The Federal Government is planning to move away from indefinitely financing electricity tariff shortfalls towards bilateral power agreements that link electricity supply more directly to payment, as it seeks to address revenue leakages and persistent gas supply constraints affecting power generation.

The Minister of Power, Joseph Tegbe, disclosed this at the Harvard Business School Association of Nigeria (HBSAN) Energy Conference at the weekend, where he outlined plans to reform electricity market arrangements, improve revenue collection, strengthen transmission infrastructure and tackle the alleged unauthorised use of electricity by companies connected to the national grid.

Tegbe said the government could not continue covering tariff shortfalls indefinitely, stressing that changes to the market structure and design were necessary to prevent a recurrence of the financial difficulties that have burdened the sector.

“We can’t keep covering tariff shortfalls until we give power to every Nigerian. So, what we need to do is move to bilateral agreements. And where are the bilateral agreements going? Mainstream supply and demand. Because mainstream will supply you what you pay, rather than somebody saying, ‘Don’t pay me more; they take money and give you more,” he said.

He said the government is reviewing assumptions underpinning electricity tariffs and examining how the market could be structured to improve financial sustainability.

Beyond market reform, Tegbe raised concerns about companies allegedly taking electricity from the national grid outside authorised arrangements, saying the government intended to act against them.

He said some companies were directly connected to the grid and taking as much as 150 megawatts of electricity daily.

“We’re going after those companies. We’re going to baptise those companies. And when we are going to baptise those companies, we’re going to put them on the grid.”

The minister did not identify the companies involved or clarify whether the 150MW represented their combined consumption or the amount taken by individual companies.

The proposed electricity market reforms also depend on resolving persistent challenges in the gas-to-power value chain, particularly the commercial terms governing gas supply, the cost of transportation and outstanding payments to producers.

The Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mallam Rabiu Abdullahi Umar, said Nigeria needed to move beyond repeated discussions about gas-sector reforms and focus on implementing existing plans.

He said the Gas Aggregation Company of Nigeria (GACN) had an important role in ensuring that gas supply commitments were fulfilled, but challenges persisted in meeting domestic obligations.

Umar said the authorities were working on arrangements to allow gas to be redirected to locations where it is needed when an obligated supplier could not deliver, while another operator had available supplies.