Electricity tariff hike eminent as FG increases price of gas

The Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) has  announced an increase in the price of natural gas for strategic sectors.

A statement signed by NMDPRA’s chief executive, Farouk Ahmed, showed an increase in the price of gas for power Generation Companies (Gencos) to $2.42 per cubic feet.

The price of gas sold to Gencos had been constant at $2.18 since 2021. For commercial gas, the price increased from $2.50 to $2.92 per cubic feet.

With this increase, the implication for the electricity sector is that the Multi-Year Tariff Order (MYTO) calculated for Distribution Companies (Discos) by the Nigerian Electricity Regulatory Commission (NERC) in January, this year, may no longer be valid.

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Until Monday, April 1, the calculation was done based on the rate of $2.18 per cubic feet of gas which the commodity was sold to Gencos.

Farouk, in the statement, noted to the Petroleum Industry Act (PIA) 2021 assented to by the President on August 16, 2021 and gazetted 11 days later, as providing a framework for the determination of a Market-based pricing regime for the domestic gas market.

He explained that the action was taken  in line with Section 167, the Third and Fourth Schedule of the PIA 2021, which mandated the Authority to determine the Domestic Base Price (DBP) and the marketable wholesale price of natural gas supplied to the strategic sectors.

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The statement partly reads: “The Domestic Base Price at the marketable gas delivery point under Section 167 (1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles: 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; 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; lowest cost of gas supply based on three tier cost of supply framework; market related prices tied to International Benchmarks.

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“Accordingly, after due consultation with key stakeholders and taking into cognisance the provisions of the PIA, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the Year 2024 Domestic Base Price as $2.42 / MMBTU and wholesale prices of natural gas in the strategic sector, and $2.92 for commercial gas,”the statement said.

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