NERC: FG Incurred N380bn Electricity Subsidy Bill in Q2 2024, Down By 40%

* Says DisCos generated N431bn revenue in Q2 2024, up by 47%

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The Nigerian Electricity Regulatory Commission (NERC) has said the federal government incurred an electricity subsidy obligation of N380 billion in the second quarter (Q2) of 2024.

This is just as the agency said that distribution companies (DisCos) generated N431.16 billion between April and June of 2024.

 NERC, in its quarterly report released at the weekend, said the electricity subsidy bill dropped by N253.24 billion (40 per cent) from N633.3 billion recorded in Q1.

The drop, according to the commission, was due to the upward review of tariffs for Band A customers in April.

“It is important to note that due to the absence of cost-reflective tariffs across all DisCos, the government incurred a subsidy obligation of N380.06 billion (52.51 per cent of total NBET invoice) in 2024/Q2 (average of N126.69 billion per month),” NERC said.

“Between 2024/Q1 and 2024/Q2, the subsidy obligation of the government reduced by – N253.24 billion, from N633.30 billion (90.57 per cent of total GenCo invoice) to N380.06 billion (52.51 per cent of total GenCo invoice).

“The significant decrease in the subsidy obligation of the FGN is a result of the policy directive of the government to implement reviews of tariffs charged to Band A customers while the tariffs for Band B-E customers remain frozen at the rates payable since December 2022,” said the report.

The NERC said in the absence of a cost-reflective tariff, the government covered the resultant gap (between the cost-reflective and allowed tariff) in the form of subsidies.

The commission said for ease of administration, subsidy was only applied to the generation cost payable by DisCos to NBET at source in the form of a DisCo’s Remittance Obligation (DRO).

“The total revenue collected by all DisCos in 2024/Q2 was N431.16 billion out of N543.64 billion billed to customers,” NERC said.
“This translates to a collection efficiency of 79.31% which represents an increase of +0.20pp when compared to 2024/Q1 (79.11 per cent),” NERC added.

On revenue collection performance of all DisCos, NERC said Ikeja and Eko DisCos recorded the highest collection efficiencies of 94.67 per cent (N87.36 billion) and 88.03 per cent (N75.33 billion), respectively.

“Conversely, Yola DisCo recorded the lowest collection efficiency of 55.67 per cent (N4.78 billion),” NERC said.

“A comparison of DisCos performance in 2024/Q1 and 2024/Q2 showed that six  DisCos recorded improvements in collection efficiency in 2024/Q2 when compared to 2024/Q1 with Yola DisCo recording the highest increase of +12.64pp.

“Conversely, five (5) DisCos recorded declines in collection efficiency with Kaduna having the most significant decrease (-10.04pp) during the period.”

According to The Cable, NERC said the cumulative upstream invoice payable by DisCos was N399.53 billion, consisting of N343.76 billion for DisCos remittance obligations (DRO)-adjusted generation costs from Nigerian Bulk Electricity Trading (NBET) and N55.77 billion for transmission and administrative services by the market operator (MO).

“Out of this amount, the DisCos collectively remitted a total sum of N318.65 billion (N271.87 billion for NBET and N46.78 billion for MO) with an outstanding balance of N80.88 billion,” the commission said.

 “This translates to a remittance performance of 79.76 per cent in 2024/Q2 compared to the 96.93 per cent recorded in 2024/Q1.”
On April 3, NERC approved an increase in electricity tariff for customers under the Band A classification.

The commission said customers under the classification, who receive 20 hours of daily power supply, will pay N225 per kilowatt (kW) — up from N66.

Following the development, the agency said the approved tariff would reduce electricity subsidy for the 2024 fiscal year by about N1.14 trillion.

Meanwhile, the commission has said that distribution companies (DisCos) generated N431.16 billion between April and June of 2024.

In its latest report for the second quarter (Q2) of 2024, NERC said the revenues from customers in Q2 2024 increased by 47.84 per cent from N291.62 billion recorded in Q1.