NERC approves electricity tariff hike, affirms N1.6trn power subsidy for 2024

THE Nigerian Electricity Regulatory Commission (NERC) has approved new electricity tariffs for the 11 distribution companies (DisCos) in the country, with effect from January 2024.

The NERC chairman, Sanusi Garba, who disclosed this on Wednesday, January 17, assured that customers would continue to pay the current tariffs as the Federal Government would subsidise the new tariffs to the tune of N1.6 trillion throughout the year.

Garba said the Federal Government would continue to subsidise electricity to ease the financial burden on Nigerians due to economic challenges the nation faces.

The ICIR reported that the Minister of Power, Adebayo Adelabu, gave the Federal Government’s position on electricity subsidy of N1.6 trillion in 2024.

He said, “The government will continue to subsidise power supply to vulnerable Nigerians.”

The NERC also approved a monthly tariff review of the DisCos, arising from changes in the inflation rates, Naira/US dollar exchange rates, and gas-to-power prices.

Before now, the Multi-Year Tariff Order (MYTO) allowed for bi-annual minor tariff reviews while major tariff reviews were planned every five years.

According to Garba, the government has decided to continue subsidising electricity for now, following the rising cost of living.

“In the new tariff order just published by the commission, you will discover that the tariff is not going up but will see what the Electricity Distribution Companies (DisCos) should be charging.

“You will also see in the tariff order the amount of subsidy the government will be providing to cover the gap between what they will charge and what they are allowed to charge,” he said.

There were no tariff adjustments in 2023, as the government sustained subsidy payments in the power sector amid a face-off with the Nigeria Labour Congress NLC on the already removed petroleum subsidy.

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.

He said that in the tariff, NERC included some provision that would ensure that the DisCos pay what they are obligated to pay.

A breakdown of the approved tariffs indicates that the cost-reflective tariff for Abuja Electricity Distribution Company is N120.88 per kilowatt hour (kwh). However, a tariff of N63.24/kWh is allowed by NERC, indicating a shortfall of N58.12/kWh, which the Federal Government subsidises.

The commission said that in line with the direction of the Federal Government policy on electricity subsidy, the allowed tariffs are frozen for all customers at the rates payable since December 2022.

With this policy, the estimated subsidy benefit for customers under the Abuja Electricity Distribution Companies (AEDC) franchise in 2024 is approximately N233.26 billion, which translates to N19.44 billion monthly.

“The allowed tariff is with effect from January 2024 and shall remain in force, subject to further policy direction of the FGN,” the commission stated.

For Ikeja Electric, the cost-reflective tariff is N128.18 while the approved tariff is N56.6, leaving a shortfall of N53.5/kWh-(Kilowatts means a measure of thousand watts of electrical power)

With this policy, the estimated subsidy benefit for customers under the Ikeja Electric franchise in 2024 is approximately N238.201 billion (N19.85 billion monthly), effective from January 2024.

The estimated subsidy benefit for customers under the Ibadan DisCo franchise in 2024 is approximately N199.841 billion (that is, N16.65 billion monthly).

Garba emphasised that the Electricity Act 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.

He said the commission remained committed to working with the states so that the existing public utilities would be nurtured to provide services to Nigerians and utilised for what they intended.






     

     

    On metering, the chairman said that the commission had identified that the electricity distribution companies had financial challenges in metering their customers.

    He said the metering rate had been adversely impacted by DisCos’s inability 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.”

     

    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.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

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