The Minister of Power, Chief Adebayo Adelabu, has advocated for Nigeria to migrate to a full cost-reflective tariff regime if the federal government cannot pay for subsidies owed to the market.
Adelabu, who gave the advice during a nationwide inspection visit to power installations, expressed concerns over the poor electricity supply situation in the country caused by several issues including outstanding subsidy debts.
The minister also stated that the National Independent Power Plants (NIPPs) being operated and managed by the Niger Delta Power Holding Company Plc (NDPHC) were currently suffering under-capacity utilisation of below 25 per cent due to gas supply constants.
As part of the inspection, the minister visited the 750 megawatts (MW) Olorunsogo Power Generating Plant in Ogun State and the 500MW Omotosho Generating Plant in Ondo State on Wednesday.
The minister said, “We have been to Olorunsogo and we are now in the Omotosho Power Plant. These are big power plants. I am impressed with the size and the technology of the power plants here. Their operational history is also impressive.
“And I am amazed at the level of underutilisation of these power installations. Each of them operates below 25 per cent capacity when we are still complaining that power generation is low in this country. The under-capacity utilisation is due to a variety of reasons.
“The major part of it is the shortage in gas supply to these installations, which is why I needed to see these plants myself, to look at what can we do to improve the operational capacity of these plants.
“What can we do to repair those turbines that are down? What can we do to support these power plants to operate at impressive capacity, so that power supply will improve nationwide?”
He said he would later engage with the management of the power companies to explore better ways of collaboration and cooperation such that the government could support them to improve their operational capacity, and consequently improve the level of power supply to the distribution companies.
He also observed that the government-owned generating companies were currently undervalued, arguing that a number of works needed to be done on them by the government to bring them back to higher capacity and improved valuation before they could be sold.
Adelabu said if the plants were sold in their current state, the country would be losing, maintaining that Nigeria had invested so much in those power installations that have only existed for 12 years.
According to Arise TV, to address the gas supply challenge, the minister insisted that there was the need for a meeting and collaboration with the Minister of State for Petroleum (Gas) in order to ensure that gas supply to the Gencos were regular, and ultimately solve the issue of under capacity utilisation of the plants.
He said, "We also want to appeal to the federal government that once there is a subsidy promise, it has to be fully funded. If our government is not ready to fund subsidies, it is actually better for us to migrate to a fully-cost-reflective tariff, because liquidity is a major issue in the sector, which has led to a huge debt being owed power generating companies.
“And once they are owed, they are also unable to pay the gas suppliers. When the gas suppliers are not paid, they will be unwilling to supply regular gas to them.
“So where are these debts piling up? Where are they coming from? Part of it are the Discos are owing some portion of these debts while the federal government is also owing a huge portion of these debts, which relate to the unfunded portion of the subsidy that they pledge.
“So, I will do everything within my capacity. I have already had a meeting with the honourable Minister of Finance and Coordinating Minister of the Economy as well as the honourable Minister of Budget and National Planning, and the Special Adviser to the President on Energy, on how we can fund the outstanding subsidy unpaid by federal government.”
He said the meeting with the relevant ministers would continue on Thursday, noting that they were to discuss ways to help the power sector through injection of the required liquidity and payment of parts of the outstanding debts owed the generating companies.
Going forward, the power minister said Nigeria should have a conversation on whether to pay for the real price of power, which he said was no longer cheap.
According to him, throughout West Africa, Nigeria still pays the lowest tariff for power supply, arguing that Ghana, Ivory Coast, Niger and the like pay almost more than double Nigeria’s electricity tariff.
“So, if the government is insisting on continuing with the subsidy, then it has to be funded, so that there’s no debt piling up for the generating companies. That’s the only way out of the current power situation,” he maintained.
However, Adelabu assured Nigerians of an improvement in nationwide power supply in the coming weeks, saying the drop in supply experienced in the past three weeks was a temporary situation and resulted from shortages in gas supply to the power Gencos.
He also promised that the government would pay down a major part of the debts owed the Gencos in the next couple of days, adding, “And I believe that gas supply will improve to the power generating companies and power supply to the entire nation will also improve.”
SaharaReporters reported on January 18, that despite that Electricity Distribution Companies (DisCos) made little or no investment in the electricity sector, the Nigerian Electricity Regulatory Commission (NERC) had approved new electricity tariffs for the 11 distribution companies in the country.
The new tariffs which took effect from January 1, 2024, came exactly one year the discos increased tariffs and barely four months the regulator increased price for meter to 40 percent.
SaharaReporters had reported on September 6, 2023 that NERC in a circular marked NERC/2023/020, and jointly signed by Sanusi Garba, the commission's chairman and Dafe Akpeneye, its commissioner, legal, licencing, and compliance announced the increase.
The commission said a single-phase meter will now cost N81,975.16k, instead of the previous price of N58,661.69k.
Announcing the new tariff increment, during a Media interaction, NERC chairman, Sanusi Garba, assured that customers will continue to pay the current tariffs as the federal government is to subsidise the increased tariffs to the tune of N1.6 trillion this year.
Garba said the federal government will continue to subsidise electricity to ease the financial burden on Nigerians due to economic challenges in the country.
NERC also approved a monthly tariff review of the DisCos going forward arising from changes in exogenous indices, which include changes in the inflation rates, Naira/US exchange rates, and gas-to-power prices.
“Government has decided for now, arising from the cost of living crisis and so many others, to in the meantime continue to subsidise electricity.
"In the new tariff order just published by the commission, you will discover that tariff is not going up but you will see what the Electricity Distribution Companies (DisCos) should be charging.
“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,” he said.
According to him, the new tariff contains what the DisCos are allowed to charge based on government policy, if they are to remain in service.