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DisCos ask FG to reduce cost of gas in power generation

The absence of a market reflective tariff had continued to have a negative impact on the sector.



Discos, TCN suspends KEDCO, TCN suspend Kano Electricity Distribution Company, Kano Electricity Distribution Company, Transmission Company of Nigeria, Market Operator in Nigeria's power sector

Electricity Distribution Companies (DisCos) have pleaded with the Federal Government to intervene in gas pricing for power generation, as this has been a major challenge in the power sector. This is to help ensure effective and efficient delivery of service to consumers.

This was disclosed in a statement by the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, on Saturday, June 27, 2020, in Abuja.

He pointed out that the cost of gas was a major determinant of the electricity tariff in Nigeria, adding that it was high time the Federal Government found a way to help bring down the price of gas in the interest of the sustainability of the power sector.

READ MORE: Ban on generators: Throwing the baby with the bath water?

Oduntan stated, “Most of Nigeria’s power generating plants are thermal plants. They use gas as their fuel and as long as the price of gas is high, the cost of generation and the eventual tariff to the end user will also be high.”

He said, “At present, the energy generation mix is around 80% thermal and 20% hydro. More so, the cost of gas is also affected by fluctuations in Foreign Exchange (Forex). So while the cost of gas and generation will rise due to forex fluctuations, the tariff is fixed in Naira and may not account for this difference. Especially because of the absence of a commitment to adhering to periodic tariff reviews.”

It was noted that the absence of a market reflective tariff had continued to have a negative impact on the sector and had been a major contributor to the N1.5 trillion liquidity gap in the sector.

He said that a new performance driven increased tariff structure would be implemented with effect from July 1, 2020, as a step towards narrowing the liquidity gap.

READ MORE: Minister of Power states the impact of COVID-19 on power sector

Nairametrics had reported that the National Electricity Regulatory Commission (NERC), had postponed the take-off of the new electricity tariff by the DisCos, which was supposed to commence on April 1, 2020.

This was due to claims that 60% of electricity customers were unmetered nationwide, the coronavirus pandemic which has significantly impacted the ability of the DisCos to meter customers, need for network and infrastructure upgrades by the DisCos and Transmission Company of Nigeria, and so on.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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