The Federal Government has committed to bridging the revenue gap for the Kano Electricity Distribution Company caused by the difference between cost-reflective tariffs and actual tariffs paid by customers.
This was detailed in a September 2024 Supplementary Order issued by the Nigerian Electricity Regulatory Commission under the Multi-Year Tariff Order framework, released on Thursday.
Effective from September 1, 2024, the order addresses financial imbalances arising from factors such as exchange rate fluctuations and inflation.
According to the document, the government will fund the difference between cost-reflective tariffs and actual tariffs paid by consumers during a gradual transition to fully cost-reflective prices, providing safeguards for less privileged customers.
The commission reviewed several key indices, including the Naira-to-US Dollar exchange rate, set at N1,601.50/US$1 for September–December 2024, and Nigeria’s inflation rate of 33.40% for July 2024, to adjust KEDCO’s revenue and tariffs for the rest of the year. These revisions are intended to ensure KEDCO can meet its financial obligations despite cost pressures.
The Federal Government’s intervention will be managed by the Nigerian Bulk Electricity Trading company, ensuring that all market invoices from generating companies are fully settled.
The order also outlined KEDCO’s service commitments under the Service-Based Tariff framework, requiring the company to deliver specific minimum hours of electricity supply to consumers across various tariff bands.
Additionally, KEDCO is mandated to upgrade its infrastructure by procuring 27MW of embedded generation capacity, with at least 50% sourced from renewable energy.
This financial support aims to stabilize the electricity market while shielding consumers from the full impact of cost-reflective tariffs during the transition. NERC has committed to monitoring KEDCO’s compliance through near real-time data on electricity supply.
The government’s intervention is expected to help KEDCO meet its market obligations while maintaining essential service delivery.
