The Federal Government has promised to pay for the income differential resulting from the cost-reflective prices less the actual tariffs paid by Kano Electricity Distribution Company (KEDCO).
This was covered in a supplementary order published in September 2024 by the Nigerian Electricity Regulatory Commission (NERC), inside the Multi-Year Tariff Order (MYTO) structure.
Effective from September 1, 2024, the rule addresses financial difficulties resulting from elements such inflation and changes in exchange rates. It details how the government intends to progressively use cost-reflective tariffs to safeguard low-income consumers.
The Federal Government will compensate for the difference between the approved tariffs and what consumers pay during this changeover. Based on important data including the currency rate and inflation, NERC clarified that it changed KEDCO’s rates for the remainder of 2024.
For September to December 2024, the Naira to US Dollar exchange was established at N1, 601.50/US$1; the Nigerian inflation rate for July 2024 was then applied at 33.40%.
The financial support of the government will guarantee KEDCO’s ability to fulfill its debt even with growing expenses.
With Nigerian Bulk Electricity Trading (NBET) handling payments to guarantee complete settlement of invoices from power generating firms (GenCos), this government subsidy would be controlled through budget allocations and other funding sources.
The order also holds KEDCO responsible for delivering the promised power supply under the Service-Based price structure, therefore guaranteeing consumers in various price bands obtain the designated minimum hours of supply.
KEDCO also has to update its infrastructure and acquire 27MW of embedded generating capacity by 2024, of at least half of which comes from renewable energy.
This government financial support is supposed to help to stabilise the electricity market throughout the changeover and protect consumers from tariffs’ whole cost.
Using technologies to track the actual hours of energy supply in almost real-time, NERC will keep close eye on KEDCO’s service obligations.
