Electricity tariff hike likely as gas price jumps by 11%

THERE are strong indications of an imminent hike in electricity tariffs with the latest increment in the wholesale price of gas to power by 11 per cent.

The Nigerian government announced on Monday that there would be an increase in the wholesale price of gas to power plants by 11 per cent.

This means an increment of $2.42 per million British thermal units (MMBTU) from $2.18 per MMBTU amid Nigeria’s persistent electricity supply shortfall.

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In a notice issued by the Chief Executive of Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Engr Farouk Ahmed, on Monday, April 1, the government raised the commercial wholesale gas price from $2.50/MMBtu to $2.92/MMBtu.

“Accordingly, after due consultation with key stakeholders and taking into cognisance the provisions of the PIA, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the Year 2024 Domestic Base Price as USD 2.42 / MMBTU and wholesale prices of natural gas in the strategic sector”, the notice partly reads.

The Leadership Association of Power Generating Companies (APGC)of Nigeria has yet to issue any official statement about this development.

The ICIR reached out to the Chief Executive Officer of the APGC, Joy Ogaji, to get her response to the development. She said, “No comments.”

Analysts say the implication is that the country’s electricity generation companies would have to pay more to buy gas, with the likelihood of tariff adjustments by the Nigerian Electricity Regulatory Commission (NERC)

Findings have shown that gas pricing exchange rate variables are key factors considered by NERC before adjusting its tariff.

These changes are at variance with concerns of gas shortages, the undersupply raised by gas-generating companies, and the continuous “dollarisation” of the product in Nigeria. In contrast, power produced in the country with the gas is priced in naira.

Data obtained from the NERC revealed that some power plants which are largely gas-powered, such as – Afam IV-V, Sapele ST, Olorunsogo National Integrated Power Projects- NIPP, Omotosho National Integrated Power Projects NIPP, Sapele GT NIPP, Ihovbor NIPP, Geregu NIPP, Olorunsogo, Ibom Power, River IPP, Omoku, Trans Amadi, Paras, Taopex Energy and Dadin Kawa- currently produce just about 1,053MW (37 per cent) of the power consumed in-country.

This drop has led to the epileptic power supply in the country, with the gas generation companies threatening force majeur on several occasions.

On the other hand, only 10 power plants classified as major, including Egbin ST, Delta GS, Kainji Afam VI, Odukpani, Shiroro, Jebba, Okpai, Azura IPP and Geregu currently generate 56 per cent, about 3,398MW of total power consumed.

Although the 26 plants have a total installed capacity of 12 199 (megawatts)MW, current electricity generation is less than 5000MW, which is far from what the country requires to boost its industrialisation drive.

The Minister of Power, Adebayo Adelabu, had faulted the gas pricing in dollars in December last year.

Since January, gas companies have reduced their supply to power plants following years of unpaid invoices amounting to over $1.2 billion.






     

     

    The government intervened in March by paying $120 million to the companies as the power supply dwindled.

    However, the country’s epileptic power supply has persisted.

    Reacting to the Development, a stakeholder in the power sector, Executive Director and Convener, PowerUp Nigeria, Adetayo Adegbemle, said: “The Federal Government just used its hand to hike its (unpaid) ‘subsidy ticket’; it was already battling the impact of the FX floating policy and has now just decided to increase the price of gas.”

    “This further brings back our argument that the subsidy on electricity tariff is unsustainable,”he added.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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