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Electricity: New Subsidized Cost Takes Effect, To Run Till April

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The federal government will continue to subsidise the gap in electricity cost to consumers pending the adjustment in tariffs announced by the Nigerian Electricity Regulatory Commission (NERC) on Saturday.

On Saturday, NERC announced a new multi-year tariff order (MYTO) to supersede the previous one issued since 2015.

In its announcement, the electricity sector regulator said the new order was scheduled to come into effect January 1, 2020.

The order involved the review of the electricity tariffs chargeable by the 11 electricity distribution companies (DISCos) for all categories of consumers in the country, except the residential category (R1).

However, following the publication of the order in the media, NERC on Sunday gave a clarification that although January 1, 2020 was given as the effective date for the new order, the government will continue to subsidise electricity consumption cost till April 1 this year.

“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,” the clarification highlighted.

“In the interim, the Federal Government has committed to fund 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 statement added.

The criteria include an obligation by all the DISCOs to settle in full their market invoices to gas suppliers and other commitments as adjusted and netted off by applicable tariff shortfall; compliance to the minimum remittance threshold spelled out in the MYTO, taking into consideration receivables from ministries, departments and agencies.

The spokesperson of the Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, last year gave the shortfall in revenue as a result of the federal government’s refusal to implement a cost-reflective tariff regime in the power sector since 2016.

The shortfall is the minimum amount the government will have to pay to subsidise the cost of electricity supply.

NERC spokesperson, Usman Arabi, in the statement obtained by the News Agency of Nigeria (NAN) in Lagos said the latest “minor review implemented by the Commission was a retrospective adjustment of the tariff regime released in 2015.”

“This is to account for changes in macro-economic indices for the years 2016, 2017 and 2018 thus providing certainty about revenue shortfall that may have arisen due to the differential between tariffs approved by the regulator and actual end-user tariffs.

“The commission, therefore, wishes to notify the general public that no tariff increase has been approved by the Commission vide the order,” he clarified.

He said, NERC, in the discharge of its statutory responsibilities enshrined under the Electric Power Sector Reform Act, would continue to undertake periodic reviews of electricity tariffs in accordance with the prevailing tariff methodology. Premium times

 

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