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Yet Another Electricity Tariff Hike Looms

The Nigerian Electricity Regulatory Agency (NERC) has said from July it would again review, nay increase electricity tariffs across board in the country. This is as the quality and stability of supply continues to dwindle by the day. Like in the past, it’s almost a done deal, unless President Muhammadu Buhari steps in or declines to approve the hike.

Again, the Nigerian Electricity Regulatory Agency (NERC), which now appears to be seen or heard only when plans are underway to embark on reviews, as if that’s its only statutory function, has announced that Nigerians may pay more for the elusive power supply a few months from now.

For many Nigerians, in the last few years, the bills they pay monthly for the almost non-existent service has doubled or in some cases even tripled, still leaving them in perpetual darkness.

While beleaguered and hapless citizens continue to reel under the rising cost of power and massive darkness occasioned by increasing lack of supply, it would seem that in reality, the capacity of the major players in the value chain to deliver has been growing inversely.

As has become routine, Nigerians have continued to express outrage over this phenomenon that has, it seems, increased their cost of living and lowered their standard of living.

In January, roughly four months ago, NERC discreetly began the execution of an increase in electricity tariffs, a development that jolted citizens – artisans, technicians, manufacturers, and industrialists who described the action as ill-timed, insensitive, and a deliberate move to further impoverish an already poor entity.

But even then, it came less than another four months after a roughly 50 per cent increase on September 1, 2020 and another one in December when it gave the Distribution Companies (Discos) the go-ahead to adjust tariff based on certain factors impinging on its operations, including changes in inflation rate, foreign exchange, among others.

Coming at a time negotiations were going on with organised labour, which had kicked against the previous September hike, it shocked many Nigerians how such a decision could be taken by NERC during a recession and a pandemic, without the least attempt at consultations.

Many Nigerians believe that despite the pressure from Generation Companies (Gencos), the Transmission Company of Nigeria (TCN) and Discos, NERC ought to be able to stand its ground, focus mostly on service delivery, rather than the unbridled drive for more money for the players, even when majority of Nigerians have not been metered and are arbitrarily billed.

Although the regulator hinges its actions on the Multi-Year Tariff Order (MYTO), which in 2015 was enacted to satisfy different interests, including that of the ordinary consumer, the framework appears to only take care of the Discos, NERC (which gets their own cut from it by law), TCN and the Gencos.

Even since the implementation of the so-called Service-Based Tariff (SBT), which seeks to match billing with service began, the unmistakable consensus is that the initiative has not succeeded in changing anything, given that the regulator neither has the manpower nor the infrastructure to monitor Discos

Although the SBT is expected to operate a progressive regime, which means that customers are charged based on quality of service, however, a quick sample of public opinion would easily show that the body hardly has the capacity to enforce this rule.

A few months ago when the enforcement of the new tariff regime commenced NERC insisted that there will never be a good time for the review, stating that it will ensure that Discos improve on the quality of service as well as a 10-day deadline to install meters for power consumers who pay upfront.

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“The SBT will operate a progressive regime-the customers that receive the highest quality of service (12-24 hours per day) will pay the highest tariff. Customers that receive under 12 hours of service per day will continue paying their current tariff,” the chief regulator noted at the time.

But many months down the line, Nigerians have continued to pay more for non-existent service.

In disclosing the latest planned hike last week, NERC stated that it was not only planning a review of tariffs paid to the 11 Discos by Nigerians, but that it was also reviewing the approved capital expenditure for the power distributors.

Indeed, capital expenditure allowance approved by NERC has always been a source of disagreement between the regulator and the distributors who insist that it is too low and has limited the capacity for network expansion.

Going by MYTO 2015, a framework that guides the pricing of electricity in the country and by the rules is supposed to be adjusted twice a year, the approved average capital expenditure allowance to Discos remains $12m or roughly N5 billion per Disco annually.

Making the latest planned review/hike public through a release posted on its website, tagged “Notice of Minor and Extraordinary Review of Tariffs for Electricity Transmission Distribution Companies”, NERC stated that the move was pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA) which sets out the methodology and procedures for reviewing electricity tariffs in Nigeria.

“The MYTO provides for minor reviews every six months, major reviews every five years and extraordinary tariff reviews in instances where industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry,” it said.

Further to this, the commission noted that it held series of public hearings and stakeholder consultations in the first quarter of 2020 on the extraordinary tariff review applications of the 11 electricity Discos to consider their respective five-year Performance Improvement Plans (PIPs).

