22 May 2012

Nigeria: Electricity Tariff - NERC Abolishes Fixed Charges for Poor Customers

The lowest-paying customers, generally referred to as Residential 1 (R1) customers under the electricity billing system will no longer pay for monthly fixed bills, which are paid by electricity consumers, irrespective of whether there is power supply or not for the month.

This takes effect from June 1, 2012, when the new tariff regime will be implemented by the Nigerian Electricity Regulatory Commission (NERC).

Under the new tariff regime, R1 customers will only pay for the electricity consumed, which is N4 per kilowatt hour.

But the other categories of customers will pay a fixed monthly charge of N500, in addition to the cost of electricity consumed, which varies between N11 per kilowatt hour and N23.10 per kilowatt hour, depending on the category of the affected consumer.

Chairman of NERC, Dr. Sam Amadi, who disclosed this at the weekend in Lagos, also noted that by this new arrangement, the poor consumers, which he referred to as lifeline consumers, would pay less under the new tariff regime than what they are currently paying.

Amadi stated that the new tariff regime would ensure that different classes of customers would pay different rates that are applicable to their classes.

He debunked insinuations that the new tariff would inflict hardship on the people, adding that the NERC invited experts that did analysis on how inflation would affect the new tariff.

"We have done the micro-economic analysis with their input. I just want to underline the integrity in terms of consultation and quality of what we have done," he said.

He noted that the new tariff came after wide consultations with the civil society groups, business community, manufacturers, electricity consumers and other stakeholders.

"So, first, we took a democratic approach to talk to all those who should know - operators, investors, consumers and electricity workers. We have also put out the model in our website, so that people could give us feedbacks. So, the process has been consultative as is expected of a competent and wise regulator. You don't set policies in your bedroom, no matter how smart you are," he explained.

He said the tariff was structured to attain cost-reflective pricing that would ensure private sector investment in the generation, distribution and transmission of electric power in the country.

With stable power supply, Amadi said businesses would thrive and the country's economy would flourish.

"Small and medium scale enterprises will once again have electricity they need to keep their businesses running. Hairdressers, vulcanisers, barbers and other small-scale entrepreneurs will no longer have to depend on generators, while bigger commercial and industrial ventures will considerably reduce their cost of doing business, leading to a general reduction in the cost of goods and services," he said.

He stated that private sector participation was central to the power sector reform aimed at transforming the sector, in line with NERC's mandate to ensure adequate and affordable electricity to every Nigerian.

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