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FG raises electricity tariff to N8.50 per KWh

Okays N177bn subsidy for consumers

By Oscarline Onwuemenyi
ABUJA—THE Federal Government, yesterday, announced an increase in this year’s Multi-Year Tariff Order, MYTO, but insisted that the increase would not affect retail tariff for consumers across the country.

Administrator of the Nigeria Electricity Regulatory Commission, NERC, Mr. Imamuddeen Talba, said while announcing the new tariffs, the 2010 annual review sought to obtain a fair balance in regulation of electricity in the country.

He said: “The 2008 tariff order had frozen retail tariffs at N6.00 for 2008, N7.00 for 2009 and N8.50 for 2010 average per kilowatt hour, KWh. This year’s review will only affect the wholesale price and not the retail tariff.

“Therefore, consumers should not expect any increase in their tariff beyond what was approved in 2008.”
Talba added that the Federal Government had approved a subsidy of N177 billion over a three-year period to avoid rate shock to consumers, noting that the government had released N43.9 billion to market operators for onward disbursement to beneficiaries.

He said, however, that following concerns by the Commission and some stakeholders on the administration of the subsidy so far released, a firm of auditors had been appointed to review the subsidy disbursement process.

Talba noted that to restore confidence and ensure transparency and, the Commission decided to undertake a major review of the MYTO to ensure that tariffs are in line with the economic realities.

He said: “Another reason behind the need to carry out the major review earlier than previously envisaged is to incorporate tariff for coal and feed-in tariff, FIT, for renewable energy sources,” adding that the Commission was concluding work on these tariffs and would organize a final consultation with stakeholders in July 2010.

While explaining that critical to the major review of the MYTO was the valuation of the regulatory asset base, he noted that the Commission was in the process of finalizing arrangement for the valuation exercise to ensure appropriate return on the assets and adequate provision for depreciation.

Talba who said that the problem of gas supply was central to the success of the collective effort to move the sector forward, noted that the Commission had successfully negotiated an increase in gas supply to the sector with the Nigeria National Petroleum Corporation, NNPC, and had agreed on an increase in gas price by the end of the year if increase in supply is sustained.

Appropriate tariff

He said: “In this way, our gas powered stations can have improved feedstock for improvement in generation.”

The administrator said the Commission was striving to reposition the electricity industry through the establishment of an appropriate tariff that is fair to both customers and operators, adding: “To us in the Commission, it is a continuation of the statutory obligation and mandate to ensure that prices charged are not only cost-reflective but also fair and affordable to all Nigerians.

“This has become imperative considering the long history of electricity price determination in the country and its adverse effect on the overall economic development of the people.”

Talba explained that the MYTO, which was established by the Commission in July 2008, provided a pricing path for 15 years with minor and major reviews annually and every five years respectively.

He noted that this was to guarantee returns to investments in the electricity market and also promote the effective principle of availability and access to power, adding that: “In spite of the huge potentials for power generation in the country, generation capacity has been very low with investors still complaining about low tariff and other constraints.”


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