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Electricity subsidy gulps N629bn, as DisCos generate N1.1trn

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The Federal Government spent N628.61 billion as subsidy on electricity in 2023, as power distribution companies collected a total revenue of N1.08 trillion during the same period, the latest industry data obtained from the Nigerian Electricity Regulatory Commission during the week showed.

An analysis of figures from the power sector regulator indicated that electricity subsidies continued to increase every quarter all through last year.

It was observed that subsidies on power in the first, second, third, and fourth quarters of 2024 were N36.02 billion, N135.23 billion, N204.6 billion, and N252.76 billion respectively.

It was also observed that during the same period, power distribution companies raked in N247.09 billion, N267.86 billion, N267.61 billion, and N294.95 billion in the first, second, third, and fourth quarters of 2023 respectively.

The rise in revenue by DisCos prompted calls for improved services from the power firms, as consumers condemned the Discos’ inability to deliver satisfactorily.

In the absence of cost-reflective tariffs, the Federal Government undertakes to cover the resultant gap between the cost-reflective and allowed tariff in the form of tariff subsidies.

For ease of administration, the subsidy is only applied to the power generation cost payable by DisCos to the Nigerian Bulk Electricity Trading company, which is the power trader in the sector.

The transmission and administrative service costs payable by DisCos to the Market Operator, an arm of the Transmission Company of Nigeria, are recovered 100 percent.

However, it should be noted that the power generation cost is a major component that guarantees electricity generation and supply across the country.

Also, the share of the NBET invoice to be covered by DisCos is determined by the percentage of the generation cost they can recover from the allowed tariff and set out as their Minimum Remittance Obligation in the periodic tariff orders issued by the commission.

Commenting on the amount spent on electricity subsidy in the fourth quarter of 2023 in its latest report, the NERC said, “It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N252.76 billion in 2023/Q4.”

This represents an average of N84.25 billion per month, which is an increase of N48.16 billion (23.54 percent), compared to the N204.6bn (average of N68.20 billion per month) incurred in 2023/Q3.

“This increase is largely attributable to the government’s policy to harmonise exchange rates, while also directing that end-user customer tariffs remain at the December 2022 approved rates,” the commission stated.

Explaining the subsidy spent on power in the third quarter, NERC said, “It is important to note that due to the absence of cost-reflective tariffs across all Discos, the government incurred a subsidy obligation of N204.59bn in 2023/Q3 (average of N68.20bn per month).”

This is an increase of N69.37 billion (51.30 percent) compared to the N135.23 billion (average of N45.08 billion per month) incurred in 2023/Q2; this increase is largely attributable to the government’s policy to harmonise exchange rates.

“The rise in the government’s subsidy obligation meant that in 2023/Q3, Discos were only expected to cover 45 percent of the total invoice received from NBET. For ease of administration of the subsidy, the MRO is limited to NBET only with the MO being allowed to recover 100 per cent of its revenue requirement from the Discos.”

On the same subsidy issue for the second quarter of 2023, the commission stated that due to the absence of cost-reflective tariffs across all Discos, the “government incurred a subsidy obligation of N135.23bn in 2023/Q2.”

It added that this represents “an increase of N99.21 billion (275 percent) compared to the N36.02 billion incurred in 2023/Q1. This increase is largely attributable to the government’s policy to harmonise exchange rates. On average, the subsidy obligation incurred by the government per month was N45.08 billion in 2023/Q2.”

The data from NERC also showed how power distribution companies garnered about N1.1tn from customers across the country last year amid complaints of poor supply by end-users of electricity.

On the collection efficiency of the Discos in the fourth quarter of 2023, the regulator said, “The total revenue collected by all Discos in 2023/Q4 was N294.95 billion out of N399.69 billion billed to customers.

“This translates to a collection efficiency of 73.79 percent which represents a decrease of -2.77 basic points when compared to 2023/Q3  (76.56 percent).”

The commission explained that over previous quarters, it observed that whenever there was an increase in energy offtake, there was usually a decrease in DisCos’ billing and collection efficiencies for the same period.

“This is probably because DisCos send more energy to areas where they incur more commercial losses. The inverse relationship between energy offtake by DisCos and billing as well as collection efficiencies may pose challenges to the long-term growth of the NESI (Nigeria Electricity Supply Industry) unless DisCos make significant progress towards improving energy accounting and addressing the major causes of losses,” it stated.

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Energy

TCN restores power supply to Lugbe, Galadimawa, other parts of Abuja

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The Transmission Company of Nigeria, TCN, has announced that it has restored bulk power supply to its 60 megavolt-amperes transformer at Kukwaba 132/33-kilovolt transmission submission 24 hours after the facility was faulty.

Ndidi Mbah, the General Manager of Public Affairs of TCN disclosed this in a statement on Friday.

The firm said the power supply was restored to the substation around 5:51 pm on Thursday.

Consequently, Abuja Electricity Distribution Company can now offtake bulk power for distribution to its customers in Galadimawa, Games Village, National Stadium, Sunny Vale, Kabusa Gardens, TSF Eye Clinic, AMMSCO Estate, Sun City, parts of Kabusa, Same Global, Durumi, American International School, Sabo Lugbe, TradeMore Estate, Pyakasa, Aleita/Chika and Ako Estate.

“TCN hereby announces the restoration of bulk power supply through its 60 MVA TRI transformer at Kukwaba 132/33kV Transmission Substation, on the 13th of June, 2024 at 5:51 pm.

