NLC rejects $2.18 gas price for GenCos, demands reduction to $1.5 per SCF

The Nigeria Labour Congress (NLC) has rejected the reduction of domestic gas prices for electricity generation from $.2.50 to $2.18 per standard cubic feet (SCF), adding that the reduction “falls far short below expectation.”

Last week, Timipre Sylva, minister of state for petroleum resources, said the federal government had approved the downward review of gas-to-power for domestic supply obligation (DSO) by 32 cents to $2.18/MMBtu with immediate effect.

But in a statement on Thursday, Ayuba Wabba, NLC president, said the $2.18 new gas price violates the agreement between the federal government and organised labour.

He said the price runs contrary to the submission of the technical committee which submitted its final report to the principals at the close of January 2021.

“The meeting of Principals convened on 22nd February 2021 and discussed the report. The Principals accepted among other recommendations that “necessary actions should be taken to use efficiency to bring the gas price to below $1.50 per MMBtu,” the statement reads.

Wabba said the report was further corroborated by Chris Ngige, the minister of labour and employment, who said that electricity tariff ought to go down considerably.

“Congress also wishes the Nigerian public to know that about 80% of electric energy generated in Nigeria is from thermal stations, which are powered by natural gas,” the statement further reads.

“In fact, the GENCOs consume over 70% of domestic gas production. Whereas the GENCOs are required to pay as much as $2.50 per standard cubic feet (SCF), other gas users, however, get the same at lower rates, ranging from $1.50 to $1.70 per SCF. The worn explanation for the incongruous high differential was the lack of timely payment by the GENCOs for the gas supplied.

“In other words, the lack of payment discipline and certainty was implicated as a major contributing factor that despite GENCOs account for over 70% of the consumers of domestic gas, rates are higher for power generation.”

Wabba said the NLC also rejected the denomination of domestic gas pricing to GENCOs in foreign currency.

He said the congress insisted on a payment regime in naira not only for domestic gas but also, all energy associated products, which should be denominated in local currency.

Wabba explained that the government representatives, at the negotiating meetings were convinced by the argument of the NLC and unanimously accepted that the current practice of gas pricing in US dollars would be discontinued to enable gas supply to GenCos to be made payable in naira.

“From the foregoing, Congress is increasingly hard put to repose confidence on the discussions and agreement at the meetings. The resolutions of the Principals cannot certainly be the basis for the minuscule gas price reduction announced by Minister Timipre Sylva,” Wabba noted.

“Consequently, Congress demands of the Federal Government to reduce the pricing of domestic gas supply to GENCOs to less than $1.50 per SCF.

“We also demand that payment for gas by GENCOs should be denominated in Naira. Furthermore, the Gas Companies should be included in the Central Bank of Nigeria (CBN) and Nigerian Electricity Service Industry (NESI) payment waterfall to guarantee payments for gas and contract sanctity with GENCOs.

“Finally, Congress demands that the Federal Government should respect the agreement it reached with Labour on electricity tariff. Congress remains implacably committed to the ultimate reduction of electricity tariffs by N15 per kilowatt-hour by December 2021 as contained in the agreement.

“Congress hereby serves notice that the posture of the Federal Government to flout agreements is completely unacceptable and would be resisted.”