Power producers will now pay more for gas
Nigerians may have to pay more for electricity as the Federal Government says it is considering a hike in the price of natural gas to power plants by about 50 per cent.
At the moment, oil and gas companies supply gas to power plants for the generation of electricity at the rate of $1 per 1000 standard cubic feet, SCF.
However, the Group Managing Director, Nigerian National Petroleum Corporation, NNPC, Andrew Yakubu, said in Abuja on Tuesday that the rate would soon be raised to $1.5 per 1000 SCF to ensure adequate supply and encourage more gas supplies/sales to power plants.
The decision to consider a 50 per cent hike in the price of the commodity was said to be sequel to the demand by gas suppliers who complain about the “uneconomic price” they have been made to sell to the power plants.
Indications are that the development may result in an increase in electricity tariff with power producers trying to recover cost incurred.
Currently, fertiliser companies pay about 90 cents for 1,000 cubic feet of gas, while industrial users purchase 1,000 cubic feet of the commodity at above $2.50.
The price of gas for power producers, who account for about 80 per cent of the domestic gas consumption, was increased about two years ago from $0.1 to $1.0 by the federal government for the same purpose of encouraging suppliers to sell to power plants.
The government has said that despite the hike, the prices were still lower than the about $3 per 1,000 standard cubic feet charged at the international market price for gas.
Concerns have always been expressed among electricity producers that the existing inappropriate gas pricing regime may frustrate the Federal Government’s efforts at achieving efficient and stable power supply in the country.
Power industry experts have noted that this was already happening as producers were now reluctant to supply gas to the power plants in favour of industries, a development that has negated government’s objectives in the power sector.
The Minister of Power, Chinedu Nebo, also said the decision to raise the price of gas was an attempt to establish an appropriate pricing regime as a necessary step to guarantee improved power supply in the country.
The minister said the disparity in price between gas supply to the power industry and the industrial sector was cited by the defunct Power Holding Company of Nigeria, PHCN, as a major reason why gas supply to power plants had been erratic, an issue that negatively affected power supply nationwide.
Another issue that has affected gas supply to power plants is pipeline vandalism which has sometimes reduced gas supply and thus electricity generation by about 20 per cent.
Nigeria recently privatised most of its power generating and distributing plants. The new gas pricing thus means the power generating plants, majority gas powered, would have to pay more to generate power; and to break even may demand an increase in the amount paid for the electricity generated by the eventual consumers, many of whom already complain of paying for non-available electricity. Nigeria generates less than 5000 megawatts of electricity, less than a quarter of what is required to power the whole nation.
Before this new gas directive, however, the National Electricity Regulatory Commission, NERC, had said there was no plan to increase electricity tariff.
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