New tariff for electricity starts October 31 amidst demand for prepaid meters by consumers, according to the Nigerian Electricity Regulatory Commission
| By Anayo Ezugwu | Nov 2, 2015 @ 01:00 GMT |
AMIDST economic challenges confronting Nigerians, electricity consumers in the country are to brace-up for an increase in the electricity tariff soon. The Nigerian Electricity Regulatory Commission, NERC, is set to increase the tariff by the end of October. NERC said the new electricity tariffs proposed by the distribution companies for approval by the regulatory agency would be ready for implementation by the end of October.
The agency at its recent public consultation where the proposed new retail electricity rates were jointly reviewed by stakeholders, explained that it would first review the figures presented by the distribution companies, Discos with consideration to the diverse views of consumer groups, who were at the consultation before approving any rates.
Sam Amadi, chairman, NERC, noted that the new rates would be out and subsequently practical in the sector by the end of October. From the end of October, the country’s electricity sector is expected to operate with new sets of tariff which is considered cost-reflective and capable of attracting investments in the sector.
“The new tariff is expected by the end of the month but we may skip our timeline to be able to do more thorough work. For example, we have to go to Kaduna and find out the numbers but essentially, our target is the end of the month. The policy for government is that we need a tariff that encourages investment. Ultimately, whatever they send to us, we are not going to give them a back of the envelop tariff. They have to satisfy all expected regulatory standards. The regulator does not allow people to recover more than what they are supposed to recover.”
According to Amadi, “The views of consumers have been tremendous, if you recall, the issue of fixed charge, CAPMI and penalising Discos came from consultation.
“If you look back, you will see that we have always factored the views of consumers and this does not mean that whatever the consumers tell us becomes law but it helps us to do more research and find out what the problems are. Of course, public consultation has huge impacts on what we finally do but as always, it must be balanced and evidenced with good practice. NERC can guarantee that the process we are undertaking is not just a ritual or hollow routine. This is a real search for tariff regimes that will enable investors recover their prudent costs and at the same time provide strong incentives for quality service for consumers.”
The regulator would in every tariff framework it approves for the Discos, include enforceable ‘service level agreements’, and that any Disco that fails to the meet up with the agreement will lose its rights to such approved tariff. Accordingly, the submissions made by the Discos showed that they had proposed sweeping increase in their current charges to consumers.
Irrespective of the fact that the Electric Power Sector Reform Act (2005) empowers NERC to review electricity tariffs in favour of Gencos and Discos, if market variables such as gas and its transportation cost, as well as naira to dollar ratio and inflation shift by over 5 percent. An estimated 40 to 50 percent of electricity consumers in Nigeria are not metered. The metering gap creates energy pricing credibility problems between Discos and their customers, as well as between NERC and Discos.
When this plans are implemented, customers of the Abuja Electricity Distribution Company, AEDC, will record 25 percent increase, Benin Electricity Distribution Company, BEDC, will have to contend with 21 percent hike, Ibadan Electricity Distribution Company, IEDC, have a marginal 1.76 percent increase to cope with. The Enugu Electricity Distribution Company, EEDC, have 19.25 percent rise to bear. There was no information yet on what customers of Port Harcourt, Ikeja, Eko and other companies will be paying at the frozen point to allow a comparative analysis of their new tariffs.