National Telescope national telescope newspaper
The Federal Government has announced a subsidy to cover the revenue gap for customers of Kano Electricity Distribution Company (KEDCO).
This decision, outlined in a September 2024 Supplementary Order by the Nigerian Electricity Regulatory Commission (NERC), addresses the disparity between cost-reflective tariffs and the actual tariffs paid by consumers.
Effective from September 1, 2024, the supplementary order is part of the Multi-Year Tariff Order framework for KEDCO.
It aims to rectify financial imbalances caused by factors like exchange rate fluctuations and inflation.
The Federal Government’s policy outlines a gradual shift towards cost-reflective tariffs while protecting less privileged electricity consumers.
The government will fund the shortfall between the approved cost-reflective tariffs and the current tariffs during this transition period.
NERC reviewed several factors, including the Naira to US Dollar exchange rate and inflation rates, to adjust KEDCO’s revenue requirements and tariffs for the rest of 2024.
For example, the exchange rate has been set at N1,601.50 to US$1 for the period from September to December 2024, and the inflation rate of 33.40% for July 2024 has been used for calculations.
This government intervention will help KEDCO meet its obligations despite rising costs.
NERC explained that the Federal Government’s funding would be channeled through the Nigerian Bulk Electricity Trading Plc (NBET) to ensure that KEDCO can fully settle its market invoices with power generators.
The order also stipulates KEDCO’s commitment to service delivery under the Service-Based Tariff framework.
KEDCO is required to provide specific minimum hours of electricity supply based on tariff bands and is obligated to improve its infrastructure.
This includes procuring at least 27MW of embedded generation capacity, with at least 50% coming from renewable energy sources.
The Federal Government’s support during this period aims to stabilize the electricity market and shield consumers from the impact of higher tariffs.
NERC will continue to monitor KEDCO’s compliance with its service commitments using real-time data from KEDCO’s systems.
