FG raises electricity tariff, commences free meters purchase
FG raises electricity tariff, commences free meters purchase
The Federal Government is about to effect upward revision of electricity tariffs by December as it steps up its mass metering initiative.
According to Proshare report, the objective of the revision is to bring the market closer towards cost-reflective tariffs which is crucial to the industry’s sustainability and attracting investment flows.
The industry has been held back by a lack of investment since its privatisation and the absence of cost-reflective tariffs is a major step in solving the financing constraint that has beleaguered the sector.
The review is expected to take place in two stages: the Extraordinary Review of Transmission Company of Nigeria’s Loss Factor (TLF) in the MYTO, and the processes for the December 2021 review of MYTO – 2021.
The MYTO review in December 2021 will take into account changes in relevant macroeconomic indicators, generation capacity, and capital investment required for the evacuation and distribution of available generation capacity in accordance with current norms.
It is likely that the adoption of the Multi-Year Tariff Order (MYTO) would be followed by resistance from labour. Just like in the case of subsidies on PMS, labour unions have been vocal in their resistance to power tariff hikes.
They fail to see the direct link between cost-reflective tariffs and increased power supply which would lower the use of alternative forms of energy (which cost up to 400 per cent more).
While the tariff hike would be initially inflationary, an improvement in revenue will tackle the challenge of inadequate transmission and distribution infrastructure which will boost efficiency. The capacity of the players to meet their debt obligations as well as attract funding is also improved.
Meanwhile, Federal Government commenced the procurement of 4 million electrical meters which will be distributed to unmetered power consumers across the country under the National Mass Metering Programme.
There are about 8mn unmetered consumers in Nigeria (3.88 per cent of total population). The programme is divided into three phases: phase zero, phase one, and phase two. It is worthy of note that the mass metering operation is not entirely free, as the government provided loans for the purchase of these meters.
