Government to grant subsidy on electricity tariff

Government to grant subsidy on electricity tariff
Hauwa Noroh Ali, Abuja

As part of efforts to step up electricity generation and improve distribution nationwide, the Nigerian government will grant subsidy to reduce increased tariff in the power sector with a new subsidy regime.

The Director General of the Bureau for Public Enterprises, Bolanle Onagoruwa, at the second edition of Eminent Speakers Series organised by the Securities and Exchange Commission (SEC) in Abuja, said the new regime, which would come into operation next year, would help cushion the shock in the price of electricity, as the government stepped up the level of power generation in Nigeria.

Though details of how the power sector subsidy regime would be funded are still being worked out, she said the subsidy being proposed would do a similar thing that MYTO (Multi-Year Tariff Order) was currently doing - to cushion rate of shock in the period of opening up of production of power.

“I hope to a large extent that I have been able to satisfy your concerns and that you will also propagate this message to millions of Nigerians who are afraid of the tariff increases that there will be a subsidy, which will take off early next year so that you will not feel the pain as much as possible,” Onagoruwa said.

She said that the Bureau was working out strategies to ensure that the subsidy was properly funded to ensure that investors would not have to wait for the budgets before the subsidy would be provided.

She said that the subsidy would run for two years to three years to sustain the privatisation process.

She said: “the whole idea of the reform, especially as it concerns distribution, is to get the independent power producers to have the confidence that the power they will produce will be paid for. ``If you don’t get the distribution right, collect and make it efficient, you will not be able to attract the independent producers.”

The subsidy is different from the Multi-Year Tariff Order (MYTO), adding that the subsidy is not a tariff order.

Power generation

Special adviser to the president on Power, Barth Nnaji, who also spoke at the occasion, said government was currently placing emphasis on power generation through hydro and gas-fired plants, which were considered as the easier ways of generating electricity.

He said that though renewable energy - namely wind, solar and biomass - was important, government could not have reliable power supply from them, because, as the cost of providing wind power was not cheaper, as is erroneously believed.

"What government has decided to do is to be using them as energy mix to stabilise the supply system. But consumers should expect power from coal and other sources very soon," Mr Nnaji said.

The chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, last week, met with Chief Executive Officers (CEOs) of the 11 power distribution companies (DISCOs) in the country on the review of the framework for the planned MYTO.

Proper billing

Speaking at the meeting, Mr Amadi said: “if the new tariff order takes off in January as planned, it is important to resolve what needs to be done with the debts already owed.”

"It is important to consumers and operators that customers are metered and billed properly for electricity consumed. Meeting with CEOs would help in consultations on the development of a framework for the fund, to determine who would be eligible to draw support from the fund as well as how to access the fund when it eventually takes off," he said.

Subsidy controversies

There has been so much controversy, even to the viability of subsidy in the industry.

While some feel the subsidy could bring more difficulties to the operators and the consumers, because of the record of performance, others believe the subsidy could be designed in a way that would mitigate the shock to the consumers as well as help the operators break even in business.

Earlier, the Director-General of SEC, Ms Arunma Oteh, said that there was the need to educate Nigerians on the process of the power sector reform.

She said: “Power reform is very critical and it needs a long-term funding. The capital market has a role to play, so we all need to be educated on what government is doing. Knowledge is the key aspect of what we share, so we as apex regulator of the capital market need to ensure that we are informed of all the critical development in the economy and country.”

Ms Oteh said that it was for such reasons that SEC from time to time, invited people to share ideas with the commission.  

Williams