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Published On: Tue, Jan 7th, 2020

The electricity tariff raise

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The Federal Government has asked the Nigerian Electricity Regulatory Commission (NERC) to effect an “immediate (upward) review” of electricity tariffs across board. The NERC announced the new power charges in a series of documents dated December 31, 2019. The tariff increase ranges from 59.7% to 77.6%.

Consumers classified as residential (R1) are, however, unaffected by the by cost increment. The excluded N4 per kWh they have been paying is unchanged. A majority of Nigerians fall into the category of residential consumers who are those using singe phase and three-phase meters and consuming 50 kWh of electricity “in premises with flats exclusively for residential purposes. “Those categorised under commercial are consumers who use premises for any purpose other than exclusively as residence or as a factory for manufacturing goods, while industrial consumers are those who use their premises for manufacturing goods, including welding and ironmonger. Consumers involved in agriculture other than agro-allied enterprises involved in processing, water boards, and religious houses, among others, are categorised as special electricity consumers.

The NERC explained that the new tariff regime was based on “actual changes in macroeconomic variables” in generation capacity as at October 31, 2019. Other factors are an “exchange rate of N306.9 plus one per cent premium, which is about N309.97 to the dollar, and gas price of $2.50 per million metric tons BTU and gas transportation cost of $0.80 per MMBTU.”

However, the new tariffs will not take effect until April 1. “The Federal Government’s updated Power Sector Recovery Programme does not envisage an immediate increase in end-user tariffs until April 1, 2020, and a transition to full cost reflectivity by end of 2021,” said NERC. “In the interim, the Federal Government has committed to funding the revenue gap arising from the difference between cost-reflective tariffs determined by the commission and the actual end-user tariffs payable by customers.”

The truth is that two of the stakeholders – the government and power distributors – have pushed for higher tariffs commensurate with their investments in the industry. The government generates the electricity which it then sells to 11 private distribution companies. The other stakeholder that will resent higher tariffs is the consumer, this for good reasons.

Firstly, the government claims power generation has averaged 5,700 Megawatts but supply to end-users has been less and very epileptic. For instance, the national grid suffered two shutdowns each in November and December 2019. The government said the power distributors were to blame, a charge the latter denied.

Secondly, the distribution sector of the power industry, over the years, had been riddled with corruption. Consumers were often shortchanged by staff of the former Power Holding Company of Nigeria (PHCN). It was for that reason that the company was unbundled and power distribution privatized. Yet the corruption has not abated. Distribution companies have failed to provide all consumers with pre-paid meters so that they pay for only what they can buy. This is the consumer’s constant headache.

Without revolving this problem and going ahead to announce new tariffs in the New Year is putting the consumer in an insufferable situation. It is important that the meter issue is sorted out quickly for the consumer to get value for his money. This is why we think the 3-months moratorium placed on the new charges is not enough for the government to sort matters out with the distributors. Next June will be more like it.

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