As Nigerians continue to battle with the challenge of steady power supply, the recent announcement by the Nigeria Electricity Regulatory Commission (NERC) seems to be have compounded their woes; BENJAMIN UMUTEME reports.
Electricity consumers in the country got a shock on Saturday morning with the announcement by Nigeria Electricity Regulatory Commission (NERC) that starting January 1, Nigerians will be begin to pay more for electricity.
For a resident of Jikwoyi, a suburb of the Federal Capital Territory, Baba Ifeanyi, the announcement by NERC did not make any “sense” to him because he does not even “enjoy the light.”
According to him, it’s a further drain on his resources as it would mean paying extra when he still struggles to even pay his monthly bill.
“Why will the government just increase tariff just like that? We manage to pay for light that we don’t enjoy always and instead of finding a way to address the issue they are increasing tariff. This is just pure wickedness,” he told Blueprint Weekend in anger.
The shocker
Like it was in 2012, when the federal government gave Nigerians a new year gift with the increase in pump price of petrol, Nigerians got the shocker also from NERC as the electricity sector regulator announced an increase in tariff for different levels of customers across the states.
The increase would be done by the 11 Electricity Distribution Companies (DisCos) in the country. The directive of the new tariff regime for different DisCos and category of customers, which was signed by the NERC chairman, Prof. James Momoh, and secretary, Mr. Dafe Akpedeye, was published on the Commission’s website on Saturday, last week.
According to NERC, the order which super-ceded the earlier one issued on the subject matter “takes effect from January 1, 2020.”
NERC stated that the order was taken into consideration, other actual changes in relevant macroeconomic variables and available generation capacity as at October 31, 2019.
The commission added that the order was in line with updating the Multi Year Tariff Order operating -2015 Tariff Order for 2019 in line with the provisions of the amended MYTO Methodology.
“Projections are made for the variables for year 2020 and beyond based on the best available information. The Commission, however, based adjustments in the tariff, on the relevant data obtained from the Central Bank of Nigeria and National Bureau of Statistics such as average monthly inflation rate of 11.3 per cent, exchange rate of N309.97.”
In the new tariff regime, Abuja Electricity Distribution Company residential customers R3 that were paying N27.20 per unit are to now pay N47.09.
“The commercial customers C3 that paid N27.20 per unit in 2015, when the tariff was last adjusted and implemented are now to pay N47.09 in 2020,” it added.
The commission said for the Ikeja Electricity Distribution Company’s customers, the R3 category that were formerly paying N26.50 per unit is to now pay N36.92 per unit.
The customers are, therefore, to pay additional N10.02 per unit, representing 368.49 per cent increase.
“The commercial customers C3 that paid N24.63 per unit in 2015 are to now pay N38.14 per unit. The customers are to pay additional N13.51 per unit representing 282.30 percent.
The industrial customers of the IKEDC D3 that paid N25.82 per unit are now to pay N35.85 per unit. The difference is now the additional 10.03 per unit, representing an increase of 357.42 percent.”
NERC disclosed that Enugu Electricity Distribution Company residential (R3) customers that were paying N27.11 per unit in 2015 are to now pay N48.12 per unit. The customers are to pay additional N21.01 per unit, which translates to 229.03 percent. It directed that “all DisCos are obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall.”
The president won’t interfere
When the announcement was made many Nigerians had expected the Presidency to wade into the matter by urging the electricity regulator to stay action by President Buhari has poured cold water on such thought.
According to his spokesman, Femi Adesina, in an interview on Channels, President Muhammadu Buhari would not influence the decision of the National Electricity Regulatory Commission (NERC) to increase electricity charges.
Adesina said the decision to increase electricity tariff is within NERC’s purview.
“The matter is strictly not within the purview of the President but the ministry of power and National Electricity Regulatory Commission. Besides, the ministry had already explained that any adjustments to the tariff will only take effect from April. So, let’s leave it at that for now,” he said.
