22 July 2016, Abuja – The Federal Government on Thursday opposed the court ruling that mandated it and the Nigerian Electricity Regulatory Commission to reverse the 45 per cent increase in power tariffs payable by consumers across the country.
It also commended NERC for appealing the judgement, describing the ruling as a setback that posed a challenge, which had prompted misunderstanding in the sector.
The Minister of Power, Works and Housing, Babtunde Fashola, disclosed this during the signing of the front-runner Power Purchase Agreements between the Federal Government and 14 solar power development and promoting companies in Abuja.
The Acting Managing Director/Chief Executive Officer, Nigerian Bulk Electricity Trading Company Plc, Mr. Waziri Bintube, signed on behalf of the Federal Government, as the NBET is the agency of government saddled with the responsibility of signing PPAs for the country.
In his address at the ceremony, Fashola saluted the courage of the solar power investors despite the court ruling, and stressed that a lot of unusual things were beginning to happen in the sector, among which was the judicial intervention.
He, however, stated that despite the various concerns in the sector, the Federal Government would play by the rules that drive the electricity business.
Fashola said, “I must say that as all of these are happening, the Nigerian government has demonstrated that it will play by the rules, especially in the power sector. I must, therefore, commend our regulators, NERC, for the position that they have taken regarding the judgement. The commission has shown that although it disagrees with the judgement, it is challenging it as the law allows.
“To me, it is a positive sign for our power sector. The decision of NERC to respect the court is a sign that conflicts and interests in the power sector can be resolved in a democratic environment. These are the hallmarks of a good economic and investment-worthy destination. There are silver linings in the cloud of the setback, which the judgement appears to represent.”
NERC had stated that it would respect the court but went ahead to appeal the ruling as well as filed for a stay of execution of the judgement.
Fashola maintained that in spite the opposition to tariff increase, the government remained resolute and committed to proceed with it.
He argued that power tariff was anchored on the dynamics of the economy, adding that as the raw materials for generating power increased in price, the rate being charged for electricity would also go up, and vice versa.
“Let us use this opportunity to enlighten the public that tariff can never be permanently fixed, because it must be always subject to the dynamics of the economy. Therefore, if the raw materials go up, tariff must follow at the same time; in the way that if it comes down, tariff will also come down,” the minister said.
On the agreements signed between the NBET and the 14 firms, Fashola said, “The PPAs are the heart and soul of financing power projects. They do not automatically on their own mean that we will have electricity tomorrow, but they indicate that within the next six, nine, 12 or 18 months, depending on the speed of each promoter and developer, we will begin to see incremental delivery of electricity.”
He added that it was wrong to have the perception that immediately the power sector was privatised, Nigerians would start getting stable electricity, and noted that the signing of the solar PPAs should not be seen in that light.
Fashola observed that the tariff from solar generated power was originally on the high side, but explained that it was scaled down after considering the interest of the power consumers.
“It was difficult to imagine how that can be transferred to the consuming public. Even though the boundary was about 26 cents; at N200 to a dollar, that was N34, which was what we met; we didn’t feel comfortable to pass this on to the consumers. But today, it has become 11.5 cents; at N200 to a dollar, I think we are probably at N23, which is in the region of the disputed tariff,” he added.
He stated that at the approved price, the sector was hopeful of getting more investors, adding that the tariff would reduce as things get better in the power business.
He urged the investors never to compromise quality and stated that electricity generation was no longer dependent on one source, as the government had decided to exploit wind, biomass, solar and hydro for power generation.