Yesterday, the federal government yielded to pressure from gas producers, announcing an 11% increase in the wholesale price of gas-to-power for generating companies (GenCos), jumping from $2.18 to $2.42 per million British thermal unit (MMBTU).
Gas producers had been advocating for this hike, citing the global surge in gas prices. This adjustment is poised to escalate the expenses of power generation, given that gas serves as a primary fuel for the majority of the country’s thermal power plants, constituting 80% of total power generation.
Moreover, this increase will amplify the subsidy burden on the federal government for electricity consumers, unless they permit the market to enforce a fully reflective tariff. Additionally, gas companies had curtailed supply to power plants since January due to long-standing unpaid invoices amounting to over $1.2 billion. To mitigate this, the government intervened by disbursing $120 million last month.
The federal government justified the price adjustment under the Petroleum Industry Act, entrusting regulatory bodies to set prices based on international benchmarks and cost evaluations, ensuring sustained gas supply for domestic needs.
