TheCable

Electricity tariffs will rise from December 1 as a result of increase in gas prices, the Nigerian Electricity Regulatory Commission (NERC) has said.

NERC on Thursday announced the take-off of the regulated price of $1.8 per million British thermal unit (MBTU) for natural gas in 2014 to power plants.

Gas price increased to $3.30 as against the regulatory authorities’ assumption of $2.30.

Muhammad Lawal Bello, vice chairman of NERC, said there was a $1 difference from the assumption and the actual price of gas during the bi-annual minor review of the Multi Year Tariff Order-2 (MYTO2).

He said the upward review of electricity tariffs was inevitable despite the continued poor electricity supply in the country.

Though tariff review is a very sensitive issue to the consumers, the way to go was to pay what is due to ensure improvement in the sector, 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 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.

Bello said apart from gas price, NERC took into consideration other factors such as inflation, foreign exchange rate and power generation capacity, before approving the recent tariff review.

Also speaking, Roland Achor, a member of Tariff and Rates department, 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.

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.

“MYTO-2 benchmarked at N178 to $1 allows a charge of one per cent above the CBN rate to cover letter of credit and other bank charges. The effective exchange rate now is N156.29 to $1 over the next six months,” he said.

Available data from the Systems Operations of the Transmission Company of Nigeria (TCN), according to NERC, that showed available power generation on six months average as at September 30, 2014 was 3,675.41 megawatts (MW).

Achor who said electricity retail tariff for the period between December 1, 2014 and May 31, 2015 would be based on 3,675MW of generation capacity noted that gross electricity capacity was estimated at 5,556 MW against the last available generation figure of 3,424MW.