PDP’s take
Several days after it made public its decision NERC’s action continues to elicit reactions from its Nigerians. And the Peoples Democratic Party (PDP) blasted the All Progressive Congress-led federal government, saying that decision to increase electricity tariff is ill-timed and an insult to Nigerians.
In a statement, its spokesman, Mr. Kola Ologbondiyan, said it was completely against the interest and well-being of Nigerians.
He said the increase was a further “fleecing of Nigerians,” whom the party said were already overburdened and groaning under the weight of high costs, economic repression and heavy taxes.
“It is lamentable that Nigerians, who are already suffering the devastating negative impact of the recent increase in the Value Added Tax (VAT) from 5 percent to 7.5 by the APC administration, are now being further suppressed with increased electricity tariff.
“Our party holds that the increase in electricity tariff, under the prevailing harsh economic conditions, is injurious to the wellbeing of Nigerians as it will further stress the productive sector and lead to an upsurge in the cost of regular and essential goods and services, including food, medicine, housing, education and other critical needs.
“This APC policy, if allowed, will worsen the suffering of Nigerians as it will put more stress on already overburdened families, cripple businesses, result in job losses and exacerbate the prevailing frightening unemployment rate under the Buhari administration,” the statement read in part.
More condemnations
Groups, Energy Consumer Rights and Responsibilities Initiative (ECRRI) and the All Electricity Consumer Protection Forum (AECPF), have noted that the increment in electricity tariff was unjustified based on present realities.
ECRRI national president Mr. Sural Fadairo noted that increasing the cost of electricity was not the panacea to Nigeria’s energy crisis.
“If they want to increase tariff because the Distribution Companies are under remitting due to debts by consumers, that will not solve the problem. If people are refusing to pay now because they are disputing their bills will they now pay if it is further increased?
“What they need to do is to meter all electricity customers, so that we can end the issue of estimated billing. So, from the consumer point of view, we are totally against any increment because power generation and supply has not improved significantly in the country, “he said.
For the AECPF national coordinator, Mr. Adeola Samuel-Ilori, increase was totally uncalled for in all ramifications.
He said, “The basis for such increase at this time can’t be justified in that consumers have not been metered and they still purchase transformers and other line materials by themselves with attendant extortion via estimated billings. All these are not taken into consideration and extensively dealt with before contemplating tariff increase.”
However, the coordinator of Electricity Consumer Advocacy Network, AbdulHakim Balogun, said the increase was expected, as provision had been made for such under the law. He, however, stated that the timing might not be appropriate, considering the state of the economy, increase in VAT and pressure on consumers’ disposable incomes.
The director-general of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, said the power sector problem was multifaceted, adding that the approach to addressing it should be holistic; otherwise the consumers would be vulnerable.
“The tariff question is no doubt one of the problems. But what is NERC doing about the issues of the capacity of the DisCos, estimated billing, technical and commercial losses, metering problem, quality and adequacy of investment by the DisCos, transmission, proposal on the decentralisation of the sector, promotion of off grid solutions and incentives for renewable energy solutions? All of these need to be addressed in order to inspire the confidence of consumers.
“NERC should protect the interests of consumers as well as those of the investors. There is also the social dimension of electricity provision to those at the bottom of the pyramid. It is also critical to disaggregate and interrogate the components of cost being claimed by the DisCos. Already, many small businesses have complained about prohibitive tariffs by DisCos following the last review. What is needed is a holistic reform rather than the simplistic solution of tariff review,” he said.
Slight increase
On his part, the executive director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Barrister Sunday Oduntan, said “what is being proposed is a slight increase.”
According to him, there is currently no tariff increase explaining that even though there is going to be an increase it would be a gradual transition.
He said, “There is no tariff increase as at this morning so there is no need for hysteria on tariff increase. First, NERC is empowered by law to review tariff in this industry and as at today, there is no tariff increase. What they are proposing is the slight increase that will occur….it is even planned to be a gradual thing.
