Monday, 10 June 2024 04:36

Nigerians to pay more for electricity as govs move towards full subsidy removal

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State governments in Nigeria are preparing to eliminate electricity subsidies and introduce different tariffs within their jurisdictions. This initiative is part of a broader effort to operate their power markets independently under state laws.

A document from the Nigeria Governors’ Forum (NGF), titled ‘Development of the National Integrated Electricity Policy and Strategic Implementation Plan Policy Recommendations by State Governments to the Federal Ministry of Power,’ outlines these recommendations. These changes follow the enactment of the Electricity Act 2023, which replaces the Electric Power Sector Reform Act and serves as the current legal framework for Nigeria's electricity industry.

The Electricity Act 2023 establishes a dual-tier electricity market framework, consisting of a single wholesale federal electricity market and various retail sub-national electricity markets. These markets are interconnected through policies and regulations. The Act mandates the transition of regulatory powers from the Nigerian Electricity Regulatory Commission (NERC) to State Electricity Regulatory Commissions once states meet the necessary requirements.

In the NGF document, obtained in Abuja, governors also urged the Federal Government to continue addressing the N4 trillion legacy debts in the power sector, emphasizing that these liabilities were created under a unified electricity market.

The Federal Ministry of Power confirmed receipt of the document, noting that state governments are now empowered to enact their own electricity laws.

Commenting on the removal of electricity subsidies, the NGF stated, “Electricity is a commodity and a product that must be paid for by consumers. States believe that federal subsidies and financial interventions in the power sector over the past 15 years have been inefficient and ineffective.”

They highlighted that these subsidies have not improved service quality or reliability and have primarily benefited customers connected to the national grid, leaving many underserved communities to pay significantly higher costs for electricity.

The NGF pointed out that the 2001 National Electric Policy recommended limited use of subsidies to promote universal electricity access. They agreed with this policy and proposed reducing and eventually eliminating wholesale and retail electricity subsidies, except for specific customer categories or as part of national economic initiatives.

The governors also suggested that if subsidies continue, a cost-of-service analysis should be conducted to determine the appropriate subsidy for each state. They called for transparency and clear criteria in the application of federal electricity subsidies to avoid discrimination against states with more efficient electricity markets.

The NGF document emphasized that ongoing subsidies could undermine the viability of state electricity markets. They recommended a collaborative framework between the Federal Government and states for administering any future subsidies.

Regarding state electricity laws, the NGF noted that several states have already enacted their own laws, which do not cover national grid operations or interstate electricity activities. They encouraged the Federal Government to support states wishing to enact their own electricity laws and for NERC to issue necessary Transition Orders and support.

The governors reiterated that a multi-tier legal and regulatory environment is standard in a federation like Nigeria and that state electricity laws are not in conflict with the Electricity Act 2023, provided they apply solely within the state and do not cover national grid operations.

Finally, the NGF urged the National Assembly to reject any amendments to the Electricity Act 2023 that would create legal conflicts with state electricity laws or invalidate their provisions.

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