However, NERC said that the evaluation of the Discos’ requests for review of the capital expenditure proposed in their improvement plans could not be concluded for the consideration of the commission during the minor reviews undertaken in 2020.

Specifically, the commission noted that section 21 of the MYTO, 2020 order, provides for consideration of Discos’ capital expenditure application upon further scrutiny and evaluation of the investment proposals.

It explained that the latest notice was issued to inform the general public and industry stakeholders of the commission’s intention to conclude the extraordinary tariff review process for the 11 Discos.

In addition, NERC stated that it was also to commence the processes for the July 2021 minor review of MYTO – 2020 to consider changes in inflation, foreign exchange, gas prices, available generation capacity, and capital expenditure.

It stressed that this is required to evacuate and distribute the said available generation capacity in accordance with the extant laws and other existing industry rules.

“This notice is hereby issued in compliance with the provisions of EPSRA, the business rules of the commission and the regulations on procedures for electricity tariff reviews in the Nigerian Electricity Supply Industry (NESI) to solicit for comments from the general public on the proposed reviews.

“Stakeholders and the general public are invited to send their comments to the commission within 21 days from the date of this publication,” NERC added.

But as usual, the announcement have met with resistance from electricity consumers and industry watchers who are insisting that the planned increase is not only ungodly, but unjustified.

In its condemnation of the planned hike, citizens under the aegis of the Nigerian Consumer Protection Network (NCPN) urged the commission to back down on any plan to do the review, saying that it is ill-timed.

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The group’s President, Mr. Kola Olubiyo, in a protest letter to the chairman of NERC, explained that the timing of another increase in electricity tariff in Nigeria was ill-advised and therefore unacceptable to electricity consumers in Nigeria.

He stated: “We had expected that the regulator would have allowed the impact of the January 2021 major tariff Increase to settle down first. The 1st September, 2020 major review which was given effect in January translating to between 120 per cent – 200 per cent increase in some places is yet to go down.

“In several homes, offices, business outlets, hotels etc., Nigerians have stopped using air conditioners, microwaves, water heater and basic household equipment that are taken for granted in other climes. Government needs to listen to us as end-users.”

Olubiyo, a member of the National Technical Investigative Panel on Power Systems Collapses/System Stability & Reliability (June, 2013) and Presidential Ad Hoc Committee on Review of Electricity Tariff in Nigeria (August, 2020), argued that past increases have not rubbed off on service delivery positively.

Going forward, he urged government to address the 200 per cent “over-bloated” cost of gas, since it accounts for 85 per cent of total daily grid-sourced electricity in Nigeria.

“We crave your indulgence to calm down, slow down and halt the drift. The timing of another increase in electricity tariff in Nigeria is ill-advised and unacceptable to electricity consumers of all classes of electricity end users in Nigeria,” he said in the letter to NERC.

A professor of Capital Market, Uche Uwaleke, in his comments, said: “Without prejudice to the merits of having a cost reflective tariff, the time is not just right to increase electricity tariffs. The conditions precedent have also not been met.

“It is clear, even to the blind, that further hike in electricity tariffs will aggravate cost of production and by extension cost of living for the ordinary Nigerian and increase poverty levels,” he stated.

But while noting that the increase is necessary, Special Adviser to President Muhammadu Buhari on Infrastructure, Mr. Ahmad Zakari, noted that to be able to overcome some of the current challenges in the sector, including liquidity and its attendant poor supply issue, the review had to be carried out.

He argued that the review may not immediately translate to a hike in the price of electricity for Nigerians, stressing that the federal government was not unmindful of the situation, reason it is still subsidising electricity for those at the lowest rung of the society.

“Don’t forget that the tariff rates for B and D and E customers have not changed and the government has continued to pay subsidy on that,” he stated.

Zakari added: “Allowing the review does not mean all the financial burden automatically passes to the end users. Government reserves the right to say, I will subsidise for certain classes as it is already doing”.

But as another tariff increase looms, Nigerians have continued to ask why the NERC has kept putting the cart before the horse or whether it’s simply a case of which comes first between the egg and the chicken.

Yet questions like: whether Nigeria will ever exit the current cycle of perennial electricity tariff increases without commensurate service, whether the country will ever enjoy stable and reliable power supply or if the customer will ever be crowned king in the Nigerian Electricity Supply Industry (NESI) remain unanswered.

Source: Thisday

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