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Power Tariff Shortfall Hits N420bn in Two Years

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  • Power Tariff Shortfall Hits N420bn in Two Years

The total shortfall in the amount of electricity tariff payable by consumers to the power sector between January 2015 and December 2016 is N420bn, the Federal Government has declared.

According to the government, the huge tariff shortfall has been a major constraint to the power sector due to insufficient end user tariffs that should have been paid to the industry.

This is contained in the Power Sector Recovery Programme document detailing series of policy actions to be implemented by the Federal Government, which was obtained by our correspondent in Abuja on Wednesday.

The Minister of Power, Works and Housing, Babatunde Fashola, recently presented the PSRP document to civil society organisations in Abuja.

The government stated that the power sector had been faced with series of constraints and challenges despite the many reforms in the industry.

It noted that with the reforms in the sector still unable to achieve a regime of fully effective contracts, many challenges had created the need for a market reset.

It said, “The challenges include infrastructure constraints associated with gas, generation, transmission and distribution; insufficient end user tariffs; sector tariff shortfalls between January 2015 and December 2016 of N420bn; slow pace of loss reduction and load rejection by the Discos (distribution companies); and sector governance challenges.

“Collectively, these challenges have discouraged private sector investment in the sector and continued to impede Nigeria’s economic development.”

Commenting on the different reforms in the sector, the government stated that its quest to implement sustainable programmes in the industry dated back to the National Electric Power Policy in 2001, which came with the unbundling and subsequent privatisation of electricity generation and distribution companies in 2013.

It stated that while power sector reforms, including the Electric Power Sector Reform Act of 2005 and the 2010 Road map for Power Sector Reforms, served to facilitate a competitive, efficient private sector-led power sector, three years after privatisation, the sector still faced infrastructure, liquidity and governance challenges that required specific strategic interventions by the government.

It said, “For this reason, the Federal Government initiated the May 2016 Road map of incremental, steady and uninterrupted power supply. The 2016 road map with its related deliverables like improvements in sector governance, meter supply, eligible customers and mini-grid regulation, dovetail into a comprehensive electricity market intervention by government – the Power Sector Recovery Programme.

“The PSRP was designed on this basis and aims to reset the Nigerian Electricity Supply Industry, while enhancing the 2016 road map.”

It explained that the PSRP was a series of policy actions, operational, governance and financial interventions to be implemented by the Federal Government over the next five years.

It further stated that the aim of the programme was to restore the financial viability of Nigeria’s power sector, improve transparency and service delivery, resolve consumer complaints, reduce losses and energy theft and reset NESI for future growth. The Federal Government developed the PSRP in collaboration with the World Bank Group and the programme is comprised of components/reform actions in four groups of interventions, which include financial, operational/technical, governance and policy interventions.

The financial interventions were to fully fund historical and future sector deficits by establishing sustainable and appropriate electricity tariffs through a well defined tariff adjustment trajectory, so that tariffs cover the revenue requirement of efficient service provision by 2021.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.