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COMMERCIAL ELECTRICITY TARIFFS TO TAKE EFFECT Q1 2011

By NBF News
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PHCN Installation
Nigerians will start paying cost- reflective electricity tariffs by the first quarter of 2011.

According to the road map on power sector reform recently released by the Federal Government, the review of the tariff regime being undertaken by the Nigerian Electricity Regulatory Commission will be completed before the end of the first quarter of 2011.

The document said that the review was being done with a view to replacing the national uniform tariff with a new and genuinely cost- reflective ceiling on end-user tariffs.

It said, 'However, to protect against 'rate shock' and to ensure that low-income consumers are provided with the 'lifeline' tariff envisaged by the framers of the original power sector reform policy, there will also be much greater price differentiation and the introduction of an inclining block tariff whereby the rate paid for electricity varies with a given level of consumption.

'The Nigerian Bulk Electricity Trading Company Plc has now been incorporated and, over the next two months, this entity will be appropriately resourced and established, with the expectation that by October 2010, it will be ready and able to start negotiating appropriate power purchase agreements, not just with successor generating companies and existing independent power producers, but also with potential new entrants into the power generating market.'

The road map also said that in order to accelerate private sector investments in power generation, the Ministry of Finance was reviewing a set of options through which the Federal Government might provide credit enhancement to the bulk purchaser that would enter into power purchase agreements with the successor generation companies and independent power plants.

On the hydro power generating plants, the roadmap stated, 'The strategy adopted by the Bureau of Public Enterprises is to grant concessions for the operation of Kainji, Jebba and Shiroro. This approach is principally predicated on the magnitude of the capital requirements and water rights issues associated with these plants; but it also reflects the link between the sustainable management of hydro power and the development of the country's agricultural resources.'

It also said that the Transmission Company of Nigeria would be handed over to a credible private sector company under a five-year management contract.

'The key, therefore, to the successful commercialisation of the national grid is the appointment of a contractor with the skills required to manage the huge and complex programme of construction and rehabilitation that will be required over the coming decade,' the roadmap said.

It added, 'In the short term, we must clearly ensure a substantial increase in the total quantum of power delivered to electricity consumers across the country. In this regard, we are committed to ensuring that the average number of hours of electricity supplied to consumers increases noticeably over the coming year.

'The second and equally important objective is to ensure that the supply of power will not only be significantly greater than ever before, but that it will also be much less erratic and unpredictable.'

The road map further said, 'To that end, the targeted increases in generation, transmission and distribution capacity will be combined with a deliberate change in the practices of the System Operator. This change will mean that instead of despatching all the available generating capacity all of the time, the System Operator will aim to keep power generation and distribution steady and relatively predictable.

'In addition, the government is also urging the System Operator and the various distribution companies to undertake more strategic and more predictable load-shedding practices.'