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Updated: NERC orders DisCos to increase electricity tariffs, effective January 1, 2021

The Nigerian Electricity Regulatory Commission has instructing DisCos to increase tariffs, effective January 1, 2021.

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The Nigerian Electricity Regulatory Commission (NERC), National electricity grid collapses again, as NUEE suspends strike action , FG to increase electricity tariffs in order to improve power supply, Power: Liquidity crisis-same old story in 2020?, GenCos urges NBET to pay up N1 trillion debt, Electricity Tariff: FG, electricity stakeholders to work on equitable rate , Power: NERC applies "brakes" on hike in tariffs, NERC to sanction 7 DisCos over uncapped estimated billing

Electricity distribution companies started the year with a further increase in electricity tariffs. This follows a new order issued by the Nigerian Electricity Regulatory Commission NERC instructing DisCos to increase tariffs effective January 1, 2021.

The order was signed by the new NERC Chairman, Sanusi Garba and one of its Commissioners Dafe Akpeneye.

READ: Estates in Lekki increase electricity tariff to N105/kWh

The increase in tariffs follows a suspension of an earlier order issued in August increasing tariffs starting September 1, 2020. However, a threat by Labour to go on a nationwide strike forced the government to suspend the tariffs for two weeks ending October 15th, 2020.

READ: Only customers with minimum of 12 hours electricity can have tariff increase – FG

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The Federal Government and the organized Labour then agreed to provide a tariff relief of N10.20 per kilowatt-hour for Nigerians for the next 3 months and also distribute 6 million free meters following the completion of the 2 weeks suspension of electricity tariff.

NERC was yet to publish the orders on its website as of when this article was sent.

READ: Buhari moves against DISCOs that collect money for prepaid meters

New Tariffs

The latest tariff increase suggests all customers will see their tariffs increased regardless of the band unlike in the previous order where tariff class D & E was frozen. Customers on Tariff Class A, B, and C will see their tariff go back to the tariff order released on September 1st, 2020. Some of these customers will see their tariff increase by as high as 120% compared to the pre-September 1st MYTO 2020 levels.

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Customers in tariff classes D & E who are those with less than an average of 12 hours of electricity daily also saw their tariff increase albeit slightly and not up to the levels originally included in the September 2020 tariff order. In general, Nigerians (including businesses) will see their tariffs rise by as much as 75% depending on the distribution companies.

The Nigerian Electricity Regulatory Commission (NERC) issued a public notice explaining the tariff increase. According to a press release shared by NERC;

“The Commission hereby state unequivocally that NO approval has been granted for a 50% tariff increase in the Tariff Order for electricity distribution companies which took effect on January 1, 2021. On the contrary, the tariff for customers on service bands D & E (customers being served less than an average of 12hrs of supply per day over a period of one month) remains frozen and subsidised in line with the policy direction of the Federal Government. In compliance with the provisions of the Electric Power Sector Reform Act (EPRSA) and the nation’s tariff methodology for biannual minor review, the rates for service bands A, B, C, D and E have been adjusted by NGN2.00 to NGN4.00 per kWhr to reflect the partial impact of inflation and movement in foreign exchange rates.”

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What this means: NERC is confirming that though tariff was increased, it is not a 50% hike as stated by some news sites.

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  • Nairametrics explained that the tariff high is on average 75% from pre-September (MYTO 2020) levels before the initial September 1 tariff order and revised October tariff order based on the agreement with Labour.
  • However, it appears some news sites misconstrued this as a 50% hike from the tariffs agreed with labour in October 2020.
  • From the release of this order, customers will pay higher electricity tariffs.
  • Prepaid customers will witness an immediate increase when they vend for power while postpaid customers metered and estimated billing, will start paying the full tariff in February when they get their bills.

Tariff Assumptions

In determining the tariff, NERC relied on a number of assumptions made up of key economic indicators such as exchange rate, inflation rate, and power generation.

