Electricity consumers in the country may have to brace up for tougher times the new tariff raise announced by the Nigerian Electricity Regulatory Commission (NERC) .
The new tariff imposes a maximum of N14 per kilo watt hour (KwH) structure for various categories of customers.
The regulator had recently announced moves to begin the implementation of its Multi Year Tariff Order (MYTO) designed in 2015 (for the period Jan. 1, 2016, to Dec. 31, 2018) and the Minimum Remittance Order for the Year 2019.
NERC in announcing the increase said that, it had determined and recognised the historical (2015-2018) tariff deficits pursuant to the objective of resolving the impairment of the financial records of DisCos arising as a consequence of the deficits.
“This order has taken into consideration the actual changes in relevant macroeconomic variables and available generation capacity in updating the operating MYTO 2015 Tariff Order for the period Jan. 1, 2016, to Dec. 31, 2018.
Despite NERC’s recent denials of tariff increase, comments from it and the publication of new tariff structure on its website suggest that indeed there were visible adjustments in what the consumers would now have to pay for a kilowatt of power.
Part of the publication announcing the MYTO 2015 Tariff Order for the period Jan. 1, 2016, to Dec. 31, 2018 read, ‘‘In line with the provisions of the MYTO Methodology (Amended) projections were made for macroeconomic variables for the year 2019 and beyond based on best available information.
“The Commission shall make necessary adjustments to reflect actual values at the time of the next minor review that will take effect on January 1, 2020.’’
Since the increase however, civil society groups and different consumer advocacy groups have vowed to resist the move in the face of the harsh business environment, coupled with lack of metering facilities which have led to huge estimated billing.
Effect of new tariff structure
Under the MYTO review expected to commence from 2020, residential consumers (R2) would pay a maximum N14 addition for every kilowatt-hour of energy, depending on their status and their distribution companies.
Customers under the Abuja DisCo who paid N24.30 kWh currently, will pay N31.96 in 2020, an addition of N7.66. However, the rate is projected to climb further to N33.34 by 2021.
For residential customers in the south-east under the Enugu Disco distribution franchise, there is an addition of N9.28 to their current charge. From the N30.93 they pay presently, the new tariff will see them paying N40.21 kWh.
According to the new tariff for residential customers under Kano Disco who currently pay N22.50kWh current charge will move up to N33.51 by 2020, which means N11.01 has been added to the old rate.
Even with the addition of just N9.38kWh to the tariff being paid by customers under the Benin DisCo franchise areas, they will be paying the highest amount in the country as the old bill of N31.27kWh will increase to N40.65. It is expected to move up to N42.13 by 2021.
Residential customers under Eko Disco who currently vend at N24kWh, will vend at N30.74, a difference of N6.74. For Ibadan Disco, the rate will move from N24.97kWh to N32.49, as N7.52 climbs the former tariff.
For residential customers under the Kaduna Disco, they will be paying a minimum of N6.69 as an addition to the current electricity rate of N26.37kWh. By 2020, the rate will become N33.06 and N35.05 by 2021.
However, customers of Jos Disco will cough additional N9.33kWh. From the current rate of N29.81kWh, they will pay N39.14 under the new regime and N48.96 by 2021.
The Port Harcourt Disco will increase its current charge of N30.23kWh to N39.56kWh in 2020, with further increase to N43.03kWh in 2021.
Yola Disco will charge N5 above its present rate of N23.25kWh. Hence, its residential customers will pay about N28.19kWh as the new rate. It is projected to jump up to N37.66kWh by 2021.
Of all residential customers in the country, consumers under the Ikeja Disco will continue to enjoy more goodwill as they will be paying less for electricity consumption in comparison to other Discos. Currently, the rate is a minimum N21.30kWh. By 2020, it will be N28kWh and N29.68 by 2021.
According to the Commission, the provision of cost reflective tariffs is to ensure that prices charged by the Discos are fair to customers, and are sufficient to allow them operate efficiently to recover the full cost of their activities, including a reasonable return on the capital invested in the business.
