Tango over power tariff hike

From the Nigerian Electricity Regulatory Commission (NERC), power distribution companies to the customers, all major stakeholders in the power value chain remain sharply divided over implementation of the Multi-Year Tariff Order. Adeola Yusuf writes

 

T

he power sector was penultimate Monday enveloped by confusion. The simple reason for that bickering was the plan to hike tariff for electricity consumers across the country.

 

The move earlier announced by the Federal Government sharply polarized the Nigerian Electricity Regulatory Commission (NERC) and the 11 power distribution companies (Discos). It also widened the gulf between the DisCos and the customers.

While the disCos declared that they shall enforce the new electricity tariffs beginning from April 1, NERC bluntly denied that there were “plans for immediate increase in electricity tariffs at the moment or nearest future.”

 

Insisting that NERC “has just reviewed the Multi-Year Tariff Order (MYTO) 2015 and has published an order on tariffs and minimum remittance for January to June 2020,” the distribution companies said through a statement obtained by New Telegraph that they were going ahead with the implementation of the tariff hike in less than 90 days.

No pre-paid meters, no hike

Electricity consumers in Nigeria declared that the planned increase in tariff by NERC would amount to nullity if all customers are not properly metered.

 

Declaring the plan as inhuman, ungodly and unjustifiable, two umbrella groups for consumers, Energy Consumer Rights and Responsibilities Initiative and the All Electricity Consumer Protection Forum, unanimously declared to New Telegraph last Sunday that “what they (NERC) need to do is to meter all electricity customers, so that we can end the issue of estimated billing.”

 

The consumer groups kicked against increasing tariff for end-user customers, declaring any such effort as inhuman.

 

National President, Energy Consumer Rights and Responsibilities Initiative, Suraj Fadairo, stated that increasing the cost of electricity was unjustified based on present realities and this could not be the solution to Nigeria’s energy crisis.

He said: “If they want to increase tariff because the distribution companies are under remitting due to debts by consumers, that will not solve the problem.

“If people are refusing to pay now because they are disputing their bills will they now pay if it is further increased?

 

“What they need to do is to meter all electricity customers, so that we can end the issue of estimated billing.”

 

From the consumer point of view, he continued, “we are totally against any increment because power generation and supply have not improved significantly in the country.”

 

Corroborating Fadairo’s view, National Coordinator, All Electricity Consumers Protection Forum, Adeola Samuel-Ilori, said that the planned increase was totally uncalled for in all ramifications.

 

“The basis for such increase at this time can’t be justified in that consumers have not been metered and they still purchase transformers and other line materials by themselves with attendant extortion via estimated billings,” he said.

”All these are not taken into consideration and extensively dealt with before contemplating tariff increase.”

 

Some of the electricity consumers who have been paying N27.11 per kilowatt hour (kWh) bill are now expected to be charged N48.12 per kWh as the 11 distribution companies (Discos).

 

Though NERC has denied the move, the order was issued to the 11 electricity distribution companies (DisCos) on December 31, 2019, but published on the commission’s website on Saturday.

 

 

Entitled; “December 2019 MYTO Minor Review Order,” for the 11 DisCos, the order was signed jointly by the Chairman of the Commission, Joseph Momoh, and the Commissioner for Legal, License & Compliance, Dafe Akpeneye.

 

The affected Discos include Abuja Electricity Distribution Company, Benin Electricity Distribution Company, Enugu Electricity Distribution Company, Eko Electricity Distribution Company, and Ibadan Electricity Distribution Company.

 

Others are Ikeja Electricity Distribution Company, Jos Electricity Distribution Company, Kaduna Electricity Distribution Company, Kano Electricity Distribution Company, Port Harcourt Electricity Distribution Company and Yola Electricity Distribution Company.

The new bill

The various tariff reviews for all categories of consumers — except those consumers classified as residential (R1) — ranged from 59.7 per cent for consumers in Ikeja to 77.6 per cent in Enugu.

 

Under the new order, electricity consumers in Ikeja who used to pay about N13.34 per kWh since under the 2015 MYTO when the last review was carried out will from January 1 this year pay N21.80 per kWh, same as their R2 counterparts.

Their counterparts in Enugu who used to pay about N17.42 per kWh will, under the new order, pay about N30.93 kWh from January 1.