READ: What to expect from Nigeria’s capital market in 2021

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  • Inflation rate: The November 2020 inflation rate of 14.9% was relied upon to project for the year compared to 13.1% average for the period January to November 2020.
  • Exchange rate: NERC switched from using N360 or a fixed CBN exchange rate, to NAFEX rate which it placed at NGN/USD exchange rate (+1%) of N397.44. This was the rate as of December 29, 2020.
  • US Inflation rate which is often used for Gas prices was set at 1.22% also based on November 2020 rates
  • Generation capacity adopted for the year remained unchanged, suggesting NERC was not expecting any major increase in 2021 despite increasing the cost of power. “The year 2020 projection on available generation is maintained for the first half (Jan-Jun) of 2021 to account for the impact of the delay in the implementation of MYTO-2020. No change was applied to generation projections from July 2021 and beyond.”
  • Gas Prices which is a major factor in determining electricity tariff was $2.5/MMBTU while gas transportation cost of US$0.80/MMBTU and gas prices outside the regulated rates for GenCos with effective Gas Sale Agreements were maintained.

The new tariff increases effectively mean the Federal Government has removed an estimated 80% of its subsidy on electricity, giving the Discos the cost-reflective tariffs that they have requested for since 2016 when the tariff was last increased. DisCos maintain that the extra amount being paid by electricity customers will be passed on to government agencies; Nigerian Bulk Electricity Trader and the Market Operator who will then pay gas providers, the Transmission company and generating companies.

 

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

2 Comments

2 Comments

  1. Ekene Obi

    January 5, 2021 at 12:52 pm

    I hope in the next protest.. everyone dealing with energy power will be bright down..both buildings so that you know people are not animals in Nigeria

  2. Olatunde

    January 6, 2021 at 9:09 am

    Why all these anti-people policies in this country??? Must the masses be made to pay for Government inefficiencies? Making the economy to Nose-dive deliberately or due to lack of transformative ideas and the resultant effect is the choking being suffered by the innocent masses. May God help us to do the right thing!

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Energy

Africa’s electricity generation will double by 2030, fossil fuel to be dominant – Research

Fossil fuel is expected to dominate Africa’s energy mix by the end of the decade.

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A new research from the University of Oxford has predicted that the total electricity generation across the African Continent will double by 2030.

The study also expects that fossil fuel will still be dominant in Africa’s energy mix by the end of the decade, accounting for two-thirds of all generated electricity across Africa, posing a potential risk to global climate change commitments.

READ: AfDB approves a grant of $7m for renewable mini-grid industry in Africa

An estimated 18% of the generation is set to come from hydro-energy projects, which have their own challenges, such as being vulnerable to an increasing number of droughts caused by climate change.

The study, which looked into Africa’s energy generation landscape, uses a state-of-the-art machine-learning technique to analyse the pipeline of more than 2,500 planned power plants and their chances of successful commission.

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The study shows the share of non-hydro renewables in African electricity generation is likely to remain below 10% in 2030, although it varies by region.

READ: AfDB supports Africa’s flagship climate initiative with $6.5bn 

What there are saying

Galina Alova, Study Lead Author and Researcher at the Oxford Smith School of Enterprise and the Environment said that:

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  • “Africa’s electricity demand is set to increase significantly as the continent strives to industrialise and improve the wellbeing of its people, which offers an opportunity to power this economic development through renewables.”
  • “There is a prominent narrative in the energy planning community that the continent will be able to take advantage of its vast renewable energy resources and rapidly decreasing clean technology prices to leapfrog to renewables by 2030 – but our analysis shows that overall it is not currently positioned to do so.”

READ: Foreign investors jostling to exploit Nigeria’s $82 billion healthcare gap

Philipp Trotter, Study Author and Researcher at the Smith School said:

  • “The development community and African decision-makers need to act quickly if the continent wants to avoid being locked into a carbon-intense energy future. Immediate re-directions of development finance from fossil fuels to renewables are an important lever to increase experience with solar and wind energy projects across the continent in the short term, creating critical learning curve effects.”

READ: DisCos ask FG to reduce cost of gas in power generation

What you should know

  • The study suggests that a decisive move towards renewable energy in Africa would require a significant shock to the current system. This includes large-scale cancellation of fossil fuel plants currently being planned.
  • In addition, the study identifies ways in which planned renewable energy projects can be designed to improve their success chances – for example, smaller size, fitting ownership structure, and availability of development finance.
  • Fossil fuels include coal, petroleum, natural gas, oil shales, bitumen, tar sands, and heavy oils. All contain carbon and were formed as a result of geologic processes acting on the remains of organic matter produced by photosynthesis, a process that began in the Archean Eon (4.0 billion to 2.5 billion years ago).
  • These non-renewable fuels supply about 80 percent of the world’s energy. They provide electricity, heat, and transportation, while also feeding the processes that make a huge range of products, from steel to plastics.

