An Electricity Market Specialist for Power Generation Companies (GenCos), Adetunji Adeyeye, has said that the Nigerian Electricity Regulatory Commission (NERC) will continue to reduce the electricity tariff for Band A customers if the rate of the dollar to naira as well as the inflation rate continues to go down.
Adeyeye said this in an interview with ARISE NEWS on Tuesday while he discussed the decision of the NERC on Monday to order a downward review of electricity tariff for Band A customers to N206.80 per kilowatt-hour from the N225/kWh.
He said, “The reduction that has happened through the May 2024 supplementary order of the multi year tariff order by NERC is actually a reaction to the micro-economics that goes around in the power sector. Don’t forget that the tariff is a building block, and it is a building block of many micro-economic factors- exchange rate being one of them, the volume of electricity available being one of them, inflation index being one of them, also, the availability of gas and the gas transportation being one of them.
“So, what has happened since the initial 2024 order that set that N225 price, there is a lot of changes that have happened, and we must commend NERC and government for the policy direction that are going to follow through it now. So, what NERC has done is to immediately, on a real term basis, adjust to the micro-economic indices that is shifting.”
He went on to say, “The multi-year tariff order is adjusted six months, but because of the volatility in our system, NERC decided to take the plunge and say, we will be adjusting every month. So, if dollar keeps coming down, inflation keeps coming down, electricity tariff will be coming down as well, whereas it gives also the discos the needed cash to continue to improve and provide efficiency.”
Adeyeye then provided clarity as to why the NERC was still setting electricity tariffs when the electricity act had granted autonomy to states to do so as he said, “The Electricity Act does not give absolute power to the States Electricity regulatory commission to set tariffs. In fact, the electricity act indeed even strengthened and empowered NERC to be the National Regulatory body for electricity in Nigeria. As a matter of fact, they are even strengthened to do what they are doing now.
“If anything at all, the State Electricity Act actually only recognises the right of states to, in some form and in some shape and to a very limited extent, regulate the electricity market within their borders. It has not usurped or replaced the right or the powers of NERC to be the regulator for the power sector in Nigeria.”
However, Adeyeye recognised that there were still challenges in regards to some discos providing the paid for electricity for Band A customers who had experienced the increase in electricity tariffs with the promise of an assured 20-24 hours power supply per day.
He said, “There’s certainly challenges, this is not El Dorado yet. But I would say that from the NERC variability side and also from the operator’s side, even for me that comes from the GenCo’s space also, we are all attempting in good faith to mitigate against the constraint that exists in the system. So, for the disco customers who are not able to get 20-24 hours electricity, there are many factors that could contribute to that- either network challenges, either even distribution challenges, or even the grid itself.
“The good thing is that everybody is now aligned because there is now penalty in the system. You’ve seen that through NERC, NERC has demonstrated its ability to wield the stick, to make sure they sanction the stakeholders that are not performing. So, with that mindset, everybody is putting their hand on the deck to make sure that the services that are promised are being met.”
In April 2024, the NERC announced an huge increase in electricity tariffs for customers under the Band A category to ₦225 per kWh, a 240% increase from the initial ₦68 per kWh (kWh). The tariffs for Bands B, C, D, and E customers, however, remained unchanged.
Ozioma Samuel-Ugwuezi
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