FG to pay N1.6trn electricity subsidy in 2024, as NERC approves new tariffs for DisCos

 

The Nigerian Electricity Regulatory Commission (NERC) has approved new electricity tariffs for the 11 distribution companies (DisCos) in the country, with effect from January 1, 2024.

NERC’s chairman, Sanusi Garba, made this known on Wednesday during a news conference.

The NERC chairman said the government will continue paying electricity subsidy due to the cost of living crisis.

Garba said consumers would continue to pay the current tariffs as the federal government will subsidise the new tariffs to the tune of N1.6 trillion throughout the year.

He said NERC also approved a tariff review of the DisCos, due to changes in the inflation rates, naira/US dollar exchange rates, and gas-to-power prices.

“In the new tariff order just published by the commission, you will discover that the tariff is not going up but will see what the electricity distribution companies (DisCos) should be charging,” he said.

“You will also see in the tariff order the amount of subsidy the government will be providing to cover the gap between what they will charge and what they are allowed to charge.

“The order seeks that prices charged by DisCos are fair to customers and are sufficient to allow DisCos to fully recover the efficient cost of operation, including a reasonable return on the capital invested in the business in accordance with section 116 of the Electricity Act 2023.”

He said the new tariff includes the fees DisCos are permitted to charge under government policy if they are to remain in service.

“Some N110/kWh, N120/kWh, N130kWh and so on, because DisCos as distinct legal entities have different operating parameters, different efficiency levels and so on,” he said.

“So on that basis, they also have different tariffs. So for the first time, we have published what they should charge. We have also published the amount they are allowed to charge based on government policy.

“Because the government has decided for now, arising from the cost of living crisis, in the meantime, to continue subsidising electricity.

“So in the new order just published by the commission, you will discover that tariff is not going up but you will see what the DisCos should have been charging and you will also see the amount of subsidy that the government will be providing to cover the gap between what they will charge and what they are allowed to charge.

“With the tariff allowed, the federal government will be expected to pay as high as N1.6 trillion to subsidise electricity in the year 2024 at a monthly average of N120 billion.”

The multi-year tariff report for 2024, published by NERC, which contains the new tariff review, took effect on January 1, 2024.

According to NERC, the tariff rates slated in the report will cease to be effective on the issuance of a new tariff review order.

A breakdown of the report showed that customers within the Abuja Electricity Distribution Companies (AEDC) franchise are expected to get subsidies worth an estimated N233.26 billion in 2024 (N19.44 billion each month).

There is N53.5/kilowatts per hour (kWh) shortfall for Ikeja Electric because their cost-reflective price is N128.18 whereas the approved tariff is N56.6.

Customers under the Ikeja Electric franchise are expected to receive a subsidy benefit of about N238.201 billion (or N19.85 billion each month) under this scheme starting in the year.

Ibadan DisCo customers are expected to receive subsidies worth about N199.841 billion in 2024.

In the same vein, the government will pay N128.92 billion (or N10.74 billion monthly) as subsidy for Enugu DisCo customers in 2024.