A Review of the Nigerian Energy Industry

Power producers yet to pay new domestic gas price

30 September 2014, Lagos ~ Contrary to the concern being raised that the recent increase in the price of domestic gas from $1.5 per thousand cubic feet (mcf) to $2.5 per mcf would lead to immediate hike in electricity tariff, investigation has revealed that the electricity generation companies have not started paying the new price.

In what it described as a “pragmatic and creative” short term approach to address the issue of inadequate gas supply to thermal generation plants across the country, the federal government, through the Nigerian Electricity Regulatory Commission (NERC) had approved a new gas-to-power pricing benchmark of $2.50/mcf and $0.80/mcf as transportation costs for new capacity.

Chinedu-Nebo-300x225The benchmark, according to the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, would equally increase with the United States annual inflation statistics.

Following the announcement, concern was raised that electricity tariff would also increase by about 40 per cent as power producers are now paying higher price for gas used in electricity generation.

Though the new pricing and other measures from which the government expected to ramp up grid power generation by at least 5,000 megawatts (MW) within the next four months, were expected to take off immediately, THISDAY gathered that power producers were yet to pay the new price.

The Chairman of NERC, Dr. Sam Amadi, who confirmed the development to THISDAY at the weekend, pointed out that no generation company has started paying the new price.
“No one has started paying the new gas price,” he said.
The price of gas-to- power was earlier increased from $0.5 cents per mcf to $1 in 2010.

It was further increased to $1.50 by 2011 and $2 by the end of 2013, and $2.5 in 2014

The government, in a recent inter-ministerial press briefing involving the ministries of petroleum resources, power, NERC, Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC), said collective effort was being made to find a lasting solution to shortages in gas supply to power plants in the country.

Alison-Madueke stated that following the challenge of inadequate gas supply, successes had been recorded in sorting out outstanding issues around current gas pricing regime as well as fast-tracking additional development of gas supply sources which will in the short term result to an addition of at least 370 million metric cubic feet per day (mmscf/d) of gas to the power plants.

She said as part of the new intervention, the CBN and the Bankers’ Committee had agreed to setup a Special Purpose Vehicle (SPV) to offset about N25 billion outstanding legacy gas related debts owed to gas suppliers by the defunct Power Holding Company of Nigeria (PHCN), while also working out further financial aid to the power sector.


~ This Day

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