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FG orders increase in electricity tarriffs

The 11 electricity distribution companies (DisCos) have the mandate of the Nigerian Electricity Regulatory Commission (NERC) to effect the tariff increase from April.

These are:

(1) Abuja Electricity Distribution Company,

(2) Benin Electricity Distribution Company,

(3) Enugu Electricity Distribution Company,

(4) Eko Electricity Distribution Company,

(5) Ibadan Electricity Distribution Company,

(6) Ikeja Electricity Distribution Company,

(7) Jos Electricity Distribution Company,

(8) Kaduna Electricity Distribution Company,

(9) Kano Electricity Distribution Company,

(10) Port Harcourt Electricity Distribution Company and

(11) Yola Electricity Distribution Company.

Consequent upon the NERC directive, Abuja Electricity Distribution Company (AEDC) residential customers R3 will now pay N47.09 per unit as against the current N27.20, while Ikeja Electricity Distribution Company (IKEDC) customers in R3 category will pay N36.92 per unit instead of N26.50. Commercial customers C3 category will start paying N38.14 per unit instead of N24.63 and industrial customers of the IKEDC D3 category who are currently paying N25.82 per unit will henceforth pay N35.85 per unit.

Enugu Electricity Distribution Company residential (R3) customers who currently pay N27.11 per unit will start paying N48.12 per unit. NERC said the order was pursuant to Section 32 and 76 of the Electric Power Sector Reform Act aimed at providing a cost reflective tariffs that ensures prices charged by licensees are fair to consumers.

The commission also directed the DisCos to complete settlement of market invoices. “All DisCos are obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall,” NERC said, adding: “In the determination for compliance to the minimum remittance threshold in this Order, the commission shall consider verified receivables from MDAs for the settlement period and DisCos’ historical collection efficiency for MDAs.

“The commission shall hold the TCN responsible for deviation from the economic dispatch Order that adversely impact on the base weighed average cost of the wholesale of energy.” NERC last approved an upward review of tariff in July. The commission said the tariff adjustment was based on the relevant data it obtained from the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) such as average monthly inflation rate of 11.3 per cent, exchange rate of N309.97.

It also added that it obtained its data on inflation rate from the US rate of inflation, which projected 1.8 percent for the period of January to October 2019. It said that all DisCos are “obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall.” It added:”in the determination for compliance to the minimum remittance threshold in this Order, the commission shall consider verified receivables from MDAs for the settlement period and DisCos’ historical collection efficiency for MDAs.

“The commission shall hold the TCN responsible for deviation from the economic dispatch Order that adversely impact on the base weighed average cost of the wholesale of energy. All FGN intervention from the financing plan of the PSRP for funding tariff shortfall shall be applied through NBET and the MO to ensure 100 percent settlement of invoices issued by market participants.Under this framework, the minimum market remittance by AEDC is determined after deducting the revenue deficient arising from tariff shortfall from the aggregate NBET and MO market invoices. AEDC shall be availed the opportunity to earn its revenue requirement only upon fully meeting the following obligations and subject to efficient operations.”

The increase in tariff is coming at a time the majority of Nigerians are displeased with the poor and epileptic supply from the Discos. The national grid collapses at will, disrupting socio-economic activities. Many households cannot afford to store food items in freezers while commercial and industrial companies spend huge sums to generate their own power, resulting in high production costs. Only last week, residents of Yenagoa stormed the streets to protest a blackout that left them without electricity for about 10 days.

Angry youths besieged the Port Harcourt Electricity Distribution Company to drive home their grievances. The power company insisted it was struggling with a shortfall due to unpaid bills totaling running into billions of naira. Power output currently hovers around  4,000 megawatts.

Mixed reactions trail new electricity tariff

Nigerians have reacted to the new electricity tariff announced by the federal government, describing it as anti-people.

Speaking in a chat with our correspondent last night, Chinedu Bosah, National Coordinator, Coalition of Affordable and Regular Electricity (CARE) said the action stands condemned because it was yet another way of impoverishing the masses.

According to him, “We’re condemning it on the basis that the working masses are already overburdened.  They are not considering the plight of the masses. They are relying on the inflation rate being given by the Central Bank of Nigeria (CBN).”

“What we are demanding for is for them to reverse it. This increase will only provide opportunity for the Discos, Gencos and to profiteer at the detriment of the working masses,” he stressed.

Echoing similar sentiments, Ibrahim Usman, Chairman, Infrastructure Committee of Manufacturers Association of Nigeria (MAN) said, “The issue of tariff hike at this time is a very big shock and it is not good enough.”

Besides, he lamented the fact that there were no wide consultations as the federal government took a unilateral decision.

“Definitely, this will affect everyone, especially our members. We expected that all the stakeholders should have been involved during the decision taking towards increasing the tariff. The DISCOs ought to have carried all of us along, because there is a major and a minor review. Traditionally, the National Electricity Regulatory Commission (NERC) would have been part of meeting where they decided to increase tariff.”

While admitting that Nigerians desire stable and steady supply of electricity, he however warned that “electricity tariff should be made in such a way that it will attract investors. We must make sure that we have a tariff that is acceptable to all stakeholders to be able to take care of the cost of electricity generation.”

This view however runs contrary to the position canvassed by Chief Sunday Oduntan, Executive Director, Research and Advocacy of the Association of Nigerian Electricity Distributors (ANED).

While reacting to the new tariff regime, Oduntan who said the Association is still trying to study the new development was however quick to add that a lot of factors determined the cost of electricity.

“Most Nigerians fail to factor in a lot of f indices in costing electricity. Cost of electricity has foreign exchange component, exchange rate, interest rate, lending rate, cost of gas to mention just a few. All these are very important when you’re talking about cost of electricity,” he said.

Pressed further, the AMED boss said, “If you’re producing at a loss there is no way you can survive as a business.”

The cost of electricity, he stressed, “Has to be a cost that will reflect the cost of production. “I’m not commenting on the figure or percentage,” he said, adding, “Any product must reflect the cost otherwise it’s a recipe for chaos. We all must support the government quest to make electricity available. And it can only be available if we are mindful of cost. I can tell you for a fact that since 2013, the electricity distribution companies have been running at a lost and that’s why we have problem with the issue of efficiency.”

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Victor Akande

Victor Akande, a blogger by profession for the past 7 years. He studied Mathematics at the University of Nigeria, Nsukka Contact: +2348053316946 Twitter: @Newsflash2471

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