President Goodluck Jonathan has approved new electricity tariffs, which will take effect on June 1.
Although details of the new tariff regime are sketchy as at the time of filing the report, a top official of the Nigeria Electricity Regulatory Commission (NERC) hinted last night that the tariffs are in different categories for various categories of electricity consumers.
He said the commission worked out the tariffs in such a way that low income households and small and medium enterprises in the country would pay lower tariff.
"The President has just approved the new tariff regime, which will take effect on June 1. The new tariff is not uniform. It is in different categories, which means various categories of consumers would pay different tariffs for electricity consumed," he said.
Chairman of NERC, Mr. Sam Amadi, disclosed at a meeting with electricity generation companies in Abuja last month that the new tariff, under the Multi-Year-Tariff-Order, would not affect low income earners.
He said the commission had already offered licences to more than 50 independent power producers, as part of efforts to improve power generation and distribution, adding that the tariff would attract more investors, as power generation would increase in the country.
Amadi had in February hinted that consumers would pay as low as 11 per cent increment when the new tariff regime takes effect this year. He explained that certain category of consumers classified as "special customers" such as hospitals and street lights would even pay lower than the 11 per cent increase.
Amadi also stated that R1 consumers consisting of rural dwellers and urban poor would pay lower tariff as they would continue to enjoy subsidy from the Federal Government as first category of commercial consumers.
He said another group, C1, consisting of artisans and small businesses, would also pay lower tariff in line with Federal Government's policy of providing power to small and medium enterprises in the country.
"In working out the tariff, we place the burden differently. We are to cross-subsidise those who cannot pay. As such, the cost of power for the R1 and C1 categories will still enjoy part of the cross-subsidy," he said.
The NERC chief declared recently service delivery and compliance with industry regulations and orders will be major indicators for electricity billing by distribution companies under the planned tariff regime expected in June.
NERC, which is charged with the statutory function of effecting major reviews of electricity tariff every five years in line with the provision of the multi-year tariff of MYTO, effected 10 per cent increase in electricity tariff in 2009.
The cost of electricity per unit was N7.00/kw in 2009, but it went up to N8.50/kw in 2010 and to N10/kw by July 2011.
MYTO was introduced in 2008 to ensure a paradigm shift from the traditional price fixing to a cost reflective tariff driven by private investment in the power sector. The initiative was to move the sector from the previous monopoly structure to the current competitive market environment, where investments could maximise required outputs, even as NERC says low tariff would not attract investors who are ready to put their money into the sector, which requires massive investments to thrive.
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ELECTRICITY TARIFF REVIEW SIMPLIFIED; WHAT IT MEANS TO YOU… Under the second MYTO structure, tariffs are aggregated and electricity consumers are grouped into various classes of R1 to R4 for residential customers; C1-C4 for commercial and industrial users and special customers. RESIDENTIAL CUSTOMERS R1 or single phase customers: These are mostly low income earners and rural based customers. Good news. From June 1st, 2012, this class of consumers will be paying between N3.30 and N4.00 per Kwh…half of what they are currently paying now. R2 or 2 phase customers: the tariff of these customers, (who are middle income earners but use more electrical appliances than the R1 customers) will increase by 11%. This class of customers will pay 11.90 per Kwh consumed. This is still heavily subsidized as the true cost without the subsidy will be between N22 and N24 per Kwh. Both rates above are made possible by a 3 year subsidy provided by the Federal Government. N.B: there will be NO meter service charge whatsoever paid by this categories. Energy saving bulbs will also be distributed for this category of customers R3 and R4 customers: The R3 and R4 customers will pay the highest among all the residents, as these are the high income earners who live in the high-brow areas and mega estates across the country. The new tariffs for these classes of consumers are cost directly by direct metering and will be determined under the agreements with their estate managers. COMMERCIAL CUSTOMERS C1 customers: These are small scale businesses like barbing and hair dressing saloons, welders, vulcanizers etc. They are also beneficiaries of the Federal Government subsidy. With the subsidy, they will pay a rate of N12 to N14 per KWh consumed. C2 customers: These are big businesses like banks, hotels etc. these companies will pay the cost reflective rate for the power consumed. C3 and C4 customers will not only pay N26/Kwh but also pay a whopping fixed monthly charge of N160, 000.