FG scraps N600bn electricity subsidy, confirms power tariff hike
The Nigerian Electricity Regulatory Commission on Wednesday declared that subsidy on power amounting to about N600bn during some period had now been stopped by the Federal Government.
It also revealed that electricity tariffs were raised in February this year, and was quick to, however, state that the tariff payable by some customers in the franchise area of one of the distribution companies was reduced.
This came as power generation companies condemned the Nigerian Bulk Electricity Trading company, stating that the NBET was failing in its obligations in terms of payment for power generated by the Gencos.
Speaking at a press briefing in Abuja on the challenges in the power sector and other issues, the Chairman, NERC, Sanusi Garba, stated that subsidy on electricity was a policy issue of the Federal Government that had to be halted.
He said, “The role of the commission is to make a determination of the rates that consumers should pay. So we strike a balance between consumers and investors.
“Now subsidy is a policy issue determined by the government. The government will decide that the rates calculated or agreed by the regulator may at this time not be passed on to consumers. It has happened many times.
“In the past four, five years the level of subsidy has gradually been reduced, because you cannot run the electricity market on life support and say that investors cannot get their return on investment until government steps in to provide the required funding.”
Garba added, “So that policy decision (stopping electricity subsidy) is as announced by the Minister of Finance. The subsidies have been, at one time as high as N600bn a year, and gradually coming down to about N30bn or so this year.”
On concerns about the rise in electricity tariffs, the NERC boss stated that the adjustment was made in February this year following some economic fundamentals considered by the commission.
“What happened on February 1, 2022, is a minor review of tariff. It is very clear on our website that every six months we will adjust rates to take care of the foreign exchange component of cost and also inflation,” he stated.
Garba described the tariff adjustment as absolutely straightforward, stressing that the distribution companies were meant to inform their customers of the changes.
On the recent blackouts and repeated collapse of the national electricity grid, the NERC chairman said the rupturing of gas pipelines by vandals and routine maintenance works on some power plants contributed to the instability of the country’s power system.
Read Also:
This was further buttressed by the Federal Ministry of Power in a statement issued in Abuja the media aide to the power minister, Sanusi Isa, where it stated that the national grid suffered double system collapse within two days due to so many factors
“The current energy crisis confronting some key sectors of the economy also contributed to the problems we are facing now in the power sector,” the statement read in part.
It added, “We are where we are today also because of the increasing vandalism of pipelines that also supply gas to the power plants.
“This too is being resolved in collaboration with the relevant agencies. The NNPC and other gas suppliers are working relentlessly to restore gas supply for optimum power supply.”
The ministry said the Federal Government was doing everything possible through the relevant security agencies to stop the vandalism of pipelines.
“Routine maintenance of power generating plants had also contributed to the current power outages we are experiencing,” it stated.
The power ministry added, “These challenges do not in any way indicate that the ongoing rehabilitation of the national grid by the government is not yielding results.”
This came as the Gencos, through their umbrella body, Association of Power Generation Companies, declared on Wednesday that the NBET was failing in its obligations in terms of payments for power supplied to the grid by Gencos.
The NBET had in a statement on March 13, 2022, stated that it was making payments to Gencos as and when due and had never defaulted on any payment cycle to date.
It further claimed that the percentage payment made to Gencos had continually been on the increase, with the N701.9bn payment assurance guarantee of government and that this ensured a minimum of 80 per cent of Gencos invoices for years 2018 and 2019.
NBET had also stated that the second payment guarantee of N600bn ensured an average of 95 per cent payment of Gencos invoices for 2020.
But the Gencos through APGC kicked against the claims of NBET on Wednesday, stressing that the bulk trader was giving out false information.
“As power generation companies, we believe that their (NBET) claim is devoid of the true picture of the realities of the generation companies in the Nigeria electricity supply industry and therefore capable of misleading the numerous consumers and stakeholders who deserve to know the truth,” APGC stated.
It added, “This is because, a perusal of their response shows that NBET never said anything about their payment details, from 2015 till 2017.
“We also believe that NBET is deliberately redirecting the focus from its inability to carry out its obligations which has thrown the Gencos in a financial quagmire, by focusing its insistence on the payments from the payment assurance fund.”
The Gencos charged NBET to publish its payments as this would show the level of indebtedness of the bulk trader to power generators.
