‘It’s ineffective’ — States advise FG to gradually phase out electricity subsidy

‘It’s ineffective’ — States advise FG to gradually phase out electricity subsidy

In the document, the state governments recommended a series
of policies to tackle the challenges within the power sector.


The recommendation comes at a time when regulatory authority
is being transferred to states.


In April, the Nigerian Electricity Regulatory Commission (NERC)
transferred oversight of the electricity market in Ondo, Ekiti and Enugu to
each state’s electricity regulatory bureau.



According to the document, the states recommended that
wholesale and retail electricity subsidies to customers and across the Nigerian
Electricity Supply Industry (NESI) value chain be reduced and eventually
eliminated over time.


“Moreover, the so-called electricity subsidies benefit only
customers who are connected to the national grid and enjoy some form of supply
reliability. Millions of households, particularly in underserved and unserved
communities, pay more than twice the average true cost of on-grid supply,” the
states said.


“The 2001 national electric policy recommended the
restricted use of subsidies for the promotion of universal access to
electricity. States agree with the retention of this policy.


“To this end, States recommend that wholesale and retail
electricity subsidies to customers and across the NESI value chain are reduced
and eventually eliminated over time, except for pre-defined customer categories
or in line with national economic growth initiatives.



“Where electricity subsidies are deemed necessary, the
States propose a cost-of service analysis which will be conducted by the state
to determine the cost of supply and arising electricity subsidies for each


The NGF further said if subsidies must continue to be
implemented as a specific policy of the federal government, there must be a
provision for funding the subsidies before implementation.


The forum also asked the federal government to be
transparent and precise in its regulatory framework to determine the extent of
subsidies required and the category(ies) of consumers that would be eligible to
receive electricity subsidies.





The states advised the federal government to implement a
“no-meter, no-service” policy for all new electricity connections.


According to NGF, the provision of electricity meters to
close the huge metering gap is a requirement to make sub-national markets



However, NGF said States Electricity Regulatory Commissions
(SERCs) in conjunction with the distribution licensees should be allowed to
determine the meter technology, type and form of meters to be deployed within
their states’ electricity markets.


“States are of the view that the national electricity policy
should mandate an immediate “no-meter, no-service” policy for all new
connections, to prevent the metering gap from further increasing,” NGF said.



“The federal government is urged to provide low-cost,
long-term funding for metering schemes as direct loans to distribution
licensees or off-balance sheet funding through special purpose meter finance
companies (or meter asset SPV companies) to close the metering gap, whilst also
encouraging electricity customers to directly purchase prepaid meters from
accredited meter asset providers and manufacturers accredited by the SERC.


“States on their own will implement their viable metering
programs and metering regulations to close the metering gap within their state
electricity market.”


In terms of electricity tariff, NGF said states will
implement different end-user tariff methodologies within their markets
according to the state electricity policies and strategic implementation plans,
viability and market sustainability requirements and peculiar socio-economic
characteristics in states.


“However, states recommend that electricity tariffs should
be both efficient and cost-reflective across the federation,” NGF said.


“States urge the federal government to revert to the 2001
Electric policy recommendation on electricity tariffs regulation.


“The national assembly and the federal government should
allow NERC to independently carry out its regulatory functions of determining,
approving, and implementing economic wholesale tariffs at the appropriate time,
and not (politically) intervene in the tariff setting process.”


In determining wholesale tariffs, NGF said NERC must also
adhere to its regulations for tariff approvals and reviews, including the need
to transparently hold consultative public hearings and mandatorily consult with
SERC on wholesale tariff methodologies and tariff proposals by licensees of the

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