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2 Aug 2017

Anxiety Mounts as Discos Plan 46% Hike in Electricity Tariff

Electricity supply in Nigeria is about to be increased again, even as the supply of the service remains abysmal as ever.
Electricity consumers serviced by the nation’s 11 Distribution Companies (Discos) may soon be on collision course with the power vendors over impending moves to increase energy tariff by about 46 per cent, amidst worsening power supply.

The looming stand-off comes as  the 11 Discos across the country have written the Nigerian Electricity Regulatory Commission (NERC), seeking its approval to raise power tariff by about 46 per cent.

Daily Sun, however, learnt that the delay in the approval process followed threats by the two labour centres, the Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC), which had warned the Discos against any increase in view of their poor services and the current state of the Nigerian economy.

NERC had in February 2016, increased electricity tariff for different categories of users by 45 per cent, a decision that did not go down well with consumers, especially those in the manufacturing sector.

Under the 2016 power tariff regime, electricity consumers in R2 class, said to be under residential category, were charged  N24.30 per kilowatt in Abuja; Benin – N24.08; Enugu – N27.13; Ibadan – N23.09; Jos – N26.93; Kaduna – N27.36 and N28.05 (in single phase and three phases); Kano – N20.26 and N26.41; Ikeja – N21.30 and N21.80; Port Harcourt – N24.91; Eko – N24.00 and 25.79; Yola –N23.25 and N24.75 per kilowatt.

The current plan to hike electricity tariff was said to be in conformity with the Federal Government’s Power Sector Recovery Plan (PSRP), a document formulated in March by the Office of the Vice President and the World Bank Group. A Working Group for the implementation is being coordinated by the Senior Special Assistant to the President on Power in the Office of the Vice President, Damilola Ogunbiyi, and the Lead Energy Specialist at WBG, Kyran O’Sullivan.

According to the document, the Federal Government plans to recover the $7.6 billion fund by raising the present electricity tariff outlined in the Multi-Year Tariff Order (MYTO) 2015. It has already considered four options and the Working Group is making a decision on which of the options to adopt shortly.

Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), the umbrella body for the Discos, Mr. Sunday Oduntan, confirmed to Daily Sun in a telephone interview yesterday that the Discos have forwarded a proposal to NERC for tariff raise.

Oduntan argued that N58 per kilowatt should be the appropriate tariff across board from the current N21.3 charged by Ikeja Electric per kilowatt hour.

He explained that the condition under which the Discos are operating was not congruent with economic realities, and hence the need to raise tariff has become inevitable.

He stated that a situation where the Discos buy per kilowatt hour of electricity at N58 from the Generation Companies (Gencos) and sell at N31 to consumers was no longer sustainable.

Odutan said that the situation was responsible for the inability of the Discos to meter Nigerians and improve on their distribution capacity because the resources to do so are simply not there as electricity tariff was not cost-reflective.

Currently, he said a huge metering gap of about eight million exists in the Nigerian electricity market, and that such could only be bridged by a cost-reflective tariff.

When asked what the Discos had proposed to NERC as the appropriate tariff that could take care of all the cost variables in the power sector value chain, Oduntan declined to give a figure, but rather spoke in his personal capacity.

‘‘To give an appropriate tariff for what should be the ideal for a kilowatt hour charge may be too premature because a lot of considerations have to be made before fixing tariff. Remember that the cost of production in Enugu is different from Lagos or Abuja. We have submitted our proposal to NERC and they are the ones that will fix what should be considered appropriate.

But in my opinion, I think N58 per kilowatt hour should be the appropriate tariff that would take care of all the cost element involved,’’ he said.

Meanwhile, the NERC is set to cut the minor review period of MYTO methodology from six months to either monthly or quarterly.

The Commission stated the intent in a consultation paper it issued on May 30, 2017, to stakeholders in the power sector, calling for suggestions. The MYTO was first reviewed in 2012 and spans a 15-year period with major review every five years, and a minor review every six months.

NERC biannually reviews the MYTO by considering changes in parameters like inflation, exchange rate, gas price, power generation capacity, transmission capacity and the operators’ Capital Expenditure (CAPEX) requirement to adjust the tariff.

The paper endorsed by the Acting Chairman, Mr. Sanusi Garba, said reducing the review period would provide incentives for continued improvement in services as shortfalls would be promptly recognised and computed into tariffs.

However, it said raising the review frequency, “may deliver higher tariffs to consumers in the long run resulting from associated finance costs where retail tariffs are not adjusted immediately.”

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