“Recall that the transformer was opened on an emergency to trace and rectify the cause of sudden smoke from the transformer. This has since been rectified and the transformer restored to service,” TCN stated.

On Thursday power outage hit parts of Abuja over a faulty Kukwaba transmission substation.

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Energy

Marketers advocate ethanol as alternative fuel, plan $7bn yearly savings

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The Major Energies Marketers Association of Nigeria has stated that ethanol could be adopted as a biofuel to help Nigeria in reducing energy poverty and emissions.

According to MEMAN during a recent quarterly press webinar and engagement, about $7.4 billion could be saved annually by taking advantage of Nigeria’s ethanol resources as a biofuel to support petrol.

Ethanol is a biofuel that is commonly used as a substitute or additive to petrol in vehicles. It is typically produced through the fermentation of plant materials like cassava, corn, sugarcane, and others.

MEMAN noted that ethanol blended into biofuel as a transformative energy source has the potential to change Nigeria’s energy landscape and pave the way for a sustainable economy.

Experts, who spoke at the webinar, revealed that Nigeria had what it takes to exploit its ethanol to biofuel potential.

Presenting a paper titled ‘Ethanol as a Biofuel,’ a Senior Consultant with Africa Practice, Agwu Ojowu, pointed out that developing the ethanol industry could save the nation about $7.4bn ba year.

“Nigeria’s cassava production, standing at 63 million metric tonnes annually, represents 26 per cent of the global total. However, with 40 percent of this yield lost each year, there is a significant economic loss estimated at $7.4bn. Developing the ethanol industry could mitigate these losses, enhance economic stability, and capitalise on the depreciating currency to reduce costs,” Ojowu stated.

He emphasised that ethanol’s higher octane rating improves fuel quality and helps meet environmental standards by reducing sulphur content and greenhouse gas emissions.

Those attributes, he said, make ethanol a cost-effective and environmentally friendly alternative to petrol, aligning with Nigeria’s climate commitments.

Going down memory lane, Ojowu recalled that Nigeria’s foray into ethanol began with the 2007 biofuels policy, which mandated a 10 percent ethanol blend in fuel.

“Despite initial challenges, including the suspension of the policy in 2008, because of blending inconsistencies, the potential of ethanol remains significant. Ethanol’s cost-effectiveness compared to petrol has historically led to economic arbitrage, suggesting that a well-regulated biofuel market could be economically advantageous,” he said.

Ojowu added that ethanol presents numerous benefits, including economic, environmental, and agricultural advantages, without necessitating vehicle modifications.

The Executive Secretary of MEMAN, Clement Isong, also emphasised the role of renewable energy in addressing Nigeria’s energy poverty.

He highlighted the importance of diverse energy sources, including biofuels, solar, hydroelectricity, and wind energy, to create a balanced and sustainable energy mix.

“MEMAN is committed to engaging with industry stakeholders to advocate for energy solutions that meet Nigeria’s needs,” Isong said.

He expressed optimism about the future of renewable energy in Nigeria and the continued efforts to enhance press engagement and industry collaboration.

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Energy

Abuja DisCo adds 45 new feeders to Band A

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The Abuja Electricity Distribution Company, (AEDC) has disclosed it has added 45 new feeders to the Band A category of customers who would enjoy a minimum of 20 hours of electricity as stipulated by the Nigerian Electricity Regulatory Commission (NERC).

The new feeders are majorly in the Asokoro, Wuye, Garki, Suleja, Apo and other areas of the capital city. This was disclosed by the Disco on their official X (formerly Twitter) page where it described the feeder location and specific areas served by the feeder.

Other areas where feeders were upgraded to band A include; Suleja, Garki Area II, Wuse, Anyigba, Mpape, Jabi, Gwagwalada, Gwarimpa etc.

The DisCo noted that the upgrade to band A for the affected feeder location is effective from June 1, 2024.  Similar upgrades across other DisCos

In April, the Nigerian Electricity Regulatory Commission (NERC) announced a more than 200 percent increase in electricity tariffs for Band A customers.

This move is part of efforts to eliminate electricity subsidies and implement a cost-reflective tariff system in the power sector.

Abuja Disco’s addition of new feeders to Band A is in line with similar actions by other distribution companies like Eko and Ikeja DisCos following the tariff hike.

Band A customers are on specific feeders that receive a minimum of 20 hours of electricity daily. According to NERC, these customers account for approximately 17 percent of all electricity users in the country.

The decision to raise electricity tariffs for Band A customers has sparked public outrage, particularly among trade and labour unions nationwide.

Organised labour members have protested the increase, while the Manufacturers Association of Nigeria (MAN) has advised its members not to pay the new tariff, claiming they were not consulted.

MAN has instructed its members to continue paying the old rate of N66/kWh. The various electricity distribution companies have vowed to disconnect customers who fail to pay the new tariff under their band.

The group has also filed a petition with NERC regarding the tariff hike, which is currently awaiting resolution.

Furthermore, the Organised Private Sector (OPS) comprising all chambers of commerce and trade associations across the country had warned that the new tariff could lead to the shutdown of 65 percent of businesses across the country.  The group stated that the over 200 percent hike in electricity tariff to N220/KWh then made Nigeria’s power cost the highest in the world. It warned that the hike could exacerbate the economic situation in the country and push more people into unemployment and poverty.

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