Electricity tariff hike looms as FG raises gas price

Onwubuke Melvin
Onwubuke Melvin

The Federal Government, on Monday, announced that the new price of natural gas for power generation companies is now $2.42 per metric million British thermal unit, higher than the previous rate of $2.18mmbtu.

Nigeria’s thermal plants fired by gas, generates over 70 per cent of its electricity. Consequently, once the Nigerian Electricity Regulatory Commission has carried out another tariff review, an increase in commodity prices may result in a rise in electricity tariffs paid by consumers, according to The Punch.

Nigeria’s upstream and downstream an agency of the Federal Government,revealed On Monday the new domestic base price and wholesale prices of natural gas for 2024.

The announcement was signed by the Chief Executive, NMDPRA, Farouk Ahmed.

In the statement, NMDPRA also pegged the cost of commercial gas at $2.92mmbtu, up from the previous cost of $2.5mmbtu.

Recall that, a multiyear tariff order issued by NERC in January 2024 was calculated for electricity distribution companies based on the previous price of natural gas.

As gas is a major component of power generation, it is therefore very likely that power tariffs will be reviewed upwards, taking into account the latest cost of the commodity.

The gas producers, including international and domestic oil and gas companies, have repeatedly called for a upward review of the product’s price, noting that this would boost production.

According to announcement on Monday, Ahmed said the Petroleum Industry Act 2021, which was signed by the President on 16 August 2021, and gazetted in August 2021, provides a clear regulatory framework for the establishment of a market based pricing regime for the domestic gas market.

The NMDPRA boss further stated the latest measures were taken, in accordance with 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 which incorporate among such other matters, the following principles.

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

“(b) 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.

“(c) Lowest cost of gas supply based on 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.”

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