), according to NERC, that showed available power generation on six months average as at September 30, 2014 was 3,675.41 megawatts (MW).

Mr. Achor who said electricity retail tariff for the period between December 1, 2014 and May 31, 2015 would be based on 3,675MW of generation capacity noted that gross electricity capacity was estimated at 5,556 MW against the last available generation figure of 3,424MW.

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