“We will not have what should be the appropriate pricing of the product this year. The plan is that by the end of 2021there will be a way to ensure that the appropriate things are done so there will not be baggage of shortfalls.”
NERC’s volte face
After gauging public opinions over the first announcement, NERC in a statement said the “minor review” order released by the Commission on January 3 “has no immediate impact on end-user tariffs.”
Speaking through its general manager, public affairs, Mr. Usman Arabi, the Commission stated that the electricity tariff increase “will have no immediate impact on consumers.”
Arabi said the order was to establish impact of the exogenous macroeconomic parameters and costs outside the control of the utilities in 2019 and projections for 2020.
He said the macro-economic indices taken into consideration to conclude the exercise included rate of inflation, foreign exchange, gas price and volume of available electricity.
“The order has further prescribed minimum market remittance threshold payable by the 11 Electricity Distribution Companies (DisCos) and the projected tariff path until 2021.
“However, where actual end-user tariffs are likely to be impacted by the review, the required public and stakeholders consultations shall be implemented. This is in line with requirements of the Electric Power Sector Reform Act and Business Rules of the Commission,” he said.
Clarifying its action
NERC in clarifying its action stated that the transition to cost-reflective tariff “will take effect by the end of 2021.”
Speaking at a news conference in Abuja recently, its chairman, Prof. James Momoh, said “there is no immediate increase for electricity end-users.”
“There is no immediate tariff increase for customers, no further discussions on the tariff. Go back and read the documents. The proposed tariff review is what we are mandated to do as a regulator. We are to do it twice a year. We did one in June 2019, January is here and we have no option than to do our job. We have done the review and it is subjected to public consultation. In the next three months, we will be engaging stakeholders for consultation. We have done our review and given a report card of what we saw based on all the indices for doing a review. We have not said it is binding tomorrow morning.
“The order is a Communication of what we have done as a regulator looking at what it entails to increase tariff if, at the end of our meeting back and forth, we saw no increase, then no increase! And if there is going to increase it is going to be based on our engagement at the public forum. On increase, we will talk to all the relevant stakeholders, MAN, and others. Don’t forget, the service must also improve,” he said.
Court halts review
However, some rights group that were left with no other choice than to drag the electricity regulator to court.
And in response to a suit by Incorporated Trustees of Human Rights Foundation brought against 15 respondents in the electricity industry, a Lagos Division of the Federal High Court ordered all stakeholders in the electricity industry to maintain current prices pending the determination of a motion challenging the proposed tariff hike.
Listed as respondents were; Nigeria Electricity Regulatory Commission (NERC); the Bureau of Public Enterprises (BPE); the Nigeria Bulk Electricity Trading Company Plc; and the minister of power.
Also, joined in the suit were Abuja, Enugu, Ikeja, Benin, Kano, Port Harcourt, Kaduna, Yola, Eko, Ibadan and Jos electricity distribution companies.
The suit followed the announcement by the NERC January 4 that electricity tariffs being paid by consumers would increase in April, this year.
Consequent upon this, the presiding judge, Muslim Hassan, fixed January 20, 2020, for hearing of the motion on notice.
The plaintiffs had told the court that “the implementation of the purported minor review of the Multi-Year Tariff Order will create unquantifiable hardship and damages on the Nigerian electricity consumers.
“Consumers will be made to pay very high tariff, which has been increased by over 40 per cent across the board of which is currently being billed.”
Their positions were made known in an affidavit deposed to by the group’s lawyer, Mr. Theodora Ubabunike.
An expert’s view
Speaking at the Channels TV Sunrise Daily Show in Lagos, an Associate Professor of Energy/Electricity at the University of Lagos, Yemi Oke, said without metering it would be difficult to have cost reflective tariff.
According to him, with the Distribution Companies (DisCos) are deliberately refusing to meter their customers the talk about cost reflective tariff is just a pipe dream.
“We cannot have cost reflective tariff. There are deliberate efforts to make sure customers are not metered,” he said.
