11 January 2018

Nigeria: New Electricity Tariffs Difficult to Implement With Poor Customer Record, Metering - Govt

Abuja — The federal government has said it will be difficult to allow the 11 electricity distribution companies (Discos) in Nigeria's power market charge new rates on electricity they supply to their customers across the country because the country does not have an accurate record of electricity consumers in the Discos' networks or enough customers that are metered by the Discos.

Speaking in a Channels Television early morning show yesterday in Abuja, which THISDAY monitored, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, defended the decision of the Nigerian Electricity Regulatory Commission (NERC) to hold back the implementation of up to three consecutive tariff reviews.

Fashola, stated that in as much as tariff was important to the commercial operations of the electricity market, the government would want to see that it is fair, and would do this by properly dimensioning the market.

He argued that it was impossible to have a fair tariff in an electricity market that has just about seven million households as its recognised customers out of Nigeria's 180 million people, adding that proper consumers' enumeration was required to establish the true basis for calibrating tariffs in the sector.

He also noted that the Discos would have to improve on their deployment of meters to consumption points, and that until these were done, approving a cost reflective tariff for the market looked difficult.

"We need to do something with the entire value chain, from tariff to metering to energy conservation, consumer education, to payment of debts by ministries and departments and ordinary consumers, and all of this are contained in the power sector recovery programme.

"Tariff is important. The agency that decides on tariff is the NERC, not the Ministry of Power, Works and Housing, and not the Minister for Power. The minister has no power over tariff under the law. When the last tariff was passed, I had no power, and didn't approve it, it was NERC that approved it. All I had was an opinion which I expressed," said Fashola.

He further explained: "My opinion as at today is that before we can review tariffs, we should increase metering, we should also increase consumer audit to actually properly dimension the economy and see whether the unit cost is understated or overstated.

"Because, if you have a market, an electricity market where seven million households are all that is in the database as consuming electricity in Nigeria, I am not sure that data is correct. So, if the tariff is one naira and applied to seven million households, it is possible that if they are actually 14 million households, you may collect more without necessarily increasing the tariffs but properly dimensioning the market."

The minister stated: "So, I will like to see more consumer enumeration, consumer audit and identification, I will like to see more metering and more education in order to properly dimension the market, and the regulator is working on it because tariff is also a function of the investments that have been made.

"The law says that the investments that is made by every operator in the sector is guaranteed to be recovered with some profit. Now, we want to verify that investment: what have you done and how did you do them, were they overstated investments, were they investments that were uncompetitive, did you buy at N15 what the market was selling at N10? That would be unfair to pass to the consumers. All of these are being verified by the NERC, and it is when we do all of that, and we then look at the number of people who are using the energy that we can decide by rational argument that this is a right tariff, and this is unfair tariff," Fashola added.

He equally spoke on the recent disruption of gas supply to some power plants in the south of the country following a fire outbreak on a section of the Escravos Lagos Pipeline System (ELPS), saying the government would not rule out the possibility of sabotage, and was investigating it.

According to him, "I felt a sense of setback. Coming from where we were coming from in 2016, when pipelines went off almost every day, one pipeline explosion 10 months after is not such a bad place to be but the best place to be is to have no pipeline explosion.

"We are still conducting investigations, what caused this, whether it was sabotage or accident, until I get the result, I really can't say more."

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