Electricity tariffs in major estates in the Lekki area of Lagos that enjoy 24/hours power have increased prices to as high as N105/kWh Nairametics investigations reveal.
Most estates in the Lekki area of Lagos rely on a combination of grid power from Eko Distribution Company (Eko Disco) and privately generated power to deliver 24/7 power to their residents. The power is contracted via a power purchase contract with independent power suppliers.
Triggered by the new tariff order
According to our investigations, most of the major estates have either increased their tariffs or are engaging in negotiations with resident associations to increase power costs.
In Nothern Foreshore, an Estate located off the Lekki Expressway, the tariff rose from about N58/kWh to has N80.80/kWh. In a letter to residents of the association seen by Nairametrics, the Estate Management informed residents that the decision to increase their tariff was due to the increase in power supply from the grid (Eko Disco).
“Similarly, and pursuant to Section 76 of the EPSR Act 2005 the Nigerian Electricity Regulatory Commission has recently received presidential approval for the implementation of the new Service-Based Tariff (SBT) effective 1ST September 2020.
In view of this, the DISCO Eko Electricity Distribution PLC (EKDP) has directed via a letter dated 4TH September 2020 an immediate implementation of the new approved tariff for the Estate from N29/Kwh to N56.94/Kwh. An almost 100% (Approximately 28 naira) increase. This development will also have an impact on the hybrid tariff for our central power solution. Consequently, we have applied the new approved tariff to the existing hybrid tariff model and reached a new levelized energy tariff for our central power solution of =N=80.80 /KWH.”
A hybrid or blended tariff is derived from the weighted average cost of consumption from the grid and other sources of private power delivered to an estate.
Other estates surveyed by Nairametrics also reveal similar trends. In Friends Colony located around Augungi area of Lekki, tariff increased to N80/kWh while Millenium Estate in Oniru increased theirs to N105.4/kWh. Other estates on both sides of the Lekki Epe Expressway are also said to be deliberating internally as they consider a possible increase in line with the change in grid electricity cost.
A Private Power producer who preferred to remain anonymous informed Nairametrics that there was a need to review their tariffs following the recent pronouncements by the government. “We use blended power to help reduce the cost of power generation thus, a change in a key component of that power will result in a change in the amount we charge the estates. This is why we have informed them of plans to increase the tariffs,” he explained.
For Eko Disco, their tariff increased to N54.08 for non-maximum demand customers and as high as N56.94 for Maximum Demand Customers. These are for Band A customers which according to the service reflective tariff will enjoy up to 20 hours of power supply daily.
Our investigation also reveals estates that are completely off-grid have left their tariffs the same as they observe the effect of the exchange rate on their power cost.
Why this matters: The recent increase in electricity tariffs means the government is no longer subsidizing power supply for locations that enjoy 12 hours and above in power supply.
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- Thus estates with a hybrid of grid and private generation might see a change in their tariffs if they fall within the tariff bands A to C (above 12 hours of power supply).
- However, since tariff increase for those who are in locations classified as Band D & E is not increasing, the estates may not see their hybrid tariffs go up.
New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC
The Minister has clarified that the new PIB seeks to commercialize the NNPC rather than scrap it.
The long-awaited new Petroleum Industry Bill (PIB), which was just submitted by President Muhammadu Buhari to the National Assembly, has taken steps to amend changes to deep water royalties made last year.
This is as the Minister of State for Petroleum Resources, Timipre Sylva, has clarified that the new PIB seeks to commercialize the Nigerian National Petroleum Corporation (NNPC) rather than scrap it.
According to Reuters, while confirming the receipt of the Petroleum Industry Bill (PIB) from the President, the Senate President, Ahmed Lawan, said that it would be officially presented on the floor of the 2 chambers of the National Assembly on Tuesday and would get quick consideration.
In addition to the earlier reported creation of a new company, Nigerian National Petroleum Company Limited, to take over the assets and liabilities of NNPC and the establishment of some new regulatory bodies, a section of the bill proposes an amendment to controversial changes to deep offshore royalties made late last year. This involves reducing the royalty that oil companies pay the Federal Government for offshore fields producing less than 15,000 barrels per day from 10% to 7.5%.
It would change a price-based royalty too so that it kicked in when oil prices climbed above $50 per barrel, rather than the initial $35.
It would also codify in law that companies cannot deduct gas flaring penalties from taxes, a practice that was the subject of a court case.
Sylva made the disclosure during an interaction with journalists at the National Assembly complex after an interactive session with the leadership of the assembly.
Sylva said, “We have heard so much noise about NNPC being scrapped but that is not being envisaged by the bill at all. NNPC will not be scrapped but commercialized in line with deregulation move being made across all the streams in the sector comprising of upstream, downstream and midstream. We have said that NNPC will be commercialized.
