The chairman of Nigerian Electricity Regulatory Commission (NERC), Sam Amadi dropped the hint recently at the ongoing Powering Africa Conference in Abuja that electricity consumers across the nation are likely to pay more by the end of October, 2015.
He said the Discos have submitted their tariff review applications, and that the review of the applications for possible ratification will be conducted in the next 30 days.
To this end, a 250 cent per mmBtu gas price has been established by Gencos and ratified by NERC. Also, the transportation cost of 80 cents per mmBtu, as against the current 30 cents being used in the NESI, is being considered by NERC for approval by the end of October.
According to him, the reason for this is to ensure cost-reflective tariffs in the Nigerian electricity supply industry, capable of attracting private investments, especially foreign direct investments (FDIs), and to ensure that these investments were profitable.
“Bills will go up, but service quality also has to be ensured. We have to bear that in mind,” Amadi told a gathering of Nigerian power sector operators as well as local and foreign investors, including representatives from Manitoba Hydro International and the Africa Finance Corporation.
Also, at the conference, Managing Director/CEO of Nigerian Bulk Electricity Trading (NBET) Plc, RumundakaWonodi, said his agency had developed a bankable power purchase agreement (PPA) template for Gencos and Discos in order to ensure that PPAs were completed within three months and made functional and sustainable over time.
“We now have about 60 projects that we are dealing with. Azura and ExxonMobil took about three years; Century Power took about two and a half years. When they started, they did not have information needed to sign PPAs for transmission, gas availability, and local force mejure in the NESI, so we were discussing and discovering along the line and everybody was getting feedbacks and that took a lot of time,” said Wonodi.
According to him, the standardised power purchase agreement (PPA) format is now on the company’s website so that prospective investors into the sector can review it and know exactly what requirements they have to meet in order to secure their PPAs in shorter time periods.
He also said that due to gas transportation challenges and dollar naira rate fluctuations militating against market stability in the NESI, the Federal Government was being urged to put up a fund to manage these fluctuations.
The Electric Power Sector Reform Act (2005) empowers NERC to review electricity tariffs in favour of Gencos and Discos, if market variables such as gas and its transportation cost, as well as naira to dollar ratio and inflation shift by over 5 percent.
An estimated 40 to 50 percent of electricity consumers in Nigeria are not metered. The metering gap creates energy pricing credibility problems between Discos and their customers, as well as between NERC and Discos. This has formed a major source of uncertainty and discouragement for current and prospective investors into the Nigerian power sector.