FG, DisCos may agree on tariff hike as electricity subsidy hits ₦2.8 trillion
The FG and DisCos may soon arrive at an agreement following the request by power distribution companies (DisCos) to review electricity tariffs.
According to a recent report by the Nigerian Electricity Regulatory Commission, (NERC) titled, ‘Overview of the Nigeria Electricity Supply Industry.’
The FG benefitted from DisCos’ decision to hike electricity tariffs as it sliced off payment of an additional ₦1 trillion in subsidy to power firms.
The NERC report also revealed that the amount of subsidy (tariff shortfall) paid by the Federal Government between 2015 and 2022 increased to ₦2.8 trillion while the amount spent on electricity subsidy between January and April 2023 gulped ₦57 billion.
“Without the tariff reviews that commenced in 2019, subsidies payable by the government would have grown to about ₦1trillon per annum by 2023. Service-Based Tariff was instrumental in the transition to cost-reflective levels.” the report added.
The rate increment which was earlier scheduled to take effect from July 1, 2023, after 11 DisCos filed an application for rate review with NERC was put on hold as NERC refused to give the nod. An increase in electricity tariff would see Nigerians pay about 30 to 40% more for selected categories of consumers.
Commenting on the development, a NERC official who spoke with the Punch noted that the DisCos were expected to justify the reasons for the tariff hike during the proposed rate review meeting.
“If you study their (Discos) Performance Improvement Plan, the number of transformers they are supposed to buy, did they buy it? And what is the justification for this increase they are asking for?
“How many transformers, lines, meters, etc, are they bringing on? How many customers are they going to migrate from four hours to eight hours, from eight hours to 10 hours, etc?
“These are the justification for rate increase. Although they may likely argue about the increase in foreign exchange rates, but they should know that the price of gas has reduced.”
NERC however, has also invited the public to make inputs on the rate review applications sent in by the DisCos.
The commission on its website, stated that “interested stakeholders are advised to review and take into consideration the excerpts of the rate review applications filed with the commission by the respective licensees.”
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