NERC Demands Review of Gas Pricing for GENCOs

NERC (1)

THE Nigeria Electricity Regulatory Commission, NERC has told the federal government to review the pricing of gas from dollar denomination to local currency to help generation companies, GENCOs stay in business. According to a statement signed by the commission’s Head, Public Affairs Department, Usman Abba Arabi, “Over 80 percent of the electricity generated in Nigeria is from gas- fired power plant. The gas price is indexed to the US$ as the generators pay the gas suppliers in Dollars ($). “We have proposed to the government the option of pricing gas in local currency to mitigate the foreign exchange risk which is the major cause for the gap in tariff.” NERC explained that it’s not oblivious of the economic hardship faced by Nigerians, adding, “We are also suffering the same fate with our fellow countrymen. We pay the same electricity tariff like every other Nigerian but we also have a duty of ensuring that the operators recover their prudently incurred cost, thus the need for the tariff review at an appropriate time and manner with the aim of ensuring that the electricity market remains operational.” The Commission maintained that it’s saddled with the responsibility of protecting the interest of both consumers as well as investors when it comes to the issue of electricity pricing and supply in Nigeria. Electricity pricing “As Nigerians are fully aware, the macroeconomic indices such as the rate of inflation and exchange rate have steadily gone up over the last one year. This increase has affected the prices of all other commodities in the country. The purchasing power of Naira has crashed to all time low within the last couple of months. The MYTO methodology (pricing methodology) mandates the Commission to carry out a minor review of the Tariff bi-annually and adjust these exogenous factors that are beyond the control of the investors and the regulators. “The official exchange rate in the country has risen from N198.97 to over N305.05 to a dollar. This alone is bound to trigger an increase in electricity tariff given the fact that all equipment, spare parts, meters used for the generation, transmission and distribution of electricity in Nigeria are imported. Electricity is therefore a product like any other product that is affected by changes in micro economic indices.”

Source: VanguargNg

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