Why we increased electricity tariffs – Federal Govt

• He also explained that the increment was in tandem with certain provisions of the electricity act which sought to protect the investments of some players in the power sector

The Federal Government has disclosed the reason behind the latest increment in electricity tariffs for some users.

Musiliu Oseni, vice chairman of Nigeria Electricity Regulatory Commission (NERC), stated that the hike became imperative and inevitable because the generation companies (Gencos) couldn’t sustain their current operational cost with the previous tariffs.

Speaking during an interview on Channels TV’s Politics Today on Wednesday, Oseni stated that the Gencos were unable pay for gas and maintain their machines.

On Wednesday, the commission approved the increase of electricity tariff for customers under the Band A classification.

With the development, customers would pay N225 kilowatt per hour from the current N66.

But during the interview, Oseni said that if there was no upward review of tariffs, the market can be relatively liquid.

He also explained that the increment was in tandem with certain provisions of the electricity act which sought to protect the investments of some players in the power sector.

He said, “If you look at section 116 sub section 2A of the electricity act, it mandates the commission to ensure that the licenses operating efficiency are allowed to recover sufficient revenue for the capital invested and for the operational cost as well as having a return on the investments they have made.

“In that case, it means that the onus is on the commission to ensure that operators actually earn sufficient revenue that we incentivize further investments in order to ensure improvement in service delivery.

“What informed the decision apart from the provision of the act, in December 2023, there was an improvement in the quality of service down to January. From then on there was dearth in electricity availability. Lack of review of tariffs caused that.

“The Discos could not be mandated to forward what they had not been allowed to charge. For that the payment to the generation companies has significantly dipped which affected their ability to maintain their machines and to pay for gas. And gas is one of the two significant raw materials for electricity generation in Nigeria.

“At a point it is clear that if nothing is done to ensure tariff is reviewed the market can be relatively liquid.”