“But if you are talking about transforming the industry, the only new thing that we are introducing is the development of the midstream, that is the pipeline sector. So we have provided robustly for the growth of the midstream sector. Through commercialization, the required competitiveness in the sector will be achieved.”
Sylva also pointed out that the host communities would have the best deal from the bill.
Nairametrics had earlier reported the scrapping of the Petroleum Product Pricing Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF) in the proposed new bill, in addition to the creation of a new entity, NNPC Ltd.
The Federal Government is expected to pay cash for shares of the company, which would operate as a commercial entity without access to state funds.
The changes could make it easier for the struggling company to raise funds. However, the bill does not require the government to sell shares in the company and, unlike previous reform proposals, does not set a deadline for privatization to be completed.
President Buhari to scrap NNPC, PPPRA as he submits new PIB to National Assembly
The President has recommended the scrapping of the NNPC and PPPRA in the new PIB submitted to the National Assembly.
President Muhammadu Buhari has proposed the scrapping of the Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA) in the new long-awaited Petroleum Industry Bill 2020 which has just been transmitted to the National Assembly.
According to a report from Punch, the president has proposed the creation of the Nigerian National Petroleum Company Limited that will inherit the assets and liabilities of the NNPC to be determined the Minister of Petroleum and the Minister of Finance as well as the establishment of Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority.
The bill proposes that the petroleum minister shall within 6 months from the commencement of the Act, incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act.
Sections of the bill state, “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited.
“Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.’’
“NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”
“The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares.’’
It also states that the “ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”
The bill also states that the proposed Nigerian Upstream Regulatory Commission will be responsible for the technical and commercial regulation of upstream petroleum operations while the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.
The new bill technically scraps the PPPRA with the creation of the new agencies that will now carry out the PPPRA’s functions.
Nairametrics had reported last week that President Buhari was expected to submit the Petroleum Industry Bill (PIB) to the National Assembly early this week following his approval.
The PIB which is an oil reform bill has been in the works for about 20 years starting with the administration of former President Olusegun Obasanjo and is key to the repositioning of Nigeria’s Oil and Gas Industry under its post-COVID-19 agenda as the main laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxes, payments to local communities, terms and revenue sharing within Nigeria.
Successive administrations have tried without success to pass the bill that is supposed to reform the oil and gas sector.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), had disclosed that the delay and non-passage of the bill have made international investors start losing confidence in the country’s oil and gas industry.
During President Buhari’s first term, the Eighth NASS split the bill into four parts namely the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — in a bid to fast-track its passage into law.
However, after the passage of the PIGB by the National Assembly, the president declined to sign the bill because of the retention of 10% of the revenue generated by the Petroleum Regulatory Commission which they considered too high and the whittling down of the powers of the Minister for Petroleum.
Electricity tariff increase is suspended for 2 weeks
The FG and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks.
The Federal Government and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks. This was part of the agreement reached between Labour and the Government as they deliberated to avert a nationwide strike that would have grounded an already deteriorating economy.
While the strike was over two major issues, an increase in electricity charges and fuel price respectively, the decision to call off the strike was based on the suspension of the electricity bills. The following terms of reference underpinned the agreement between Labour and the Government.
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Terms of reference for suspension of electricity increase for 2 weeks.
Terms of reference “The Terms of Reference (ToR) are as follows: To examine the justification for the new policy on cost-reflective Electricity Tariff adjustments.”
- Both parties are to examine the justification for the new policy on cost-reflective tariff adjustment
- To look at the different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate.
- Examine and advise government on the issues that have hindered the deployment of the six million meters.
- To look into the NERC Act under review with a view to expanding its representation to include organized labour.
- The Technical sub-committee is to submit its report within two weeks.
- During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments. “The meeting also resolved that the following issues of concern to Labour should be treated as stand-alone items:
- The 40% stake of government in the DISCO and the stake of workers to be reflected in the composition of the DISCOs Boards.
- An all-inclusive and independent review of the power sector operations as provided in the privatization MOU to be undertaken before the end of the year 2020, with Labour represented.
- That going forward, the moribund National Labour Advisory Council, NLAC, be inaugurated before the end of the year 2020 to institutionalize the process of tripartism and socio dialogue on socio-economic and major labour matters to forestall crisis.
What this means: The decision reached between the government and labour means the service reflective tariff regime which started on September 1, 2020, is effectively suspended. Customers are therefore no longer required to pay the service reflective tariffs and will revert to the previous MYTO tariffs of 2015.
- By looking at the “different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate” it appears labour might be looking to recalibrating the tariffs for some Discos.
- According to documents on the tariff order published by the NERC, some Discos have tariffs for residential customers that are as high as N62/kWh while it’s just under N54 for others.
- Labour could also get involved in determining the veracity of the tariff bands that determines which customers pay what as electricity tariffs.