 

Their R2 and R3 counterparts who paid about N19.31 and N27.11 per kWh since 2015, will now be paying N34.28 and N48.12 per kWh.

 

Residential (R2) and R3 consumers in Ikeja, who have been paying N13.34 and N26.5 per kWh since 2015, will now be paying N21.30 and N21.80 per kWh.

 

Residential consumers are those categorised as those using singe phase and three-phase meters and electricity consumption of about 50 kWh in premises with flats exclusively for residential purposes.

 

NERC said the new order updates was based on actual changes in macroeconomic variables in generation capacity as at October 31, 2019, including inflation rate of 11.3 percent for January to October 2019.

 

The order was also based on exchange rates of N306.9 plus one percent premium which is about N309.97 to the dollar and gas price of $2.50 per million metric tons BTU and gas transportation cost of $0.80 per MMBTU

 

Basic assumptions that guided the review included exchange rate of N310, generation cost of N23 per kWh, transmission cost of N7.8 per kWh, transmission and admin cost of N3.99 per kWh.

 

The order, the commission said, superseded “other orders issued on the subject matter, and shall take effect from January 1, 2020.”

 

The R3 consumers who use maximum demand low voltage who have been paying N26.5 per kWh in Ikeja will now be paying N36.49 per kWh, compared to their counterparts in Abuja who have been N27.20 per kWh since 2015, who will now be paying N47.09 per kWh, same as their R4 consumers.

 

The review also affected the tariffs for other categories of consumers, namely commercial, industrial and special.

 

Commercial consumers are those who use premises for any purpose other than exclusively as residence or as a factory for manufacturing goods.

The industrial consumers are customers who use their premises for manufacturing goods including welding and iron monger.

 

The special customers include those involved in agriculture (excluding agro-allied enterprises involved in processing), water boards, religious houses, government and teaching hospitals, government research institutes and educational establishments.

Under the new tariff order, commercial customers who have been paying between N20.45 and N27.20 per kWh since 2015 will now be paying between N37.39 and N47.09 per kWh.

Their industrial customers who have been paying between N20.95 and N27.22 per kWh in Abuja, will now be paying between N36.07 and N47.09 per kWh under the new dispensation.

 

Also, those in the special category who have been paying about N20.06 per kWh in Abuja since 2015, will now be paying about N35.74 per kWh.

 

The order, NERC said, 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.

 

Besides, such prices are supposed to be sufficient for licensees to operate efficiently to recover the full costs of their activities, including reasonable returns on the capital invested in the business.

 

In issuing the order, Section 17 of the MYTO 2015 expects that changes in the variables in the economy outside the control of DISCOs, including inflation rates, foreign exchange rates, gas prices and available electricity generation capacity will be taken into consideration.

 

The order will also reflect the market shortfall for years 2019 and 2020 as well as determine the minimum remittances payable by the DISCOs in meeting their market obligations on the allowed tariff to allow the settlement of invoices by Nigerian Bulk Trading and the market operator.

 

NERC’ action

 

Under the new tariff order, NERC insists “all Discos are obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall.

“In the determination for compliance to the minimum remittance threshold in this Order, the Commission shall consider verified receivables from MDAs (ministries, departments and agencies) for the settlement period and DISCos’ historical collection efficiency for MDAs.

 

“The commission shall hold the TCN (Transmission Company of Nigeria) responsible for deviation from the economic dispatch order that adversely impact on the base weighed average cost of the wholesale of energy.

The U-turn

 

This came as the NERC made a U-turn over the plan, declaring that it had not given any approval to the hike.

The commission had earlier on Saturday issued an order to the eleven distribution companies (Discos) to begin a new tariff regime, which hiked the tariff to as much as 78 per cent.

 

The NERC, however, said in another document on its website that no tariff increase has been approved by the commission yet.

 

General Manager, Public Affairs (NERC), Mr Usman Arabi, made the clarification in a statement sighted on the agency’s website.

 

“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 wish to notify the general public that no tariff increase has been approved by the Commission vide the order,” he declared.

 

NERC, in the discharge of its statutory responsibilities enshrined under the Electric Power Sector Reform Act, would, according to him, however continue to undertake periodic reviews of electricity tariffs in accordance with the prevailing tariff methodology.

 

According to him, in all instances of   such reviews and rule making, the commission will widely consult with stakeholders and final decision will take due regard of all contributions.

