Electricity Prices Climbs Following FG Plans to Increase Gas Price

On Monday, the Federal Government reported that the price of natural gas for power-generating firms has increased to $2.42 per metric million British thermal units (mmbtu), a significant shift from the previous rate of $2.18 mmbtu.

Nigeria generates more than 70% of its electricity, which gas-fired thermal power facilities mainly produce. Due to this insight, the Nigerian Electricity Regulatory Commission has announced that it will conduct another tariff review to examine the increased cost of the item, which could further increase the rate that power consumers pay.

In a statement released Monday, the Federal Government of Nigeria's Midstream and Downstream Petroleum Regulatory Authority revealed the new domestic base price and wholesale rates for natural gas in 2024.

In addition, the NMDPRA set the commercial petrol costs at $2.92mmbtu, a significant increase from the previous $2.5mmbtu. The statement was signed by the CEO of NMDPRA, Mr Farouk Ahmed.

In January, the NERC announced that the Multi-Year Tariff Order price for electricity distribution companies was calculated based on the previous natural gas price.

Therefore, with the current cost of the commodity, there is a high chance for an upward review of power tariffs, as gas is a major component used in power production.

However, gas producers have consistently demanded an increase in the product's price, citing domestic and foreign oil and gas corporations, emphasising that doing so would encourage them to increase production.

Ahmed stated in the announcement on Monday that a clear legislative framework for determining a market-based pricing regime for the domestic gas market was established by the Petroleum Industry Act 2021, which was announced in August 2021 and approved by the President on August 16, 2021.

The NMDPRA boss clarified that the latest action was taken under section 167, the third and fourth schedules of the PIA 2021, which mandated the regulator to determine the Domestic Base Price and the marketable wholesale price of natural gas supplied to the strategic sectors.

He said, "The DBP at the marketable gas delivery point under Sector 167(1) and other provisions of the PIA shall be determined based on regulations that incorporate the following principles, among other matters.

"(a) The price must be of a level to bring forward sufficient natural gas supplies for the domestic market voluntarily by the upstream producers.

"(b) The price shall not be higher than the average of similar natural gas prices in major emerging countries with significant producers.

"(c) Lowest gas supply cost based on the three-tier cost of supply framework. (d) Market-related prices tied to international benchmarks."

The NMDPRA, therefore, emphasised that it had set the "2024 Domestic Base Price at $2.42/MMBTU and wholesale prices for natural gas in strategic sectors, following consultations with stakeholders and in compliance with the PIA and Gas Pricing Regulations."

Back Story

According to newly released stats by NBS and published by NAN, the total number of electricity consumers increased by 410,000, from 11.71 million in Q3 2023 to 12.12 million in the fourth quarter of 2023.

The National Bureau of Statistics released this statement on Monday. In its Electricity Report for the Q4 of 2023, released in Abuja on Monday, the report stated that the increase was 3.46%.

According to the News Agency of Nigeria, the report on the review focuses on energy billed, revenue generated, and customers by DisCos under the reviewed period.

It stated that year over year, the number of electricity customers increased by 9.59% in Q4 2023 from 11.06 million reported in Q4 2022.

It said in Q4 2023, the number of metered customers stood at 5.61 million compared with the 5.68 million recorded in Q3 2023, which indicated a 1.32% decrease.

"On a year-on-year basis, the figure grew by 9.38%t from the 5.13 million reported in Q4 2022," the NBS stated.

Additionally, estimated electricity customers stood at 5.83 million in Q4 2023, a decrease of 3.34% from the 6.03 million recorded in Q3 2023.

"On a year-on-year basis, estimated customers decreased by 1.73% in Q4 2023 from the 5.93 million recorded in Q4 2022."

The NBS also said that electricity distribution companies collected N294.95 billion in revenue in Q4 2023 compared with the N260.16 billion they collected in Q3 2023.

It added that revenue collected rose by 26.96% yearly compared to the N232.32 billion collected in the fourth quarter of 2022.

It stated that electricity supply was 6,432 (Gwh) in the fourth quarter of 2023, up from 5,732 (Gwh) in the third quarter.

However, the report said that year over year, the electricity supply increased by 14.64% in Q4 2023 compared with the 5,611 (Gwh) reported in Q4 2022.