Electricity Tariff Hike Looms Again as Governors Call for Subsidy Removal

The cost of electricity in Nigeria may be on the rise, as state governors have urged the federal government to put an end to the subsidy currently enjoyed by citizens. This move comes as part of the effort to improve the viability of sub-national electricity markets and bridge the significant metering gap in the country. The state governors also called on the federal government to enforce a “no-meter, no-service” policy for all new electricity connections in the country. Let’s delve deeper into the details of this development and its potential impact on households in Nigeria.

This recommendation was outlined in the Development of the National Integrated Electricity Policy & Strategic Implementation Plan: Policy Recommendations by State Governments to the Federal Ministry of Power document from the Nigeria Governors’ Forum.

The Governors’ Recommendations

This recommendation was outlined in the Development of the National Integrated Electricity Policy & Strategic Implementation Plan: Policy Recommendations document by State Governments to the Federal Ministry of Power. In the document, the state governments highlighted the critical importance of electricity meters in bridging the significant metering gap, crucial for the viability of sub-national markets. They argued that State Electricity Regulatory Commissions (SERCs) should have the autonomy to determine the most suitable meter technology for deployment within their respective electricity markets.

No-Meter, No-Service Policy

In a bid to address the metering gap and enhance the efficiency of electricity distribution, state governors have called for the implementation of a “no-meter, no-service” policy for all new electricity connections. This policy aims to ensure that consumers are equipped with meters to accurately measure their electricity consumption, paving the way for a more sustainable energy market.

Subsidy Elimination and Different Tariffs

As more states prepare to run their power markets under their own laws, they are gearing up to eliminate electricity subsidies in their territories. The document outlined that states would implement different electricity tariffs based on the Electricity Act 2023, which establishes a multi-tier electricity market framework.

Addressing Legacy Debts in the Power Sector

Another key aspect of the governors’ recommendations is the need for the Federal Government to continue settling the N4 trillion legacy debts in the power sector. These debts, accumulated under a single electricity market in the Nigeria Electricity Supply Industry, pose a financial burden on the market and hinder its long-term viability. By addressing these legacy debts, the states hope to create a more stable and efficient electricity market for consumers.

Proposed Changes in Electricity Tariffs

The governors have also recommended the elimination of electricity subsidies in their respective territories, with plans to implement different electricity tariffs based on the Electricity Act 2023. This federal law establishes a multi-tier electricity market framework, which includes a wholesale federal electricity market and retail sub-national electricity markets. They argued that stated that electricity is a commodity that must be paid for by consumers, adding that subsidies in the power sector have been inefficient and ineffective, mainly benefiting customers connected to the national grid. By transitioning regulatory powers to State Electricity Regulatory Commissions, the states aim to streamline electricity market operations and improve market sustainability.

Winding Down Subsidies

Commenting on the winding down of electricity subsidies, the NGF stated that electricity is a commodity that must be paid for by consumers. They expressed that subsidies in the power sector have been inefficient and ineffective, mainly benefiting customers connected to the national grid.

Transparent Subsidy Criteria

States recommended that the method and criteria for applying electricity subsidies should be transparent and precise, with a clear framework determining the extent of subsidies and eligible consumers. Continuing subsidies may undermine the viability and sustainability of state electricity markets.

Also Read: NLC, TUC Demand Reversal of Electricity Tariff Hike

Efficient and Cost-Reflective Tariffs

States urged the Federal Government to revert to the 2001 Electric Policy recommendation on electricity tariffs regulation, emphasizing the importance of efficient and cost-reflective tariffs across the federation. They recommended transparent tariff-setting processes without political intervention.

In conclusion, the governors’ recommendations aim to improve the efficiency and viability of electricity markets in Nigeria. By ending subsidies, implementing no-meter, no-service policies, and enforcing cost-reflective tariffs, the states are taking steps towards a sustainable and self-sufficient electricity sector.

Summary

In this article, we discussed the imminent electricity tariff hike in Nigeria as governors urge the Federal Government to end subsidies and implement policy changes to enhance the electricity market. Do you think these recommendations will lead to a more sustainable electricity sector in Nigeria? Kindly share your thoughts.