The Nigeria Employers’ Consultative Association (NECA) says the proposed hike in electricity tariff is necessary to get the power sector back on track.
Its Director-General, Mr Timothy Olawale, said on Monday in Lagos that putting the tariff concerns in context, the issue of the increment was intended to enable the sector realise the right price for the product.
Olawale explained that cost reflective tariff was important to ensure that provider of the commodity or service could cover operational and capital expenses in order to stay in business and deliver on service
“The issue of tariff has remained topical in the sector since shortly after privatisation.
“The Nigerian Electricity Regulatory Commission (NERC) has said that the electricity tariffs being paid by consumers would increase in April this year.
“NERC disclosed this in its ‘December 2019 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2020, which was dated Dec. 31, 2019.
“Though, the proposed increase in tariff might cause a shock from the consumers’ perspective, it is, however, a necessity in order to get the power sector back on track.
“While customers have said the tariff review should only take place after there has been improvement in service, service providers have said for service to improve, the right amount has to be paid.
“The argument has always been a cyclical one, but putting the matter in context, therefore, the issue of the increase is intended to enable the sector realise what can be described as right price for the product.
“It is with this right that more investment can be attracted and consequently, improved service,” he said.
On the challenges of regular power supply and imperative for appropriate pricing of electricity, the NECA boss said that tariff reviews were expected.
“There had been minor and major reviews to adjust all the variables that make up the tariffs such as generation volumes, forex price and all these play a role in determining the tariffs.
“NERC, for some reasons, had delayed implementation of minor reviews that should normally occur bi-annually by regulation.
“The NERC tariff order in June 2019 took all these into account and adjusted the variables to ensure a cost reflective tariff.
“While the Discos have had six minor reviews, totalling 16 per cent, micro and macro-economic indices have affected the ability of the DisCos to meet their cost.
“However, the Generation Companies has had several reviews bringing their percentage increase to about 116 per cent,” he said.
While urging the DisCos to justify the proposed tariff hike, Olawale said that consumers and businesses were not opposed to paying appropriate price for electricity consumed.
According to him, the major contention has been estimated and sometimes outrageous billing for power not consumed, with implication on cost of living and cost of doing business without a guarantee of commensurate improvement in quality of service.
“The DisCos would do well to fast-track the provision of prepaid metres, the GenCos should ensure availability of power for the DisCos to distribute and government should support the DisCos to curb the rampant incidences of electricity theft across the nation,” he said.
NERC Chairman, Professor James Momoh, addressing a news conference in Abuja on January 6, 2020.
Following an outcry over the decision to increase electricity tariffs in the country, the Nigerian Government says the implementation will commence in April.
The Chairman of the Nigeria Electricity Regulatory Commission (NERC), Professor James Momoh, stated this while addressing a news conference on Monday in Abuja, the nation’s capital.
On Saturday, Channels Television reported that NERC has approved the immediate review of electricity tariffs across the country.
A series of documents dated December 31, 2019 indicate an increase that ranges from 59.7 per cent to 77.6 per cent.
The increase affects all categories of electricity consumers, except those classified as residential (R1) whose N4 per kWh charge was left unchanged.
According to the documents jointly signed by Professor Momoh and the Commissioner for Legal, License, and Compliance, Dafe Akpeneye, the NERC said the reviewed tariffs were effective January 1, 2020.
The development affects the 11 Distribution Companies (DISCOs) in the country such as Abuja DISCO, Benin DISCO, Enugu DISCO, and Eko DISCO.
Others are Ibadan DISCO, Ikeja DISCO, Jos DISCO, Kaduna DISCO, Kano DISCO, Port Harcourt DISCO, and Yola DISCO.
This sparked widespread criticism of the government, apparently forcing the NERC to make further clarification on the controversy.
At Monday’s press conference, Professor Momoh explained that the review of the Multi-Year Tariff Order (MYTO) does not mean an immediate increase in tariff for electricity consumers.
He added that the commission would engage the public on the planned review in the next three months, before deciding on any implementation.
The NERC boss also said the electricity body would begin the regulation of estimated billing by electricity distribution companies who fail to provide meters for their customers.
In a bid to further explain the rationale behind its decision, the regulatory body issued a statement.
Read the statement below:
TARIFF REVIEW CLARIFICATION.
We make this statement to inform all our esteemed customers that we are not unmindful of news making the rounds that Electricity tariffs have been increased effective January 1 2020 as reported in some print and electronic media.
For clarity and improved understanding, we state the following points:
The Nigerian Electricity Supply Industry (NESI) is primarily regulated by the Nigeria Electricity Regulatory Commission (NERC).
NERC is empowered by the EPSR Act (EPSRA) to make Orders and Declarations in a manner promoting efficiency and sustainability within the NESI.
