Nigerian Electricity Regulatory Commission (NERC) may review upward the electricity tariff with effect from December 1, 2014.
The sudden development may be the result of the gas price increase to $3.30 as against the regulatory authorities’ assumption of $2.30.
Vice Chairman of NERC, Muhammad Lawal Bello, while speaking during a presentation in Abuja, Thursday at the review of basic assumptions for semi-annual review of Multi Year Tariff Order (MYTO2) revealed a $1.00 difference from the assumption and the actual price of gas.
He noted that though tariff review is a very sensitive issue to the consumers, the way to go is to pay what is due to ensure improvement in the sector.
“From what I have seen in the initial report, not much has changed. The tariff review is a sensitive issue to the consumer who considers paying higher and not seeing improvement in electricity supply as inappropriate. But there is a general consensus that the way to go is paying what is due so that power will begin to improve,” he said.
Based on the changes in some assumption parameters, such as inflation rate, exchange rate, gas price and generation capacity, there may be an upward adjustment to the tariff.
NERC has also declared that the sector is challenged with what will be the direction of such variables as inflation, foreign exchange rate in 2015, and whether generation companies and their gas suppliers guarantee increased generation under the new gas price.
Also speaking, Mr. Roland Achor, Tariff and Rates, NERC, noted that the actual price at the moment is $3.30 as against the assumption of $2.30 by NERC in the MYTO methodology assumptions, adding that gas price has been regulated since the adoption of the MYTO in 2008 and the regulated prices are applied in the 2012-2016 price regime.
According him, the regulated gas price for 2014 is $1.80/mmbtu. However, the Ministry of Petroleum and NERC have agreed to a gas price of $2.50/mmbtu and transportation cost of $.80 effective December 2014.
Also, there is the gas price assumption of $2.30 by NERC, which actual price has risen to $3.30 resulting in a difference of $1.00, which is expected to impact on the final aggregate technical commercial and collection losses (ATCC & C) review which takes effect December 1, 2014.
MYTO methodology is done based general assumptions to Disco retail tariff such as inputs to the tariff, forecast of load, capacity, fuel costs, investment, levels of losses, customer numbers, and M costs and other economic and technical data, which are all correlated to arrive at the retail tariff to the consumers.
He said the inflation rate received from the Central Bank of Nigeria (CBN) shows a figure of 8.3 per cent as at September 30, 2014 but the inflation rate at the last minor review was 7.8 per cent even though MYTO 2 has an assumption of 13 per cent inflation rate, stressing that the effective inflation rate is now pegged at 8.3 per cent.
He explained that effective exchange rate is now N156.29 to $1.00 over the next six months, adding that the retail tariff will be based on generation of 3,675MW throughout the period from December 1, 2014 to May 31, 2015, though the gross capacity was estimated to be 5,556MW.
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