Experts have described cost reflective tariffs as being critical to unlocking the immense potential across the value chain from gas supply right through to end users and the Nigerian people.
Managing Director/CEO of Nigerian Bulk Electricty Trading Plc, Rumundaka Wondi and other participants at the West African Power Industry Convention Finance & Investment Forum, gave this indication recently during the meeting.
Speaking on the challenges to funding in the power sector, Wondi said limited Foreign Direct Investment (FDI) in the flow to the sector is key. “Attracting FDI would remain a challenge if the Nigerian Electricity Supply Industry (NESI) has not proved its financial viability. However, putting in place Cost Reflective Tariffs (CRT) is a key part of achieving financial viability and efforts are being made to actualize this and even domestic involvement including debt finance”
He said the country needs more public enlightenment on the importance of cost reflective tariffs, “The Discos have to sustain their engagements with their customers to gain their buy-in and trust. They also need to improve their service to increase customer satisfaction and willingness to accept the price increase. Further, this administration has been consistent on its messaging on the need for CRT.”
Wondi explained that in as much as cost reflective tariffs are critical, Discos must also tread the fine path between CRT and affordability for sustainable tariffs. “I would advocate transparency in the thought process and arrival of the new tariffs as well as the proposed innovative solutions through which it can be optimized. CRT requires Discos to be innovative in structuring and sourcing debt financing.”
Expressing his happiness over the privatization process in the power sector, Wondi explained that he feel ecstatic because of the opportunity to be part of the unlocking leadership of the Power Sector in the country. “We were created as part of the solution, and are working with all parties in the value chain, to resolve issues. Therefore, things can only get better from here.”
“NBET is finalizing PPA negotiations with Seven (7) solar IPPs. The conclusion of the tariff and subsequent approval from the sector regulator (NERC) could bring about 300 MW of renewable energy to the grid, a key step to diversifying the country’s energy mix, “he said.
Also, he disclosed that NBET is concluding tariff discussions with the front runner coal project (Zuma Itobe 1). The PPA for the coal transaction has been initialed and the IPP is currently working with NBET and NERC to conclude its tariff.