Lagos — The Federal Government has committed to subsidising the new electricity tariffs until April 1, this year.
The update came following the Nigerian Electricity Regulatory Commission, NERC, order on Saturday, directing all the electricity distribution companies or Discos to increase electricity tariffs with effect from January 1, this year.
NERC said the tariff review was carried out under the Multi-Year Tariff Order, MYTO, 2019.
The Federal Government, meanwhile, said it would pay for the gap in electricity costs until April 1, when the Discos are expected to officially effect the new tariff increase.
The NERC order, titled “December 2019 MYTO Minor Review Order” for the 11 Discos, contained reviews for different categories of consumers except those under the Residential, R1.
In a clarification statement, NERC said: “The Federal Government’s updated Power Sector Recovery Programme (PSRP) does not envisage an immediate increase in end-user tariffs until April 1, 2020 and a transition to full cost reflectivity by end of 2021.
“In the interim, the Federal Government has committed to funding the revenue gap arising from the difference between cost-reflective tariffs determined by the Commission and the actual end-user tariffs payable by customers in line with stipulated criteria”.
The newly-reviewed tariffs by NERC ranged from 59.7 percent for consumers in Ikeja, Lagos, to 77.6 percent for those in Enugu.
NERC said the updates in the new order were based on actual changes in macroeconomic variables in generation capacity as of October 31, 2019, including inflation rate of 11.3 percent for January to October 2019.
The order was also based on exchange rates of N306.9 plus one percent premium which is about N309.97 to the dollar and gas price of $2.50 per million metric tons BTU and gas transportation cost of $0.80 per MMBTU, it added
Basic assumptions that guided the review included exchange rate of N310, generation cost of N23 per kWh, transmission cost of N7.8 per kWh, transmission and admin cost of N3.99 per kWh.
Under the new tariff order, NERC insists “All Discos are obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall.”
“In the determination for compliance with the minimum remittance threshold in this Order, the Commission shall consider verified receivables from MDAs (ministries, departments, and agencies) for the settlement period and DISCos’ historical collection efficiency for MDAs.
“The commission shall hold the TCN (Transmission Company of Nigeria) responsible for deviation from the economic dispatch order that adversely impact on the base weighed average cost of the wholesale of energy,” NERC added.
The Discos had before now blamed the shortfall in the electricity market on Federal government’s failure to implement a cost-reflective tariffs regime since 2016.
The shortfall is the minimum amount the government will have to pay to subsidise the cost of electricity supply.