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Fashola defends electricity tariff hike

By on February 4, 2016

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, on Tuesday justified the 45 per cent increment in electricity tariff, which took effect on Monday, stressing that the action remained the only way to enhance stable power supply in the country.

Fashola, who stated this when he appeared before the Senate Committee on Power, explained that an Act of the National Assembly actually empowered the Nigerian Electricity Regulatory Commission to increase tariff, hence it would not be able to stop the implementation of the new tariff regime at this stage.

He explained that the rise in the cost of procuring raw materials to generate electricity was one of the reasons for increasing the tariff and that the best way to sustain the current stable power supply in the country.

He said, “Electricity is a product; it is made from raw materials; some of the raw materials are gas, power plants; they are also related. So, the issue of tariff is the single issue of price; when the raw materials of course go up, the price cannot stay the same.

“Investments in power are not where they should be and part of the reason why the government opted for privatisation was to get more private capital. If the recovery price and the income and profit do not make economic sense to the investor, would you do that business if you are the one?”

Fashola maintained that the Federal Government and consumers had a duty to sustain the current tempo in the power sector by encouraging the power generating firms to produce maximally at the right price level.

He said, “Everybody is owing everybody in the power equation and they are also owing the banks. Now, if you want investment in power, the banks must continue to see confidence to lend; if they do not see a recovery tariff, then they will not lend money.

“There are a lot of investors who want to pay a little more than the open market tariff; if we want them to come into the industry, we have to allow the new tariff order, which allows for embedded order. There are a lot of people producing excess power, they want to put it on the grid but the price must be right.

“In the process of privatisation, the government was perhaps unwilling to confront Nigerians with the real market price so it was reviewing the price every two years. That gave the impression that price is reviewed every two years, but that should not have been; government should have told us what the price was.”
[Punch]