There are indications that consumers will pay more for electricity from December 1, 2014 when the new price of gas for generating power takes effect.
The Nigerian Electricity Regulatory Commission confirmed the development on Thursday in Abuja, noting that the $1 increase in gas price to power plants would become effective on December 1. The regulated price of gas for 2014 was $1.8 per million British thermal unit.
The commission stated this during its presentation during a meeting with industry stakeholders on the bi-annual minor review of the Multi Year Tariff Order-2.
Aside from the price of gas, NERC stated that other factors being considered before undertaking the tariff review included inflation, foreign exchange rate and power generation capacity.
The Vice Chairman, NERC, Mr. Mohammed Bello, said the upward review was necessary although Nigeria’s power situation had yet to improve.
He said, “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. But there is a general consensus that this is the way to go. By paying what is due this is how the power will begin to improve.”
Industry analysts and operators of power distribution and generation companies also stated that the increase in gas price by $1/mmbtu would warrant a rise in electricity bills.
According to them, the gas component in the power value chain is a major factor that cannot be ignored.
“I doubt if a rise in gas price by about 40 per cent per mmbtu won’t warrant a corresponding increase in tariffs considering the significance of gas to power plants in Nigeria. This is because most power plants in Nigeria today are gas-fired,” a chief executive with one of the Discos, who did not want his name published, said.
Explaining the rise in gas price while giving the presentation at the commission’s head office, Mr. Roland Achor from Tariffs and Rates, NERC, said gas prices had been regulated since the adoption of the MYTO in 2008.
He noted that the regulated prices were applied in the 2012-2016 price regime.
“However, the Federal Ministry of Petroleum Resources in collaboration with NERC has agreed to a gas price of $2.5/mmbtu and transport cost of $0.8 effective December 2014,” Achor added.
On the rate of inflation, he stated that what the commission received from the Central Bank of Nigeria showed a figure of 8.3 per cent as of September 30, 2014 while the inflation rate at last minor review was 7.8 per cent.
“However, MYTO-2 had an assumption of 13 per cent inflation rate and the effective rate is now 8.3 per cent,” he said.
Achor noted that the data received from the CBN and the Nigeria Bureau of Statistics showed an exchange rate of N154.75 to $1 as of September 30, 2014 while the figure for the last minor review was N158.57.
He said, “MYTO-2 was benchmarked at N178 to $1. It is however important to note that MYTO-2 also allows a charge of one per cent above the CBN rate to cover letter of credit and other bank charges. The effective exchange rate is now N156.29 to $1 over the next six months.”
The NERC official stated that data from the Systems Operations of the Transmission Company of Nigeria showed available generation on six months average ending September 30, 2014 was 3,675.41 megawatts.
He noted that the gross capacity was therefore estimated to be 5,556MW but the last available generation capacity was 3,424MW.
“Throughout the period from December 1, 2014 to May 31, 2015, the retail tariff will be based on generation of 3,675MW,” Achor said. Punch
