Nigeria Decides To Continue Subsidy Payment on Electricity Until Economy Improves

The Nigerian Electricity Regulatory Commission (NERC) on Wednesday said that the federal government has decided to continue to pay the shortfall in electricity tariffs until the economy begins to improve.

Speaking during an engagement with journalists in Abuja, the Chairman of NERC, Mr. Sanusi Garba, disclosed that a new Multi Year Tariff Order (MYTO) 2024 has now been issued each electricity Distribution Company (Disco), with government ready to offset any deficit arising from the new tariff.

The order issued to the Discos showed that for instance, while Ibadan Disco (IBEDC) pegged its tariff at N118, NERC approved N62.50. The government will pay the difference, the document showed.

For Abuja Disco, NERC approved an “allowed tariff” of N63.24, whereas the distribution company applied for N151.07.

In the same vein, while Benin Disco requested a tariff of N277, NERC approved N60.10, after acknowledging a cost-reflective amount of N126, leaving a deficit of N65.90 to be paid by government on every kilowatt hour (Kwh) consumed by customers under that franchise.

NERC had in a recent document indicated that if the current subsidy regime on power continues in 2024, it would hit N1.65 trillion by the end of this year.

While there were rumors that by January 1, 2024, the federal government may approve a raise in tariffs, NERC had shut down the insinuations, saying it was not aware of such a decision.

Chairman of the power sector regulator, Garba, while addressing the press at the Abuja headquarters of the organization on Wednesday, said that the federal government will continue to subsidize electricity to ease the financial burden on Nigerians due to economic challenges in the country.

“Government has decided for now because of the cost-of-living crisis and so many other things, to, in the meantime continue to subsidize electricity. Tariffs are not going up, but in the order, you will see the tariff and the amount of subsidy the government will be providing to cover the gap,” he stated.

According to him, the new tariff contains what the Discos are allowed to charge based on government policy if they are to remain in service, explaining that NERC included some provisions that would ensure that the Discos pay what they are obligated to pay.

“The Discos are in the business of buying electricity from the Nigeria Bulk Electricity Trading Company (NBET), so they are to pay,” he maintained.

Garba said that the Electricity Act that was signed by President Bola Tinubu in 2023 presented an opportunity for states to make laws and take charge of providing electricity in their franchise areas.

According to him, the commission remains committed to working with the states in such a manner that the existing public utilities are nurtured to provide services to Nigerians and are utilised for what they were intended for.

He listed Ekiti, Ondo, Enugu and Anambra as states with their own electricity laws, explaining that Lagos, Edo and Osun laws are still in the works.

On metering, the chairman said that the commission had identified that the electricity distribution companies had challenges with finances to meter their customers, admitting that the rate of metering had been adversely impacted by the inability of Discos to raise the required capital from the banks.

“To reduce the rate of estimated billing, the commission created a framework under which the distribution companies can raise some amount of money to meter customers. So, we decided that from the market revenues, we set aside a fixed amount that is dedicated for the provision of metering.

“We are not saying that the money from the market on a monthly basis is the money to buy a metre. It is a potential lender to raise a pathway to pay whatever loan Discos are going to get to provide metres,” he explained.

To ease communication between customers and the authorities, Garba stated that the mobile app for outages reporting was live in some Discos, stressing that plans were underway to extend it to other distribution companies as well as customer care centres.

He also spoke about the forum offices where complaints are lodged and resolved, urging customers to take advantage of the offices located in state capitals.

He said that no Disco has the power to force customers to buy poles and cables, stressing that there’s a framework on how that even if they buy, customers can retrieve the amortized value of the facilities.

The NERC chairman noted that based on the multi-year tariff regime, rates are supposed to be reviewed every six months, disclosing that NERC had taken into account that the agreement between the discos and the Bureau of Public Enterprises (BPE) has expired, with the regulatory power now resting solely with the NERC, without recourse to the bureau.

He said that after due consultation, the tariff order was issued, wherein each Disco discussed what the optimal tariff for them was, due to different operating parameters.

Emmanuel Addeh

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