FG suspends energy tariff review as 4-month subsidy hits N768.68b

The Federal Government hassuspended the monthly review of electricity tariffs as power subsidy climbs to N768.68 billion in four months. There are also indications that the generation companies (GenCos), who only received 45 per cent of their invoices last month would have more to worry about next year as the Federal Government failed to make provision for tariff shortfall in the 2025 budget.

Yesterday, electricity generation, which the Minister of Power, Adelabu Adebayo, promised would hit 6,000 megawatts before the end of 2024 hovered around 2,000MW and 4,100MW

This is according to data on hourly generation of the system operator under the Transmission Company of Nigeria (TCN). The structure, which the Nigerian Electricity Regulatory Commission (NERC), had earlier resorted to was to adjust end-users’ tariffs monthly factoring in the prevailing economic situation, especially inflation, foreign exchange and gas prices.

But The Guardian gathered yesterday that the Federal Government has halted the move. In July, NERC implemented a review of the tariff for Band A feeders from N206.8/kWh to N209.5/kwh effective 1st July. Between July and now there had been an upward change in foreign exchange until the recent naira appreciation.

Between August and November, the average tariff shortfall in the market jumped from N170 billion monthly to N192.17 billion, bringing the shortfall to about N768.68 billion in the last four months.

Most power plants are performing below par and their state is in serious disrepair, a situation that portends serious worry ahead for the energy outlook and pushes for more investors into the country and the power sector.

By the end of 2024, the yearly subsidy would stand at N2.3 trillion and the Federal Government has no budgetary provision this and next year to pay off the debt.

The Guardian gathered that in January, the invoice value from GenCos was approximately N256.1 billion, but GenCos only got about 8 per cent. In February, when the invoice was valued at N208 billion, about 9.29 per cent was paid.

In March, the invoice value increased to N235.1 billion, with a payment performance of nine per cent. April showed a notable improvement in payment performance at 40 per cent with an invoice value of N212.7 billion.

In May, the invoice value rose to N240.7 billion, with a payment performance of 31.01 per cent. June saw an invoice value of N234.6 billion and a payment performance of 31.73 per cent.

July had the highest invoice value of the period at N261.6 billion, with a payment performance of about 35 per cent. In August, the invoice value was N247.8 billion, with a payment performance of 33 per cent.

Although the situation has improved marginally to 45 per cent as of last month, there is fear that a liquidity crisis in the power sector will persist. Historically, only about seven of the 30 electricity generation plants in the country are operating optimally as some of the plants are producing only about 0.2 per cent of their installed capacity.

The overall plant availability factor of all grid-connected plants for October is about 39 per cent as over 85 per cent of the power plants connected to the grid are producing less than 50 per of their installed capacity.

The major driver of plant unavailability according to NERC is mechanical issues, adding that it is a major problem that has plagued the market, arising from the age of many of the plants. The average plant in the market is 21 years old. NERC had also noted that liquidity challenges at the upstream segment of the industry which results in underpayment of GenCo invoices created constraints for the plants.