The Nigerian Electricity Regulatory Commission will not increase electricity tariff now until power supply improves
| By Anayo Ezugwu | Sep 21, 2015 @ 01:00 GMT |
THE incessant power outage in the country has made the Nigerian Electricity Regulatory Commission, NERC, to shelve its planned increase in electricity tariff for all categories of consumers. The new tariff was supposed to begin in June this year. But the NERC said although it had earlier in the year announced that the tariff would rise from June, the decision was put on hold due to the emergence of a new administration.
The commission also explained that a new model for electricity tariff was being put in place by power distribution companies, stressing that the new rates would be announced after the DISCOs had completed consultations with their various customers. Sam Amadi, chairman, NERC, said this on the sidelines of a public hearing on the minor review of the Multi Year Tariff Order 2 at the head office of the commission in Abuja.
“It (tariff increase) was frozen. What that means is that we knew that was the right time but we felt that going by the low level of metering, going by the power supply, that the DISCOs can forebear. We told the DISCOs, we know you are entitled to this tariff, but we are asking you not to collect it at this stage until you improve.
“Now the order said six months. Meaning, it will be unfrozen in June. June came and I told you why it wasn’t done. Because a new government just took over on the 1st of June and that it will be totally irresponsible to unlock tariff at that stage. Now that we have some stability, we need to move to the next stage,” he said.
Amadi noted that a new formula was being worked out, adding that it had yet to be translated to any customer’s tariff. What the tariff will actually be will await the results of the (DISCOs’) final consultations when they present it to us, because they all have the flexibility to recover within a 10-year period. This is the formula. The actual tariff will be announced by the DISCOs when they finish their consultations. The four indices that are used to determine the distribution tariffs are inflation, exchange rate, capacity and gas price. You have to have a combination of all of them and then you build it to a tariff.”
According to him, no one will tamper with fixed charge component of electricity bills, but the commission will always protect the interest of consumers as well as provide regulations that would support the business of the operators. “We are going to make sure that consumers are protected and we are also going to make sure that the industry’s revenues are supported.”
Subject to the conclusion of the tariff review, the NERC and the operators are, however, expected to present the final tariff model to the Presidency and consumers of electricity in the country to secure their buy-in and also guide the new government in its future policy decisions in the sector.
The Multi Year Tariff Order, MYTO, methodology which the country’s electricity market operates with provides for major and minor reviews. However, minor reviews are to be carried out every six months to incorporate changes in inflation rate, foreign exchange rate, gas pricing and generation capacity into the retail tariff. Depending on the outcome of the review exercise, the possibility of an upward or downward tariff review is still inconclusive, despite the indication that average retail tariff in the market has dropped from N26 to N23 per kilowatt hour (kwh).
The new indicators as shown at the meeting in the minor review include inflation rate of 8.3 percent up from 7.8 percent; exchange rate, N198.97 to the dollar, up from N166.18; energy sent out from stations is 32,921GWH, up from 28,038GWh; revenue requirement N619 billion, up from N572billion; and average retail tariff N23.8 down from N26.8.