Business & Finance

Why FG Approved New Electricity Tariff Regime – Fashola

Babatunde Fashola

Power, Works and Housing Minister Babatunde Fashola yesterday explained why the Federal Government approved a new electricity tariff regime.

He said the new Multi Year Tariff Order (MYTO) which kicked-off yesterday would correct the whole system in the entire value chain of the power sector.

Besides, Fashola, who spoke through a statement by his media aide, Mr. Akeem Bello, said the measure remained the most viable means to attain steady power supply in the country.

Bello quoted his principal as speaking on the site of the 2 X 60 MVA 132/33 KV Sub-Station Kukwaba Power Project in the Abuja at the weekend.

The tour, the statement said, was in continuation of the nationwide inspection, verification and fact-finding visits to projects under the Power ministry.

He said the acceptance of the new tariff order would not only guarantee power stability but galvanise the sector and boost investments that would in turn stimulate economic development.

According to him, investors would only be interested in the power sector only when they have an assurance on right pricing.

The minister noted that the on-going tour has taken his team of inspectors to two power generating plants – Geregu I & II and transmission stations in Benue, Nasarawa , Plateau, Pankshin and Abuja.

According to him, there was need to distinguish between a transmission and a power station, explaining that power stations generate the power while transmission stations transport power to various parts of the country.

Pointing out that generation has become a privately-managed ommercial and private business, Fashola said: “Let’s understand that Geregu I is one of the plants that has been sold and Geregu II is one of the NIPP (National Integrated Power Plant) projects we are completing”.

He said the government was no longer generating power “except with the NIPP plants that it is completing and handing over”

“There are two plants, one was grey that’s Geregu I and has been sold while the other was red and white that’s Geregu II. Geregu I have been sold, just like the other power generating plants. The sizes of those power plants are quite impressive. Smaller power plants that can do 5 ,10,20 MW are part of what we expect will come on stream as we go on but their ability to come on stream depends on ability of consumers to pay.”

He said no one would be encouraged to invest in a business unless the investor has an assurance that he would recoup hi investment.

His words: “That is where the issue of tariff is. So, tariff review is not necessarily government or NERC delivering an ultimatum of take it or leave it. That’s not it; that’s not the situation. It’s a practical choice and as a new administration, this is the first major policy that we have made.

“So, all of what has happened was inherited. The option before us is to start from the beginning or repair and manage what you have. It’s like a chess game that you did not start, you are now in the middle, somebody has played the game to the half way and you must continue.

“May be your first move you might lose your Queen or your Knight or your Rook, but if there is a game plan to ultimately capture the opponent’s King, then . on.”

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The minister, however, noted that the power sector would receive the necessary boost if the new tariff was accepted.

“If we allow the tariff regime as now reviewed to stay, instead of two, two year tariff changes we now have a 10-year tariff. That same order that reviewed the tariff upwardsays take out the fixed charge and the same order also made provision now for willing buyer and willing seller to say if you reach an agreement to buy power at a price higher than the market tariff go and do your power.”

According to him, the new regime would have a number of positive spin offs.

His words: “What that will mean is that some people who can afford to even pay more will get off the Grid, do their own arrangement, whatever they take off the Grid comes back to the masses.

“But, you can’t on one hand go to court as some people have done and say reduce the price; if you reduce the price or you don’t implement the tariff, if you succeed, which I hope you don’t, what will happen is that you are restoring fixed charge because it is the same tariff order that takes away the fixed charge which some people say they don’t want and those who don’t want it are in the majority.”

Fashola said stopping the tariff order, would also mean taking away the willing buyer and willing seller.

He said: “Somebody called me yesterday and said they have about 20 MW plant in the country but they were waiting for the tariff order to come into operation so that they can start closing their business. Now every power plant is going to run with mechanics, electricians and engineers. Imagine if those 20 power plants come into operation, the 20 engineers that will be there will be our children. That’s how an economy is built.

“This tariff provides that opportunity so you can’t take the one you like and say the others should go away; if you succeed the whole tariff order goes.”

Fashola explained that the introduction of the new tariff was not a “take it or leave it situation but a move at correcting the whole system.

Reiterating the importance of financing, market price and recovery to the entire value chain, Fashola said: “distributors must recover; transmission must recover; GENCOS must recover and the gas suppliers too must also recover their cost.

“If one end of the pricing is wrong it’s going to affect all; so if we solve this we have solved the problem that is common to all the participants.”

He said that resolving the pricing issue would leave room for addressing the other specific problems of the sector like transmission and gas supply.

“But, if we solve all of the specific problem and price is not right there won’t be power, I am so clear in my mind, “ the minister said.

Promising that the Federal Government would continue to provide the enabling environment for the development of the sector irrespective of the hurdles before it, the minister declared: “investment in the power sector is a veritable . of economic development and employment for Nigerians”.


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