 

DisCos favour hike

Speaking through their umbrella body, Association of Nigerian Electricity Distributors, the DisCos explained that the new tariffs ordered by NERC would cater for revenue shortfalls in the sector.

Executive Secretary/Director, Research and Advocacy, ANED, Barrister Sunday Oduntan, said in a tariff review clarification notice sent to newsmen on Monday that the tariffs shall only remain as they had been since 2015 but would change from April 2020.

“The Tariffs shall remain the same as they presently are (i.e. 2015 levels) until April 1, 2020 when there will be a slight increment to cater for tariff shortfalls which shall be gradually passed on to the consumer until this is fully completed by the end of 2021,” Oduntan said.

 

In view of the foregoing, he continued, the 11 power utility firms “state emphatically that there shall be no change or increase in the existing electricity tariff until April 1, 2020 when the new adjusted tariffs shall begin to gradually reflect the dynamism of our macro-economy.”

 

Expressing optimism that that their explanation “substantially clarifies the accurate position and allays any fears and concerns, our esteemed customers may have,” the Discos said: “NERC has just reviewed the MYTO 2015 and has published an order on tariffs and minimum remittance for January to 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.”

 

NERC, the DisCos insisted, was empowered by the Electric Power Sector Reform Act to carry out minor reviews of the Multi-Year Tariff Order 2015 twice a year.

 

Double speak

But NERC also last Monday denied that there are plans for immediate increase in electricity tariffs at the moment or nearest future.

 

Speaking on the recent news tariff increase on Monday, Chairman/Chief Executive Officer of NERC, Professor James Momoh NERC said that the review of the Multi -Year Tariff Order, MYTO does not mean that there will be immediate increase in tariff.

He said the electricity distribution companies, under the aegis of Association of Nigerian Electricity Distributors, (ANED), declared that they would begin implementation of the increase in tariff from April 1, 2020, but quickly added that the will still be subjected to public consultations.

 

Momoh said that the MYTO was the main mandate that NERC statutorily carries out every six months, adding that the latest review would only become effective after due consultation with the public.

 

He added that in the next three months the Commission would engage the public on a consultation on the planned review in electricity tariff, adding that the proposed tariff review is what NERC is mandated to do as a regulator.

 

“We did the first one around June. January is here, we have done it. We have no option than to do our jobs. We have done the review and it is subject to public consultation.

“In the next three months, we will engage the public for consultations. We have given the report card of what we saw based on all indices for doing the review. We did not say it is binding tomorrow morning,” Momoh said.

 

The NERC’s boss continued: “We said we are going to the second thing: consultation. The order is simply a communication of what we have done as a regulator looking at what it takes to increase or decrease tariff. If at the end of our meeting, back and front, we say increase, there is increase; if we say no increase, no increase.

 

“It is going to be based on our engagement at the public forum. No increase to tariff. We are not leaving any stone unturned. We do not want any increase without negotiations with the customers. I am a customer too. As customers, we will pay our bills. But if you suddenly change it, I need to know why. It must be for the good of everybody. Don’t forget, service must improve to regulate estimated billing.”

 

Speaking on the regulation of estimated billing, Momoh stated that henceforth, with the introduction of the law, any DISCO that failed to provide meters to customers would be compelled to charge customers a regulated fee for electricity supplied, noting that the charges would be unfavourable to the DISCOs in the long run.

 

He noted that the decision of the NERC to regulate estimate billing would help promote the drive towards ensuring the metering of customers across the country.

 

“We would do everything within our powers to ask and ensure that electricity distribution companies, DISCOs, provide meters through the Meter Asset Providers, MAP, to its customers.

 

“Failure to do so, we have a back up plan , which is one of our regulations that would be out in about a month’s time, on capping, which we would put a maximum amount the DISCOs can charge a customer that it had not been able to provide meter. In fact, it would be to their advantage to provide meters.

 

“The capping issue is win-win situation for customers to want our meters and for DISCOs to want to provide meters. The minimum we are going to allow them to charge will not be to the advantage of DISCOs in the long run,” he said.

 

Last line

 

The Discos and NERC are desirous of tariff hike because of the need for cost-reflective tariff.

 

They should, however, ensure that the customers who are to pay the bill are properly metered.

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2 Thoughts to “Tango over power tariff hike”

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