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Electricity prices expected to drop over time, predicts minister

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Electricity tariffs to crash with time, says minister
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Electricity tariffs to crash with time, says minister

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Yesterday, Adebayo Adelabu, the minister of power, said that the nation’s current electricity tariff system is only a temporary hardship that will eventually collapse, much like the nation’s telecom tariffs.

“While presenting his ministerial scorecard in Abuja, he expressed his optimism that tariffs will decrease, even though they currently appear expensive.”

The minister made the following comparison between the state of the electricity industry today and the early days of telecommunications: “We all know how much we spent on SIM cards back then. We are aware of the price at which we purchased the phone sets. But it tapered off over time.

“The costs of generation, transmission, and distribution will all decrease. Thus, it is a transient adversity that will eventually result in permanent gain.”

As a result of the Nigerian Electricity Regulatory Commission’s (NERC) improved supervision of the electricity distribution companies (DisCos), he claims that they are now attentive to their responsibilities.

In addition, he stated that for the first time in Nigeria, the Nigerian Electricity Supply Industry (NESI) has instituted a guaranteed service level for Band A customers who receive at least 20 hours of supply daily.

Similarly, government has decided to test run a cost reflective tariff and the liquidity conditions necessary for attracting investments with only 15% of its customers.

“For the first time in Nigeria, we have what we call guaranteed service level. It might be for Band A today, but no government has ever guaranteed 20 hours of supply, not to even 1% of consumers,” he said.

“But to 15% of consumers, we said let us start from here, and we have guaranteed service level for Band A customers with the introduction of cost reflective tariffs to that band, including liquidity conditions suitable for driving investment.”

He said the reforms in the NESI have attracted investments from the World Bank and the Nigerian Investment Sovereign Authority (NISA).

He credited the progress in the industry to the Electricity Act 2023, claiming that prior to the President Bola Tinubu reforms implementation, investors deemed NESI unattractive on account of what he called its uninspiring tariff policy and huge debt overhang.

The banks had also stopped lending funds to power sector investors.

Adelabu said the situation has now changed for the better following the launch of the Nigerian Power Investment Opportunities and Guidelines 2.0 which highlights opportunities in the sector.

Some of the immediate results are a $500 million investment from the NSIA (Nigerian Sovereign Investment Authority and another of $750 million from the World Bank.

His words: “We have been able to attract investment into the sector because before now, nobody was ready to touch this sector because the tariff policy was not inspiring; the debt overhang was too much.

“Nobody wanted to bring capital. Even bankers didn’t want to lend anybody money. But now that is a thing of the past.

“The federal ministry of power has launched the Nigerian Power Investment Opportunities and Guidelines 2.0 that highlights some of the opportunities in the sector.

“We have also attracted $500 million dollars initiative from NSIA (Nigerian Sovereign Investment Authority) and the World Bank $750 million.

“We are beginning to see some progress from the outcome of the reforms process and key achievements of the administration in the last one year.”

Adelabu insisted that the power sector has improved in the last one year, contrary to the impression in some quarters.

He said: “The question is, has power improved? Yes. It is no longer where we were in February, and the journey of a thousand mile starts with a step in the right direction. We are facing the right direction.”

Adelabu said the Federal Government would, in the next couple of months, award a contract for the provision of 1.5 million metres to Meter Asset Providers.

He said the project which is funded by the World Bank, is targeted at improving liquidity in the sector and also reducing estimated billing.

Government, he said, plans to deploy 10 million meters in the next five years with the provision of two million meters yearly.

Adelabu said: “We just completed the bidding process for 1.5 million meters financed by the World Bank to improve sector liquidity and reduce estimated billing.

“Within the next couple of months, this contract will be awarded to the meter providers.”

On the metering gap, he said: “We have a Presidential Initiative scheduled to provide 2 million meters per annum for the next five years to bridge the meter gap that we have.

“We have about 7million meter gap in the industry. Out of over 10 million customers, just a little over 5 million are metered.

“Everybody is complaining of estimated bills. Mr. President is determined to put an end to estimated billing so that nobody is cheating anybody.”

Adelabu said almost 50,000 meters have been procured now and deployed to all military formations nationwide to reduce Ministry Departments and Agencies (MDAs) debts and improve sector liquidity.

He, however, noted: “We will not relent until we have a resilient and efficient electricity sector that meets the needs of all Nigerians.”

The Minister said the government has started settling the N47.19 billion MDAs debts owed the Electricity Distribution Companies (DisCos) through one source – the Nigerian Electricity Liability Management Company (NELMCO).

“They’ve started paying. But we don’t want a situation whereby we are going to apply haphazard solutions for settlement of MDA’s debts.

“It is going to be centralised now so that a singular point will be the point of payment of MDA’s debts.

“There won’t be another accumulation of MDAs debts again. A lot of them are paying now. But we have what is called legacy or historic debt of these MDAs.

“It is so much that they will not be able to pay at a go. We have an agency we call the Nigerian Electricity Liability Management Company.

” We are putting all these debts together and transferring them to NELMCO so that NELMCO will go into negotiation with all the DisCos and they will agree on modalities or final settlement of these legacy debt, because as government is owing the DisCos, the DisCos too have liabilities to government.

“So NELMCO is in a position to negotiate this and ensure we zerorise government debts to power distribution companies.”

Adelabu said the government has given the DisCos which are still under the management of the Assets Management Company of Nigeria (AMCON) and the banks a deadline to resell the firms to core technical operators.

He said the ministry has secured a World Bank project to procure the Supervisory Control and Data Acquisition (SCADA) in 24 months since 2023.

He gave the assurance that with SCADA in place the National Control Center can monitor the entire national grid to ward off its collapse.

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