2024: FG Plans To Reduce Electricity Subsidy By N1.14 Trillion
THE anticipated decrease in electricity subsidies for the 2024 fiscal year is around N1.14 trillion in light of the recently authorized tariff.
This advances the Federal Government's realignment of the subsidy regime, according to the Nigerian Electricity Regulatory Commission (NERC).
The commission justified the most recent upward review of the electricity tariff by stating that it was done in accordance with the Electricity Act 2023, which required NERC to permit licensees in the Nigerian Electricity Supply Industry (NESI) to charge rates high enough to cover all of their operating expenses, including a reasonable return on capital invested in the business.
The commission's management made a statement regarding how these tariffs were determined.
According to a statement from the commission's management, the determination of such rates was the subject of thorough reviews, taking into account the need to safeguard consumers while enabling investors to make enough money to encourage the kind of investments required for ongoing service delivery improvement.
It says, “The Federal Government of Nigeria has indicated a transition in policy direction towards introducing a more targeted subsidy regime aimed at mitigating the impact of changes in macroeconomic parameters while largely protecting vulnerable customers and fostering investments targeted at providing efficient service delivery in the Nigerian Electricity Supply Industry (NESI).
“The commission has conducted a thorough review of the tariff applications submitted by the eleven successor electricity distribution companies in line with the processes established in our regulations and business rules.”
It stated that an examination of the licensees' Performance Improvement Plans and a public hearing where interested parties and intervenors reviewed the rate filing that the public utilities had submitted preceding the review process.
The statement read, “The overarching objective of the Commission in the consideration of the tariff application is the creation of a financially sustainable electricity market providing adequate and reliable power supply to drive the Nigerian economy.
“The commission, upon due consideration of the tariff applications, has approved revised rates affecting only customers classified under Band A service category (about 15% of the customer population); empirical service data has confirmed that this class of customers have truly received the committed level of service.”
DisCos are required to give consumers who fall under the Band A service category a minimum average supply of 20 hours per day, measured over the course of a week, according to the commission's new pricing decision.
“All other customers under Band B to E- service category and representing 85% of customers population would not be affected by the current review of end- user tariffs,” the NERC statement stated.
It stated that required targets for investments and consumer migration to the Band A service category had been given to all Discos.
It further said that in the case of a service breakdown, a mechanism for enforcement and compensation had been put in place.
According to NERC, “Working in collaboration with the policymakers remains committed to providing adequate and reliable electricity to all citizens as we work diligently with state governments to deliver on the gains of the Electricity Act 2023.”
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