How Dollarisation of Gas Supply Hurts Electricity Sector

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There are fresh concerns over the continued sale of gas to domestic users, to particularly the nation’s generation company in Dollars.

Considering the current challenges in procuring foreign exchange and the continued rise in the Dollar rate, operators are lamenting the increase in the cost of doing business and are asking government to intervene urgent.

The nation’s electricity distribution companies (DisCos) last week claimed they lose over N10 for every kilowatt hour, kWh, of electricity supplied to customers.

Spokesman for the Association of Nigerian Electricity Distributors (ANED, Sunday Olurotimi Oduntan, highlighted the fresh concerns in an interview with journalists in Abuja.

“The IOCs (international oil companies) do not want to sell gas in naira. Government should look at way of factoring this thing or getting it around. We buy gas in dollar and they don’t sell at the Forex recognised by MYTO (multi Year Tariff Order) but we are compelled to still sell electricity by that N197 Forex in MYTO and that is causing the shortfall.

“We are just in a helpless situation that needs help from government. It is not just about the DisCos alone but the entire value chain because if one dies, the others die too.”

He insisted that the Discos were not making profit because of operational costs, nothing that “we are only struggling to recover our cost.”

He explained how the MYTO 2015 implemented in February benchmarked the foreign exchange rate of $1 – N197 to compute the prevailing the tariff.

“The major part of the liquidity issue is that foreign exchange keeps fluctuating. As at December 2015, it was N197. By June 2016 it became N293 and now it is N360 at official rate. This is a difference of N163.

“What that means is that the cost of Generation Companies (GenCos) producing energy has increased because they buy the gas in US dollars. Even if we are paying the same amount that was agreed in December 2015, that amount is now giving a lesser percentage of payment,” Oduntan explained.

The Nigerian Bulk Electricity Trading Plc (NBET) is misleading as what the DisCos pay for monthly energy was unchanged last year but the value has been affected by Forex, he stressed.

His words: “Although the cost that comes back to DisCos is higher, they are still expected to sell at the MYTO price because it has not been reviewed. Cost of energy has gone up but the tariff remains the same. We are not clamouring for a tariff rise but government needs to intervene because the shortfall in the sector has reached N809.8billion.They fixed the tariff in December 2015 but in the wisdom they suspended it to February. The month of January that was left out cost the industry N12.8billion. It should have commenced on the 1st of January.”

Source: Guardian

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