Electricity generation and distribution firms have said the planned increase in the price of gas supplied to power plants may not lead to a direct rise in electricity tariffs across the country.
According to them, reports of a possible rise in tariff due to gas price increase are not completely true, as they note that series of calculations are involved in the computation of electricity charges.
The current price of gas supplied to power generation companies is $1 per 1,000 standard cubic feet.
This price, according to the Group Managing Director, Nigerian National Petroleum Corporation, NNPC, Mr. Andrew Yakubu, will soon be raised to $1.5 per 1000 SCF.
Yakubu, who spoke in Abuja recently, said the increase was to ensure adequate supply and encourage more gas supplies/sales to power plants.
Following the announcement by the NNPC boss, reports had it that the development could result in an increase in electricity tariff with power producers trying to recover the cost incurred.
But speaking with our correspondent on the issue, the Managing Director and Chief Executive Officer, Geregu Power Plc, Ajaokuta, Mr. Adeyemi Adenuga, said the increase in gas price might not necessarily warrant a direct rise in power tariff.
He said, “I may not be able to answer you in detail because I don’t have the calculations used in arriving at tariffs. It is like a graph and an increase in gas price may or may not have a direct effect on tariffs.
“If the Nigeria Electricity Regulatory Commission or another government agency with expertise in this has said it will not have much impact or that it won’t warrant an increase in tariff; then it is quite possible.
“If there is an increase in gas price, it will only affect the energy part. The payment is in two parts, which are capacity and energy. Experts know about this and I guess that is why they feel that it won’t cause any increase in tariff. However, there has been no increase in gas price currently.”
The Managing Director/Chief Executive Officer, Nigerian Bulk Electricity Trading Plc, Mr. Rumundaka Wonodi, told our correspondent that the increase in gas price was part of the gas master plan of the Federal Government.
According to him, the plan was a graduated system that moves upward step-by-step until it gets to the point where there will be a willing buyer and willing seller.
He said, “We know that the gas price should be going up at the end of this year and it will be moving by 50 cents. That might be reflected in the Power Purchase Agreement tariff but the truth of the matter is that we do not know whether it will cause an increase in retail tariff. Why do I say this? As you generate more power, there is a fixed cost element. So, all the staff, rents and others that the distribution company need to pay for constitute a fixed amount, which does not change.
“Now, if you have more gas and generate more power, your denominator becomes larger and, therefore, when you divide, you may find out that instead of the current tariff, you are actually having a reduction.
“So, even though gas price is going up, the denominator is increasing and at the end of the day, you are still at the same place or may even have a reduction in tariff and not an increase. Once the generation base starts to increase, there will be more power supply to generate revenue and so, the tariff may not go up.”
A senior official of the Abuja Electricity Distribution Company told our correspondent that the Discos were not contemplating raising tariffs based on the plan to increase gas price.
The official, who spoke on condition of anonymity said, “I don’t think the Discos are contemplating raising electricity tariffs based on the planned increase in gas price. Even if there is any such plan, I don’t think it will happen any time soon.”
Meanwhile, the official told our correspondent that the demand for tariff increase by some power firms was not based on the plan to increase gas price.
The Chairman/CEO, NERC, Dr. Sam Amadi, had warned power firms that the commission would not grant their request to raise electricity tariffs unless they substantially improve on their service delivery.
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