Discos Urge FG to Reduce Gas Cost for Power Generation

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SWITZERLAND, JUNE 29 – Electricity Distribution Companies (DisCos) have implored the Federal Government to intervene in gas pricing for power generation, in order to ensure the sustainability of the power sector and efficient service delivery of consumers.

This Executive Director, Research and Advocacy of the Association of Nigerian Electricity Distributors, ANED, Barrister Sunday Oduntan made the plea via a statement issued Sunday in Abuja. He argued that the cost of gas remains one of the key determinants of the electricity tariff in Nigeria.

Oduntan noted that “Most of Nigeria’s power generating plants are thermal plants. They use gas as their fuel and as long as the price of gas is high, the cost of generation – and the eventual tariff to the end-user – will also be high.

“At present, the energy generation mix is around 80 percent thermal and 20 percent hydro. More so, the cost of gas is also affected by fluctuations in forex.

“So, while the cost of gas (and generation) will rise due to forex fluctuations, the tariff is fixed in Naira and may not account for this difference especially because of the absence of a commitment to adhering to periodic tariff reviews.

“As we all know, today, the price of gas for local power production is a little over three dollars for one million British Thermal Units (mmbtu). Meanwhile, in this same country, the cost at which LNG exports gas is less than half the same amount.

“If you also consider that some of these IOCs are still flaring this much-needed gas into the atmosphere, you will realise that there are many options available to the government to intervene through in the quest to make electricity more affordable.

“This cost of gas presently accounts for almost 70 per cent of all the input the plants utilise to generate power. Except we begin to consider solutions from that angle, we may not make much headway in providing the cheap electricity Nigerians need to move the country to an industrial giant.”

He also mentioned that the absence of a market reflective tariff had continued to have a negative impact on the sector and had been a major contributor to the N1.5 trillion liquidity gap in the sector.

“Also, with effect from July 1, a new performance-driven increased tariff structure is set for implementation as a step towards narrowing the liquidity gap.

“If the cost of the major input in any production process is reduced, it will have a ripple effect across the entire chain. That is what we are advocating for. It will be in the interest of the end-users and by implication, the Nigerian economy as a whole,” He said.

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