NERC is empowered by EPSRA to carry out minor reviews of the Multi-Year Tariff Order (MYTO) 2015 (the Electricity Tariff), twice a year.
An accurate electricity tariff assists greatly in ensuring efficient power supply delivery from the different stages of the electricity process, from Generation through Transmission to Distribution, as it assures stakeholders and participants of their costs recovery and return on investment. This makes the business viable.
NERC has just reviewed the MYTO 2015 and has published an Order on Tariffs and Minimum Remittance for Jan-June 2020.
The tariffs anticipate changes in the currency exchange rates between the United States and Nigeria, changes in the rate of inflation and Gas prices.
The Tariffs shall remain the same as they presently are (i.e. 2015 levels) until April 01 2020 when there will be a slight increment to cater to tariff shortfalls which shall be gradually passed on to the consumer until this is fully completed by the end of 2021.
In view of the foregoing, we state emphatically that there shall be no change or increase in the existing Electricity tariff until April 01 2020 when the new adjusted tariffs shall begin to gradually reflect the dynamism of our macro-economy.
We sincerely hope that this statement substantially clarifies the accurate position and allays any fears and concerns, our esteemed customers may have.
The Nigerian Electricity Regulatory Commission (NERC) has denied media reports that it plans to increase electricity tariff soon.
In a statement released and signed by its spokesperson, Usman Arabi, the NERC says it has no immediate plans to increase electricity tariff.
”The attention of the NERC has been drawn to the publication in several electronic and print media that end-user electricity tariffs have been increased following the approval of the minor review (2016 – 2018) of the 2015 Multi Year Tariff Order on Aug. 21, 2019. We wish to provide guidance that the minor review implemented by the commission was a retrospective adjustment of the tariff regime released in 2015.
This is to account for changes in macro-economic indices for the years 2016, 2017 and 2018 thus providing certainty about revenue shortfall that may have arisen due to the differential between tariffs approved by the regulator and actual end-user tariffs.
The commission therefore wishes to notify the general public that no tariff increase has been approved by the commission vide the order.”
The statement further added that the NERC, in the discharge of its statutory responsibilities enshrined under the Electric Power Sector Reform Act, would continue to undertake periodic reviews of electricity tariffs in accordance with the prevailing tariff methodology and that the commission will widely consult with stakeholders on electricity tariff increment whenever the need arises.
There are indications that Nigerian electricity consumers are in for a rough patch as power supply is said to have dropped from 3,993.65 megawatts, MW, to 3,608 MW.
According to a Vanguard report, this is as a result of “inadequate gas, poor transmission infrastructure and limited distribution facilities.”
The paper quoted a source from the office of Vice President, Yemi Osinbajo, as saying that “On January 2, 2020, average energy sent out was 3,608 MW/Hour (down by 385.65 MW from the previous day). 2,026.5 MW was not generated due to unavailability of gas.” It further noted that “60 MW was not generated due to unavailability of transmission infrastructure, while 2,417.1 MW was not generated due to high frequency resulting from the unavailability of distribution infrastructure. The power sector lost an estimated N2, 162,000,000 (Two Billion One Hundred and Sixty-Two Million Naira) on January 2, 2020, due to constraints from insufficient gas supply, distribution infrastructure and transmission infrastructure.”
It has emerged that Nigerians will henceforth be paying more for power following the directive given to 11 electricity distribution companies aka (DisCos) by the Nigerian Electricity Regulatory Commission (NERC) to raise electricity tariff beginning from January 1.
According to a report gathered from Cable newspaper online, “James Momoh, NERC chairman, and Dafe Akpeneye, its secretary, gave the directive in a memo sent to the DisCos.
“The commission had published the new tariffs for the different DisCos and categories of customers on its website via an order dated December 31.
“According the order, the new tariff was reached based on data obtained from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS) and the US rate of inflation.”
It quoted the commission as saying that “other orders issued on the subject matter, and shall take effect from 1st January 2020 and shall have an effect on the issuance of a new Minor Review Order or an Extraordinary Tariff Review Order by the NERC.”
According to the paper, for instance, ‘“Abuja Electricity Distribution Company (AEDC) residential customers R3 that were paying N27.20 per unit will now pay N47.09.
‘For the Ikeja Electricity Distribution Company (IKEDC) customers, the R3 category paying N26.50 per unit will now pay N36.92 per unit.
“An increase was also recorded in the commercial customers C3 category that paid N24.63 per unit in 2015. They are now expected to pay N38.14 per unit.
“The industrial customers of the IKEDC D3 category who paid N25.82 per unit, the charges have been increased to N35.85 per unit.
“Enugu Electricity Distribution Company residential (R3) customers who were paying N27.11 per unit in 2015 are to now pay N48.12 per unit.
“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,” it read.
‘“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 weighted average cost of the wholesale of energy.”’