Nigeria: Govt Approves 5 Electricity Tariff Reviews As Customers Groan

23 August 2019

The Federal Government has approved at least five minor electricity tariff reviews that were pending since June 2016, causing a spike in the average cost of electricity payable by consumers nationwide.

The Nigerian Electricity Regulatory Commission (NERC) revealed this after it uploaded the review documents for the 11 power Distribution Companies (DisCos) to implement with effect from July 2019.

Daily Trust reports that the Multi Year Tariff Order (MYTO) 2015 was implemented on February 1, 2016 and was to be reviewed every six months but never approved for implementation by the DisCos.

In the latest update, NERC said the reviews approved were up to 2018, leaving out the first half tariff review of 2019. The commission is working on a major tariff review which will be ready by December for implementation by January 2020.

Daily Trust analysis of the various tariff documents for the 11 DisCos revealed that there is an increase of at least N8 to over N13 per kilowatt hour (kwh) of electricity supplied to the over eight million DisCos' customers in Nigeria.

The 2016-2018 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2019' document for Abuja DisCo shows that its end-user cost reflective tariff remains at N46.44 kobo for customers. However, NER said it will allow the DisCo to collect N32.66/kwh. Residential customer of this DisCo had paid N24.30/kw before the new Order, indicating a difference of N8.

NERC said it computed N102.2 billion tariff shortfall for Abuja DisCo for the four years from 2015 to 2018 and will be reflected in tariffs. It also projected another shortfall of N52.1bn for 2019 and N6.2bn for 2020 which it will recognize in subsequent reviews.

In spite of the N102bn NERC recognized from 2015 to 2018, the tariff document shows that N73bn shortfall has not been catered for.

Averagely, customers of Kano DisCo will pay N30 which instead of N53 that is the cost reflective tariff for the MYTO in 2018. The customers had paid at least N25/kwh previously

NERC then computed N97.8bn tariff shortfall for Kano DisCo for 2015 to 2018; another N42bn was recognized to take care of shortfall for only 2019. But N13.9bn shortfall of the DisCo will still not reflect in the tariff, NERC computation shows.

For Eko DisCo in Lagos, its reviewed tariff document shows that its customers will be paying N28.3 instead of N41.8 that is true cost reflective tariff. The lowest tariff before the review was around N24.

NERC then computed N95.6bn tariff shortfall for Eko DisCo for 2015 to 2018; it got another N55.4bn for 2019 and 2020. At least, N10.3bn shortfall for the DisCo is still not captured in the tariff review.

Although the Order No. NERC/GL/170 was signed on August 19, 2019 by the NERC Chairman, Prof. James Momoh, and the Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye, and should take effect from that date as contained in it, the Head of Public Affairs, Dr. Usman Abba-Arabi in a response to a Daily Trust enquiry said, "The order is effective from 1st July 2019."

NERC also said the Order was issued to reflect the impact of changes in the Minor Tariff Review variables in the determination of cost reflective tariffs and relevant tariff and market shortfalls from 2016 to 2020.

Consumer groups, labour kick over hike

Many electricity consumers have reacted to the new orders for the DisCos, describing the tariff increase as sudden, without proper customers' consultation.

Mr Okon Peters, a residential customer of Abuja DisCo, said it was surprise to hear that as the electricity supply experience has not improved. "Although the details are sketchy but I understand that customers will now have to pay more for darkness," he noted.

Adamu Salihu, a commercial customer of Kaduna Electric in Kaduna State, shares similar view saying it was too sudden as customers were not prepared to take the school.

The National President of Association for Public Policy Analysis (APPA), Comrade Princewill Okorie said NERC should not have released the Orders when a new minister was yet to assume office. "Why didn't they wait for him to assume office and now take that decision."

He also said consumers were not duly carried along. "They did it so that the minister will now have a challenge of reviewing that policy. Before increasing tariff, there is the directive given by the former minister, Fashola to ensure that the DisCos perform. Which of that have they implemented this year? This shows that they are working with the DisCos."

On his part, the Chairman, Nigerian Electricity Consumers Advocacy Network (NECAN), Chief Tomi Akingbogun said his group was studying the tariffs on how they affect consumers. "We are going to meet. We just heard about it today. In the next few days, we will be able to give collective decision."

The President, Nigeria Consumer Protection Network, Mr Kunle Olubiyo on telephone urged NERC to heighten its customer consultation saying they were not properly carried along during the process of the minor tariff review which held in 2018.

"For us, it is quite alarming that the tariff we are having now is not all-inclusive. The consultation was not good enough. NERC should change their approach even if there are concerns about liquidity crisis, but consumers must be carried along," Olubiyo noted.

The Organised labour has also rejected the federal government's approach to the increment of the electricity bill. The President of the Nigeria Labour Congress (NLC), Comrade Ayuba Wabba who spoke to Daily Trust said Nigeria pays the highest electricity tariff "even when compared to the United Kingdom."

He said such has hindered foreign investors from, "the cost of doing business in Nigeria is difficult because they find it difficult to operate. Most of their companies don't get 24 hour of light, they have to implement with generator."

Wabba further called on the federal government to cease the continuous exploitation of Nigerians stressing that "payment of tariff is not the same with the issue of improved power."

The National President of the Trade Union Congress (TUC), Comrade Olaleye Quadri said government "should not encourage inefficiency by approving higher tariff because the DisCos do not collect the revenue for the current tariff.

"That is, they very low collection efficiency. Increase in tariff means passing the low efficiency loss to the customers," Quadri said.

He analysed that, "If collection efficiency is high enough, it will help reduce the gap in cost of delivering electricity and reduce need for higher tariff or make the increase minimal."

We're studying tariff orders - DisCos' group

On their reaction to the Tariff Orders if they had satisfied the desire of the DisCos' yearn for a cost reflective tariff, spokesman of the Association of Nigerian Electricity Distributors (ANED), High Chief Sunday Oduntan said the group which represents the interest of 10 DisCos was still studying the Orders. "We are yet to see the details. We must do the analysis first in-house," he noted.

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