Electricity tariff hike plausible with increase in gas to power price

Yesterday, the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) announced an increase in the price of natural gas for strategic sectors.

Therefore, the agitations against electricity tariff increase may no longer be tenable.

According to a statement from the NMDPRA and signed by its Chief Executive, Farouk Ahmed, the Authority, which unveiled the new tariff regime for gas, increased the price of the commodity for power Generation Companies (Gencos) to $2.42 per cubic foot. The price of gas sold to Gencos has been constant at $2.18 since 2021. For commercial gas, the price increased from $2.50 to $2.92 per cubic feet.

With this increase, the implication for the electricity sector is that the Multi-Year Tariff Order (MYTO) calculated for Distribution Companies (Discos) by the Nigerian Electricity Regulatory Commission (NERC) in January, this year, may no longer be valid. This is because, until yesterday, the calculation was done based on the rate of $2.18 per cubic feet of gas which the commodity was sold to Gencos.

Farouk, in the statement, alluded to the Petroleum Industry Act (PIA) 2021 assented to by the President on August 16, 2021, and gazetted 11 days later, as providing a framework for the determination of a Market-based pricing regime for the domestic gas market.

He explained that the action was taken in line with Section 167, the Third and Fourth Schedule of the PIA 2021, which mandated the Authority to determine the Domestic Base Price (DBP) and the marketable wholesale price of natural gas supplied to the strategic sectors.

The statement further said: “The Domestic Base Price at the marketable gas delivery point under Section 167 (1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles: the price must be of a level to bring forward sufficient natural gas supplies for the domestic market voluntarily by the upstream producers; the price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas; lowest cost of gas supply based on the three-tier cost of supply framework; market-related prices tied to International Benchmarks.

“Accordingly, after due consultation with key stakeholders and taking into cognizance the provisions of the PIA, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the Year 2024 Domestic Base Price as $2.42 / MMBTU and wholesale prices of natural gas in the strategic sector, and $2.92 for commercial gas,” the statement said.



Please enter your comment!
Please enter your name here