Electricity is an important aspect of economic and social development that dictates output and industrial progress around the world. The Nigerian power sector, having faced different privatisation schemes, is yet to provide the required supply for the citizenry. Rather than finding the best strategy to increase power supply, the electricity distribution companies (Discos) decided to add to the challenges facing Nigerians by increasing tariff in February.
The new ten-year tariff regime (2016-2024) approved by the National Electricity Regulatory Commission (NERC), which took effect from February 1, 2016, has generated debates and reactions amongst Nigerians. Analysts, labour leaders and electricity consumers across the nation have continued to demand for metering of every home by the electricity Generating Companies (Gencos) and the Discos (Distribution Companies) before the introduction of the new tariff regime, describing its take-off, without provision of meters to over 60 per cent of consumers, as “fraudulent and improper.”
Economic Confidential learnt that an average of 40% increase was added to the energy charges covering residential, commercial, industrial, special and street lighting classes. For instance, the new tariff for Abuja residential consumers was increased by N9.60kwh in their energy charges, with that of Eko and Ikeja electricity distribution consumers witnessed N10kwh and N8kwh increase in their energy charges, respectively. For Kaduna and Benin residential consumers, increments of N11.05kwh and N9.26kwh were added to their energy charges respectively.
However, the compulsory fixed charges have been removed for all classes of consumers in the country. The new tariff regime allows consumers to pay for what they consume. In reality, since the
privatisation of the power sector and transition from the Power Holding Company of Nigeria (PHCN) to the private sector, the power crisis seems to have come to stay.
The question is, when will government allow competitive system like that of telecoms sector in the power sector? Through competition, local and foreign direct investment will be achieved and the power sector can be reformed to achieve its objectives. What operates in the system is not the standard practice as Gencos and Discos have failed to invest in the power sector as they promised.
On the removal of fixed charges, the Chairman/CEO of NERC, Dr Sam Amadi, said: “The removal of fixed charges aimed at introducing fair electricity pricing system to the consumers via a regulatory process that promotes investment in the electricity industry without unfairly burdening electricity consumers. The bills of consumers will depend on what they consume as electricity and could be reduced when they adopt conservative method. The objective is to make prudent consumers save
money on their electricity bill by controlling their consumption.
“The new tariff regime is the result of a transparent, rigorous and credible rate review process. It would lead to greater reliability in the provision of electricity. More people will progressively have
access to the grid, more meters will be deployed and the need for self-generation would be gradually reduced.”
But another question is how can consumers, without meters, control their consumption? The tariff hike for electricity consumption has come at a time when Nigerians are facing hard economic challenges. The prices of food and other consumables that formed the basic needs of the citizenry are increasing everyday due to the current situation of the foreign exchange market. At the parallel market, a dollar is sold above N300, making it difficult for imported foods and machinery to be patronised.
But NERC has emphasised that the new tariff regime is important for Nigerians to enjoy cost-reflective tariffs from the electricity supply sector that will be capable of attracting foreign direct investments. The justification for the increase in the electricity tariff was provided by Dr Amadi who stressed that: “The Electric Power Sector Reform Act (2005) authorises the NERC to review tariffs in favour of Generating Companies (Gencos) and Discos particularly when it realised that the market variables such as gas and its transportation cost, naira to dollar ratio and inflation shift by over five percent.”
The Minister of Power, Lands and Housing, Mr. Babatunde Fashola, described the new tariff as a “painful pill” that electricity consumers have to swallow. The new tariff regime had been set for
take-off by NERC in the last quarter of 2015, but the plan was stopped by an injunction of a Federal High Court in Lagos following a suit filed by a petitioner seeking an order restraining the agency from
applying any upward review of electricity tariff without a significant improvement in power supply at least for 18 hours in a day in most cities in Nigeria.
The organised labour, last month, protested the increase in electricity tariff across the country by picketing offices of Discos in different states and the FCT.
Leaders and members of the Nigerian Labour Congress (NLC), the Trade Union Congress (TUC) and civil society groups led the nationwide protest where they asked the NERC and Discos to reverse the tariff. They said No to tariff hike; called for provisions of prepaid meters to all consumers and insisted that Nigerians no longer needed estimated bills.
The NLC President, Comrade Ayuba Wabba, said NERC and Discos failed to follow due process in the extant of law as provided by Section 78 of Power Reform Act, 2005 in the increment of electricity tariff.
He said: “There is no co-relation between the quality of service delivery, electricity supply and the increment of tariff. Most consumers were not metered in line with the signed privatisation
Memorandum of Understanding (MoU) of November 1, 2013, that stipulated that within 18 months’ gestations period; therefore, the increment must be reversed.”
Economic Confidential gathered that the Upper Chamber of the National Assembly, through the President of the Senate, Dr. Bukola Saraki, had also directed NERC to suspend the over 40% increment in electricity tariff after deliberations with the labour leaders and other
stakeholders on the matter.
He said: “The move is necessary because any increase in cost, without the necessary improvement in service delivery by the power companies, is unacceptable. The Senate believes Discos must work to ensure that every establishment in Nigeria is provided with capabilities for metered billing in order to end the sharp practice of arbitrary billing, which estimates the power consumption of Nigerians in the generation of their monthly bills.”
Analysts said the reasons given by the Minister of Power, Lands and Housing and NERC on the tariff increase are subtle as they failed to address the most important point of ensuring adequate provisions of meters to over 30 million houses in the country. They argued that it is an avenue for electricity distribution companies to continue to reap from where they did not sow, thereby forcing Nigerians to pay for unavailable power supply. The residential, commercial and industrial consumers in the country are yet to see any solid improvement in the sector, yet, Discos and Gencos swerve their way through the regulator to achieve their aims.
The past experiences of un-metered customers showed about 50 per cent increase in their estimated billing system for electricity consumption. Why can’t NERC order the Discos to install meters for all households? It is time for thorough review of the power sector privatisation policy in order to generate adequate electricity for industrial and household use and invariably impact on the
socio-economic growth of the nation. A media report last year indicated that the Abuja Electricity Disco boss receives N36 million as monthly salary.
Analysts also observed that Nigerians have been subjected to exploitation for decades, but added that paying higher tariffs at this difficult time is not the major problem, rather the failure of
government and NERC to mandate compulsory installation of prepaid meters to all households is the real problem.
They argued that if NERC could enforce the prepaid meters installation, the fleecing of consumers via estimated billings would become a thing of the past in the sector. The gap created by meters
formed major challenge for the energy pricing integrity issues between the Discos, NERC and the consumers.
Other countries in Africa, such as Ghana, South Africa and Benin Republic, have become destinations for investment by big conglomerates due to stable power supply in those nations, with those firms end up exporting their goods to Nigeria for marketing and distribution
purposes.
According to the Head, Public Affairs of NERC, Dr. Usman Abba Arabi, the Commission has directed all Discos to meter every customer as it is ready to strictly enforce the metering policy.
He said: “For those willing electricity customers who paid for meters under the Cash Advance Payment Metering Initiative (CAPMI) but are yet to be metered within the allowable 60 days would no longer be billed by the electricity distribution companies under the new tariff regime. And the discos will not disconnect them. There is zero tolerance for overbilling of customers.”
He said an unmetered customer who is disputing his estimated bill would no longer pay the disputed bill- his last undisputed bill would be paid for the contested bill to go through the dispute resolution
process.
Arabi emphasised that no electricity distribution company should connect new customers without metering them first in order to close the wide metering gap of over 50 per cent as well as reduce high incidence of collection losses in the Nigeria Electricity Supply Industry (NESI).
