A presentation yesterday by the Nigerian Electricity Regulatory Commission, NERC, at the review of basic assumptions for semi-annual review of Multi Year Tariff Order (MYTO2), revealed a $1.00 difference from the assumption and the actual price of gas.
Based on the changes in some assumption parameters, such as inflation rate, exchange rate, gas price and generation capacity; there may be an upward adjustment in the tariff.
Speaking at the event, Vice Chairman of NERC, Muhammad Lawal Bello, noted that even though tariff review is a very sensitive issue to the consumers, the way to go is to pay what is due in order to ensure improvement in the sector.
“From what I have seen in the initial report, not much has changed. The tariff review is a sensitive issue to the consumer who considers paying higher and not seeing improvement in electricity supply. But there is a general consensus that this is the way to go, by paying what is due this is how the power will begin to improve” he said.
NERC, in the presentation, declared that the sector is challenged with what will be the direction of such variables as inflation, foreign exchange rate in 2015, and whether generation companies and their gas suppliers guarantee increased generation under the new gas price?
In his presentation, Mr. Roland Achor, Tariff and Rates, NERC noted that the outcome of the brainstorming of the stakeholders might result in adjustment of the tariff which takes effect on December 1, 2014.
According to him, the actual price at the moment is $3.30 as against the assumption $2.30 by NERC in the MYTO methodology assumptions, adding that gas price have been regulated since the adoption of the MYTO in 2008 and the regulated prices are applied in the 2012-2016 price regime.
According him, the regulated gas price for 2014 is $1.80/mmbtu, however the ministry of Petroleum and NERC have agreed to a gas price of $2.50/mmbtu and transportation cost of $.80 effective December 2014.
Also, there is the gas price assumption of $2.30 by NERC which actual price has risen to $3.30 resulting in a difference of $1.00 which is expected to impact on the final aggregate technical commercial and collection losses (ATCC & C review which takes effect December 1, 2014.
MYTO methodology is done based general assumptions to Disco retail tariff such as inputs to the tariff, forecast of load, capacity, fuel costs, investment, levels of losses, customer numbers, )and M costs and other economic and technical data, which are all correlated to arrive at the retail tariff to the consumers.
He said the inflation rate received from the Central Bank of Nigeria (CBN) shows a figure of 8.3 per cent as at 30th September 2014 but the inflation rate at last minor review was 7.8 even though MYTO 2 has an assumption of 13 per cent inflation rate, stressing that the effective inflation rate is now pegged at 8.3 per cent.
He explained that effective exchange rate is now N156.29 to $1.00 over the next six months, adding that the retail tariff will be based on generation of 3, 675MW throughout the period from December 1, 2014 to May 31, 2015, even though the gross capacity was estimated to be 5, 556MW.
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