The Enugu Electricity Regulatory Commission (EERC) has defended the recent review of electricity tariffs in the state, emphasizing that the move is essential to building a viable, investor-friendly electricity market capable of meeting Enugu’s growing power needs.
This was made known by EERC Chairman/CEO, Chijioke Okonkwo, while speaking on News Central’s Business Edge on Thursday.
Defending the commission’s decision to review the tariff, he said, “We had actually informed MainPower that we will consider your full costs, but we’ll verify it and validate it. Now, the truth is that the indices we looked at in determining their tariff happen to be the generation cost, the transmission cost, the main power’s regulatory asset base, their CapEX projection, their OPEX projection, that’s operating expenditure projection, allowable distribution loss, and cost of capital.
And one of the few things that stood out for us really was that the generation cost, which if I look at the national generation cost as it is today, is averaging approximately 112, is delivered through or via EEDC to main power for distribution in Enugu state, and is coming to us at a reduced rate of N40 for other generation companies, while the new Zungero hydro power plant that has just come on stream adds another N5 plus to it, bringing it to over N45.
“And that 112 was not invoiced by NBET to EEDC for MainPower to pay its portion. Instead, what main power was expected to pay was just over N45, that the energy was delivered to it from the national grid. I mean, we don’t think that we should implement the 112; that is the cost of probably generation today from the bucket of generating companies that are on the grid.
“Instead, it has to be in alignment with the cost at which the energy is being delivered into our own state. And that is what we input into our model, which calculated everything else. We didn’t change the cost for transmission; it’s 100%. We didn’t change the cost. We discussed the regulatory asset base of main power with them and agreed.
“We discussed their CAPEX and agreed. We definitely investigated, validated, and verified some of the numbers. We actually did some further analysis, because we found out that lifeline customers really didn’t exist in any state.
“I mean, if a lifeline customer was on a band A feeder, and was being charged the 209 that is currently in place, we wouldn’t consider a person as a lifeline customer. So, we also allowed a significant amount of distribution loss that is over and beyond what is even obtainable today, just to make main power work towards that level of efficiency that if implemented, if it becomes a lot more efficient, it recovers more revenue that it can keep. And stay more profitable than every other disco as an incentive, because we would have also adopted what was obtainable at the national level.
“And what it gave us as an average tariff was 94 Naira. The N94 was sculptured across the various banding arrangements, which they adopted, not we, because they had the option of going to the old service arrangements of residential, commercial, and industrial customers, special customers,” he stated.
The Commission also revealed a bold target of 700 megawatts (MW) in electricity consumption by 2031.
Okonkwo said his commission wants “power almost traded as any other commodity, means that people can come and buy and develop their businesses, have competition in place that would ensure that whatever is being charged is competitive across board, within the state specifically anyway, to actually drive the development of this market to the point where we can say that we have enough demand, or sorry, enough supply to meet our state-specific demand over a period of time.
“Now, our policy document that is in place actually gave us specific targets that by the end of 2026, we should be able to consume approximately 300 megawatts or have 300 megawatts supply within the state. And by 2030, 2031, we should be able to move that to 700 megawatts.
“That is a target that the policy has put in place. And we are going to work as hard as we can to try and meet that target. It means that we’re going to be attracting industries that can take advantage of that power,” he said.
He said the state is working towards attracting investors into its energy market.
Okonkwo stated, “We’re going to attract the right kind of people to operate in this space. We’re going to have contract-driven power markets or power projects. And we are saying that investors will be happy running their businesses in the state because they will get adequate returns on their investment.”
In June 2023, President Bola Tinubu signed the Electricity Act 2023 into law, repealing the Electric Power Sector Reform Act, 2005.
In June 2023, President Bola Tinubu signed the Electricity Act 2023 into law, repealing the Electric Power Sector Reform Act, 2005.
This Act decentralizes the power sector, giving states authority to regulate electricity within their territories.
Over 16 states began passing their electricity laws and setting up state regulatory commissions.
The Nigerian Electricity Regulatory Commission (NERC), yesterday, declared that state governments and their regulatory agencies lack the authority to unilaterally reduce electricity tariffs for power supplied from the national grid.