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Energy

FG insists on no petrol, electricity subsidies in 2021

The FG has insisted that its policy on the removal of subsidies on fuel and electricity in the 2021 budget remains.

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The Federal Government has insisted that it will go ahead with its policy on the removal of subsidy on Premium Motor Spirit (Petrol) and electricity, with no provision made in the 2021 budget for their subsidy.

This disclosure was made by the Minister of Finance, Budget and National Planning, Zainab Ahmed, during a virtual public presentation of the Breakdown and Highlights of 2021 Appropriation Act on Tuesday in Abuja.

READ: FG posts 27% revenue shortfall in 2020 as budget deficit hit N6.1 trillion

What the Minister for Finance is saying

While answering a question on whether there would be a return to petrol subsidy following the reduction in petrol price about a month ago, the Minister said the answer is a flat no.

Ahmed said,

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  • We are not bringing back fuel subsidy. We didn’t make provision for fuel subsidy in the budget. The impact of what was done was reducing some of the cost components that were within the template. And also related to it, on matters of electricity subsidies, no provisions have been made for subsidy for fuel and no provisions have been made for subsidy for electricity.

READ: Reps raise alarm over N200 billion unclaimed dividends in 2020

Also, while talking about the new Finance Act 2020, which took effect from 1 January 2021, Ahmed said the act adopts counter-cyclical fiscal policies in response to the Covid-19 pandemic by providing fiscal relief to taxpayers.

The Minister stated that the government would hold the unclaimed dividends of investors in the stock market in trust and would make the fund available when needed by an investor.

READ: N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund

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She said:

  • On the issue of unclaimed dividends and government’s accounts and projections, there would be as much as N850bn to be realized in the special trust fund of unclaimed dividends. Government is keeping the money in trust for the beneficiaries. At any time, a registrar or a bank confirms that this is the true and bonafide beneficiary of this fund, then the government will release from that trust fund to the investor who has it.”

READ: Nigerian Aviation: Exchange rate, 7.5% VAT suspension and other factors to determine survival – Experts

What you should know

  • It can be recalled that the Federal Government, in early 2020, announced the full deregulation of the downstream sector of the oil industry which culminated in the removal of petrol subsidy.
  • The government said that following a sharp drop in revenue, it was becoming increasingly unsustainable for it to continue to subsidize the product with funds that can be used for the development of critical infrastructures in the country.
  • Similarly, it also pointed out that the removal of subsidy on electricity tariff and ensuring the implementation of the right pricing for power will help attract the needed investment in that sector.

READ: FG borrows N2.8 trillion from CBN via Ways and Means

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Energy

Daystar Power secures $38m funding to grow its West African’ operations

Daystar Power, provider of hybrid solar power solutions to businesses in West Africa, today announced a Series B investment of $38 million.

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Daystar Power has announced a Series B investment of $38million.

The company expects to grow its operations in its key markets of Nigeria and Ghana, while deepening its presence in other regional countries such as Côte d’Ivoire, Senegal and Togo with the funds raised.

The company expects to expand its installed capacity to over 100 megawatts – enabling it to meet demand from its clients in the financial services, manufacturing, agricultural and natural resources sectors.

What you should know about the funding

  • Taking into account the previous round by Verod Capital and Persistent Energy, Daystar Power has received equity investments totalling $48 million.
  • The funding is led by the Investment Fund for Developing Countries (IFU), the Danish development finance institution (DFI).
  • IFU is joined by new investors STOA, a French impact infrastructure fund, Proparco, the French DFI, backed by a guarantee from the European Union under the African Renewable Energy Scale-Up facility (ARE Scale-Up); and Morgan Stanley Investment Management.

What they are saying

The CEO and Co-founder of Daystar Power, Jasper Graf von Hardenberg, stated that:

  • “By offering our commercial and industrial clients cheaper, reliable and cleaner power, we have seen a more than 50-fold increase in power-as-a-service revenue over the last two years. African businesses are realizing that solar power stand-alone or in tandem with a second power source is a superior energy alternative to the often-unreliable grid or too expensive, polluting diesel generators.”

Thomas Hougaard, Vice President sub-Saharan Africa, IFU said:

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  • “We believe that Daystar Power has the right elements – the client base, technology, engineering expertise, and executive leadership to scale off-grid solar across West Africa. Not only is Daystar Power at the forefront of a growing market, it is helping to accelerate the adoption of renewable energy in some of Africa’s fastest growing cities.”

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