Tuesday, February 04, 2014

Electricity tariffs set to rise as FG hikes gas price by 50%



Electricity tariffs in the country are set to rise as the Federal Government announces an increase in the domestic price of natural gas to $1.5 per 1,000 standard cubic feet.
The increase will represent a 50 per cent increase in the current $1 price for gas to power plants.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Andrew Yakubu, disclosed in Abuja that the move would ensure efficient supply of abundant natural gas to thermal power stations nationwide.
Currently, fertilizer companies pay 90 cents for 1,000 cubic feet of gas while industrial users purchase 1,000 cubic feet of the product at above $2.50.
The price for power producers, who account for about 80 per cent of the domestic gas consumption, was increased about two years ago from $0.1 to $1.0 by the government for the same purpose of encouraging suppliers to sell to power plants.
These prices are, however, below the international market price for gas, which is about $3 per 1,000 standard cubic feet.
There have been strong concerns that inappropriate pricing for gas as seen with the existing price regime might frustrate the Federal Government’s efforts at stabilizing power supply in the country and the power companies would increase tariffs to recoup the costs that would accrue from the hiked gas price.
The Minister of Power, Professor Chinedu Nebo, also indicated the move to raise the price when he stated that appropriate pricing of gas was a necessary factor that would guarantee improved power supply in the country.
Nebo, who spoke of the disparity in price between gas supply to the power industry and the industrial sector, also cited the inability of the defunct Power Holding Company of Nigeria, PHCN, to promptly meet its financial obligations to gas suppliers as a major reason why gas supply to power plants had been erratic, negatively affecting power supply nationwide. – Vanguard.

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