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Electricity: FG unveils plan to unbundle TCN into two entities

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The Federal Government has disclosed that the Transmission Company of Nigeria, TCN, would be unbundled into two distinct entities.

A day after the power grid collapsed for the second time this year, the Federal Government has disclosed that as part of the overall reform of the sector, the Transmission Company of Nigeria, TCN, would be unbundled into two distinct entities.

The government admitted that TCN, which is responsible for managing the national power grid as well as delivering bulk electricity to distribution companies and eligible customers, has been identified as the weakest segment in the Nigerian Electricity Supply Industry, NESI.

Speaking in Abuja yesterday at the opening of a Ministerial Retreat organized by the Federal Ministry of Power, the Minister of Power, Chief Adebayo Adelabu said TCN would be restructured to become the Independent System Operator, ISO and the Transmission Service Provider, TSP.

The three-day retreat has the theme: The integrated national electricity policy and strategic implementation plan: Navigating and aligning on the path to enhanced electricity reliability.

Chief Adelabu explained that the restructuring must synchronize with the evolving landscape of State Electricity Markets, addressing calls for the decentralization of the national grid into regional grids interconnected by a new higher voltage national or super-grid.

He observed that the goals of the reforms introduced by the government to improve power supply have largely remained unmet, urging stakeholders and operators to renew their efforts to ensure that these were achieved.

According to him, “one of the main objectives of the Nigerian electricity sector reform programme initiated over 23 years ago is to make electricity available to consumers across the country with efficiency and consistency, which in turn lead to general reliability and affordability. Even as electricity consumption per capita was at 140 KWh in 2021, relatively low in comparison to neighbouring countries and almost three times lower than the average for Sub-Saharan Africa, Nigeria is a case study in a deep electricity paradox.

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Nigeria has grown to become the host of probably the world’s largest fleet of diesel- and petrol-powered generation capacity that is utilized for base load supply. Various figures have been mentioned but it is safe to say that this fleet measures no less than 40,000MW of total capacity. At an average operating cost of no less than N250/kWh as opposed to an average economic tariff today of approximately N120/kWh (weighted between petrol and diesel generation), the daily cost of this extreme inefficiency in electricity supply in Nigeria, is measurable in tens of billions of Naira daily.

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This is hard-earned money that would better be deployed to savings, discretionary consumer spending and tax revenue for governments instead of being literally burnt and going up in diesel and petrol emissions that harm our environment and contribute to incessant noise pollution in many of Nigeria’s cities”.

Chief Adelabu who expressed satisfaction at the large and quality turn out for the retreat, said the outcome would be implemented in full.

He expressed regret over the second power grid crash on Monday, explaining that it happened for a few hours and “was operational again. It was not due to strategic faults in the grid. Immediately it collapsed, our people swung into action and made sure the grid was restored”.

NERC projects N1.6trn subsidy in 2024
In his presentation, the Chairman, Nigerian Electricity Regulatory Commission, NERC, Engr. Sanusi Garba disclosed that without a cost reflective tariff the government would have to pay about N1.6 trillion to subsidize electricity tariff shortfall in 2024.

He explained inflation and the Federal Government decision to unify the foreign exchange market have pushed cost reflective tariff to N124/kWh from the subsidized N73/kWh charged to Band-A customers, adding that this year alone, subsidy is expected to top the N600 billion mark.

He disclosed that the financial burden due to tariff subsidies between 2015 and 2022 stood at N2.8 trillion, adding that it was imperative that the government supports the review of end user tariff to minimize fiscal burden in the sector.

He therefore proposed the implementation of an automatic monthly tariff adjustment to manage volatilities in foreign exchange and inflation.

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