Oil & Energy
FG Incurs N194.98bn Electricity Subsidy In Six Months
The Nigerian Electricity Regulatory Commission (NERC) says the Federal Government spent N194.98 billion on electricity subsidy in the first half of this year.
Data collated from the NERC’s quarterly reports also revealed that electricity distribution companies failed to remit a total of N59.76bn to the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator (MO) in the six month period despite tariff shortfall adjustment.
The government-owned NBET buys electricity in bulk from generation companies through power purchase agreements and sells, through vesting contracts, to the Discos, which then supply it to the consumers.
The breakdown of the reports shows that the Federal Government incurred N111.13bn subsidy cost in the second quarter of the year as the 11 Discos in the country were expected to remit 57.21 per cent (N148.57bn) of the total invoice of N259.70bn issued to them for energy received from NBET and for service charge by MO.
But the Discos remitted N130.11bn (50.11 per cent) in the period under review, according to the regulator.
The government spent N83.85bn on electricity subsidy in the first three months of this year as the Discos were expected to make a market remittance of 67.76 per cent (N176.22bn) out of the total invoice of N260.07bn issued to them for energy received from NBET and for service charge by MO.
But the power distributors remitted a total of N134.92bn (51.88 per cent) as none of them met the expected minimum remittance thresholds to NBET, according to NERC.
The regulator noted in its Q1 2021 report that it had through the applicable orders set a minimum remittance threshold for each Disco having adjusted for their tariff shortfall.
It said, “It is noteworthy that tariff shortfall (represented by the difference between the cost-reflective rates approved by NERC and actual end-user tariffs payable by consumers) has a causal relationship to market shortfall (the difference between the total amount of NBET and MO invoices to the Discos and what Discos are able to settle.
“While the wholesale cost of power has increased, the tariffs charged by Discos to end-users have remained unchanged, due to government policy directive on subsidy during the quarter. That means the gap between industry revenue requirement and what Discos are allowed to collect based on tariff continue to increase as well as the subsidy burden to cover the gap”.
NERC said tariff shortfall had partly contributed to liquidity challenges experienced in the Nigerian electricity supply industry.
It, however, said, “It is obvious that Discos need to improve on their performance. Necessary mechanism must be used to nudge the Disco into compliance with the MRT order to avoid a relapse to days of zero remittance from some Discos.
“All Discos are being steered continually to rapidly improve on their services being rendered and on their revenue collection from customers in order to fulfil their market obligations and mitigate financial distress in NESI”.
The commission said to enforce market discipline and compliance with the MRTs, it had ordered NBET to exercise its contractual right on the payment security cover provided by Discos in accordance with the terms of its vesting contract with them.
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Delta Targets 120MW Power Boost, Moves To Cut Reliance On National Grid
The State Commissioner for Works (Rural Roads) and Public Information, Charles Aniagwu, disclosed this at a press conference in Asaba, weekend, noting that the initiative was part of wider reforms aimed at opening up the power sector to private investors.
Aniagwu, who was accompanied by the Executive Assistant to the Governor on New Media, Felix Ofou, said the state was exploring alternative sources of electricity to support businesses, households and communities while reducing pressure on the national grid.
He said the government was particularly interested in exploiting Delta’s abundant natural gas resources for power generation, pointing to the Kwale Free Trade Zone, which is part of the state’s special economic zone, as a major opportunity for investors.
According to him, prospective investors were taken to the zone during the state’s recent economic summit to enable them to assess the availability of gas as a key raw material for electricity generation. ComparePower Rates
The commissioner explained that generating more electricity locally would not only increase supply in Delta but also free up power on the national grid for use by other consumers.
Aniagwu cited the 8.5MW Independent Power Plant located behind the state secretariat in Asaba as an example of what could be achieved through alternative power sources.
He said the facility had enabled the secretariat complex to operate independently of the national grid, thereby making the electricity that would otherwise have been consumed there available to other users.
He added that the planned 120MW partnership with Supply Power would further strengthen the state’s electricity supply capacity and provide a more reliable power base for small and medium-sized enterprises.
Aniagwu said the state government was also intervening in areas traditionally regarded as the responsibility of electricity distribution companies because inadequate power supply could no longer be allowed to constrain economic development. LearnQuantum Physics
He identified the extension of the electricity grid from Abraka towards the Ndokwa axis as one of the interventions being undertaken to connect more communities to electricity.
The commissioner, however, raised concerns over the burden placed on communities that are often required to provide transformers and other electricity infrastructure, only for distribution companies to take over the facilities and subsequently collect electricity bills without adequately accounting for the investments made by the communities.
He said the state would continue to support efforts aimed at energising communities, noting that improved electricity supply would stimulate businesses, create jobs and help tackle social problems associated with unemployment and idleness.
On regulation, Aniagwu said the government was working with the Ministry of Energy and a committee set up to develop an appropriate regulatory framework for the state’s emerging power sector. SwitchEnergy Plans
He said the proposed energy commission would be responsible for regulating new electricity producers, determining appropriate tariffs and overseeing distribution networks.
The commissioner stressed that liberalising the sector required effective regulation to protect consumers and investors, adding that decisions on power distribution infrastructure, including the use of overhead or underground lines, must take into account the peculiarities and safety requirements of each location.
He warned that power expansion without adequate regulation could expose residents to electrocution and other hazards, stressing the need to protect electricity infrastructure while ensuring consumers were not subjected to unfair pricing.
Aniagwu said the state government’s broader objective was to build an efficient and sustainable electricity market driven by private investment and capable of powering businesses, households and communities across Delta State.
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