Explainer: What is cost reflective electricity pricing and how does everyone benefit? (1)

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In the last six years, Nigerians have embarked on a quest to make electricity consumption and supply more efficient through privatisation, based on the belief that private sector actors working with market forces of demand and supply would help rectify the ailments in the sector.

However, the privatisation process has been slow to produce the desired outcomes in terms of attracting fresh investments across the sector’s value chain of generation, transmission and distribution of electricity.

Lack of fresh investments into the sector have brought some electricity distribution companies (Discos) to the edge of bankruptcy and caused investment shortfalls of close to N1.4 trillion. These investment gaps account for the fact that Nigerians do not enjoy the benefits of steady electricity supply.

A major function of the Nigerian Electricity Regulatory Commission (NERC) as contained in section 32(d) of the Electricity Power Sector Reform (EPSR) Act, 2005 is to ensure that the prices charged by licensees are fair to customers and sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation.

To make the sector self-sustaining without bailouts from the government, cost-reflective electricity pricing has been called for. But what is cost reflective electricity pricing and how will it benefit everyone?

Cost reflective electricity pricing requires Discos to introduce tariffs that more strongly reflect their underlying costs. Good tariffs should be efficient, equitable, provide stable bills for consumers and revenue for businesses, and be acceptable to customers. There are several types of cost-reflective tariffs, and each fulfills these criteria to a greater or lesser extent.

An average retail electricity price today is N32 per kilowatt hour, for a product that has an average retail price of N80 per kilowatt hour on a cost reflective basis. This includes the debates … Read More...

AEDC reads riot act to field officers, declares zero tolerance on fatalities

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Managing director and CEO of Abuja Electricity Distribution Company (AEDC), Ernest Mupwaya, has told officers in charge of operations in the field that the company will no longer tolerate any form fatality both to the workers and members of the public.

According to Mupwaya, he prefers that the work is not done than for what is done to be the source of accident or death to any one, whether staff or members of the public.

Mupwaya made the declaration when he proclaimed the creation of an Inspectorate Division in the company and handed it over to the director of Risk and Compliance – Collins Chabuka, whose directorate will oversee the activities of the Division.

Any staff that does any act adjudged to be capable of causing any electrical accident or electrocution will be treated the same way as the staff found guilty of the actual act, he said. He said the sanction that would be imposed on such employees might include the loss of employment.

In a company statement made available to newsmen by the general manager, corporate communications, Oyebode Babs Fadipe, the MD/CEO said the company had carefully structured its operations to ensure that in pursuit of service delivery and profitability, “it does not do any act that can damage the business environment.”

Some of which he listed to include damage within the workers, damage to the community at large and such other damage that could create negative environmental impact.

“It is not by accident that the issue of Health, Safety and Environment (HSE) is a Board level matter,” he said, adding that such recognition demonstrated in very clear terms the importance attached to HSE by AEDC.

Tracing the transformation journey of AEDC, he noted that the company had gone through various levels of … Read More...

10 years later, off-grid solar industry delivers power to millions

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Since 2009 the off-grid solar energy has delivered quality energy services to hundreds of millions of people, something traditional electricity utilities had been unable or unwilling to serve, say World Bank analysts Dana Rysankova and Russell Sturm in a report for the organisation.

The report said that in 2009 off-grid solar was almost completely unknown as Lighting Africa kicked off in Kenya. Today the industry is thriving across sub-Saharan Africa, Asia, and beyond.

While in 2010 only six products met Lighting Global Quality Standards –today nearly 40 million units of over 150 quality verified products have been sold. A gray market of less reliable products also flourishes alongside, the report observes.

The impact of this growth is seen in Nigeria in thousands of new connections established daily in rural areas where grid electricity is non-existence. With over 80 million people without energy access in Nigeria and the utilities burdened by liquidity constraints, the off-grid energy sector is poised to close the gaps.

“The off-grid energy sector has been succeeding primarily on commercial terms, with over $500 million in investment pouring into the sector in the past two years. Electrification in Sub-Saharan Africa is now out-pacing population growth – which is largely attributed to off-grid solar expansion,” says the report.

New businesses have been created and it has helped stir competition. “One of the signs of a healthy dynamic is increasing levels of competition. These competitive forces stimulate innovation, efficiency, and reach, strengthening an industry’s long-term viability and building market resilience.

The story of the older and more mature solar PV manufacturing sector provides context for the younger off-grid solar industry: In 2012 alone, at the peak of the solar PV manufacturing industry’s shake-out period, some 40 companies closed operations and another seven companies were absorbed … Read More...

Electricity regulator rises from slumber, sanctions erring operators

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Cummins Power Generation Nigeria Limited (CPGNL) has become the third company ordered to pay millions of naira in fines for infractions against its licence in an indication that the electricity regulator is now awakening to its responsibility of regulating Nigeria’s floundering electricity sector. In an order published May 28, the Nigerian Electricity Regulatory Commission (NERC)…

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