The Federal Government has announced the commitment of funds to fill the gaps caused by the difference between the cost-reflective tariffs and the actual tariffs paid by customers of Kano Electricity Distribution Company.
The development was announced in the September 2024 Supplementary Order, which was on Thursday published by the Nigerian Electricity Regulatory Commission which is part of the Multi-Year Tariff Order framework for KEDCO.
The supplementary order, which has taken effect from the 1st of September 2024, according to the NERC, seeks to find solutions to the to the financial imbalances that have come up due to external factors such as exchange rate fluctuations and inflation.
The order noted that the policy the federal government on subsidy of electricity has tried to implement a gradual transition of cost-reflective end-user tariffs, which gives the less privileged people a breathing ground by safeguarding them.
The order further disclosed that the Federal Government has announced the commitment to funding the gap that exist in the revenue generation that has come up from the cost-reflective tariffs approved by the commission and the natural end-user tariffs during the transition to cost-effective tariffs where applicable.
The NERC noted that the same factors that factor such as the naira to US dollar exchange rate, the Nigerian inflation rate, and the US inflation rate, were looked into to change KEDCO’s revenue requirements and tariffs for the rest of 2024
It was explained that in the current order, the current US Dollar exchange rate of N1,601.50/US$1 has been adopted for September – December 2024, and the inflation rate of 33.40 per cent for July 2024 was also applied for the period. The order noted that the federal government intervention will help the company to meet its obligations despite the pressure that exists in the cost.
The NERC further clarified that the federal government interventions from the allocated budgetary appropriation and other sources for funding tariff shortfall should be regulated and applied by the NBET to ensure 100% settlement of market invoices, which will be disclosed and issued by the generating companies (GenCos).
According to the NERC, the company KEDCO has commitments to its customers, specifically in delivering electricity based on the Service-Based Surcharge framework. It was noted that the company should be held accountable for all the services that are being delivered to the customers based on the Service-Based Tariff proposals, which have stated some customers in some bands shall be provided with some amount of electricity for some specific hours according to bands.
The NERC further noted that the company has been mandated to upgrade its infrastructure through the procurement of entrenched generation capacity. They have also been mandated to procure a minimum of 27MW of the capacity generated, which is 10% of its 2024 load allocation.
The company was mandated that at least 50 per cent of this entrenched generation must come from renewable energy sources.
