News

April 17, 2024

FG pays N205bn electricity subsidy, as DisCos withhold N50bn — NERC

Electricity

The Federal Government paid about N205billion as electricity subsidy in the third quarter of last year, according to data obtained from the Nigerian Electricity Regulatory Commission, NERC, latest report.

The commission’s third quarterly market report revealed that government incurred a subsidy obligation of about N205billion in 2023/Q3 (average of N68billion per month), which is an increase of N69billion, compared to the N135billion (average of N45billion per month) incurred in 2023/Q2.

This increase in subsidy payment, according to the report, is largely attributable to the government’s policy to harmonise exchange rates due to absence of cost-reflective tariffs across all electricity distribution companies, DisCos.

In the absence of cost-reflective tariffs, the government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding.

This funding is applied to the Nigerian Bulk Electricity Trading (NBET) invoices that are to be paid by DisCos. The amount to be covered by the DisCo is based on the tariff that they are allowed to charge and set out as their Minimum Remittance Obligation (MRO) in the periodic Tariff Orders issued by the commission.

READ ALSO: FG still paying electricity subsidy despite band tariff hike — Adelabu

The NERC said the rise in the government’s subsidy obligation meant that in Q3/2023, DisCos were only expected to cover 45 per cent of the total invoice received from the commission.

The development comes on the heels of a report by NERC, that DisCos did not remit about N50bn to the power sector in the third quarter of last year.

According to NERC, the DisCos failed to remit about N50bn to NBET in Q3/2023.

Under the market remittance section of the Q3 2023 Quarterly report, NERC said that the cumulative upstream invoice payable by DisCos was about N208bn, consisting of N167bn for generation costs from NBET, and ?41bn for transmission and administrative services by the Market Operator (MO).