Disco make clarification
Director, Eko Electricity Distribution Company (EKDC), Mr. Geroge Etomi, explained that, there was no electricity tariff increase, adding that, what NERC simply did was to announce plans to begin the implementation of MYTO 2015, which has been on the ground ever since but not implemented.
He said the effect of the non implementation of the MYTO had resulted in accumulated revenue shortfalls for the Discos which had built up in their books but now removed, thus making them more bankable and moving their investments from the minus to positive territory.
Any review will be considered in accordance with the MYTO from next year. So let us make that clear to the consumers that, there is no increase in electricity tariff.
He said concerns about lack of regular power supply and poor metering have been some of the concerns raised by consumers in the face of the implementation of the MYTO 2015, agreeing that such concerns were valid.
He, however, noted that some of the drawbacks to the progress of the power sector was the non-implementation of the agreements on the part of the Federal Government, saying it is a chicken and egg situation.
Etomi said, he remained optimistic that between now and when there would be another tariff review, even if it means an upward review, so much would have been done to restore consumer confidence in the electricity industry.
But, the Consumer Rights Advancement Organisation (CRADO), has vowed to resist any attempt by the Discos to foist a new tariff on consumers without metering them.
President of CARDO, Mr. Adeolu Ogunbanjo, in a telephone interview with Daily Sun, said in as much as the group supports the call of Discos to have a cost reflective tariff, it was not in support of extortion through unreasonable estimated billing.
Ogunbanjo said consumers would be willing to pay more for electricity is they are provided with stable electricity and same appropriately captured through a robust metering plan that is fair to all concerned.
‘‘I suspect why the take off date for the new tariff regime is July 1, 2019, was because NERC wants to ensure that by that time, all electricity consumers would have been metered. But anything short of that, will mean that Government will continue to subsidise electricity tariff pending when that is resolved.’’
Former President of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, said: “These are charges not expected to be borne by electricity consumers under a deregulated regime. Yet consumers have no choice. NERC and its allies often cite high operating cost as reason for rise in tariff, forgetting that the high cost is itself a reflection of inefficiencies and, at times, corruption and mismanagement. Nobody would bother much to pay higher tariffs as proposed by NERC if the quality of service is commensurate because alternatives to power supply in this country are unbearable to households and businesses.”
Immediate past president of the Nigerian Association for Energy Economics, Prof, Wumi Iledare, faulted the way NERC currently operates. “Commissioners, in my opinion, cannot be involved in the day to day operations. They are political appointees and quite often, this constitutes a big problem, in my opinion. They need to let the skilled professionals supervise operations while they pay attention to the big picture of the commission and making final decisions,” he said.
He said the power sector laws were drafted in a hurry to justify the privatisation objective and called for a review. According to him, “Not much attention was paid to the cultural context of the country and the level of development at that time. Secondly, we tend to have too many experts with limited understanding of the principle of energy economics.”
Regarding tariff, he noted that the global best practice is to have an autonomous, independent and apolitical power commission with skilled professional workforce for rate determination, particularly with terms that are based on investment to deliver services.
“There should be nothing like Discos clamoring for new tariff increase without verifiable investment to build new capacity. Investments in MAP are not a justification for the new tariff. However, the current tariff rate is too low to guarantee power delivery. So, something has to be done and quickly too.”
The president, Nigerian Consumer Protection Network(NCPN),Mr. Kunle Olubiyo, also condemned the development, saying the decision was unilateral.
“Tariff is not the final solution. There are other areas of a regulatory regime that are not properly enforced. There are issues of collection and remittance inefficiencies and other issues. Electricity consumers are being made to bear the burden of the market. NERC needs to change its approach.
Doing a review retrospectively is not good for the consumer. There is not supposed to be a review that will cost so much impact. If the review is around five per cent, consumers will not feel it. This is out of negligence. It will affect the disposable income of consumers. Consumers need to be consulted,” he said.