Electricity Distributors Deny Plan to Increase Tariff

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Sunday Oduntan

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THE Association of Nigerian Electricity Distributors, ANED, has refuted media reports media that the electricity distribution companies, Discos, want to increase electricity tariff by 200 percent. Azu Obiaya, chief executive officer, ANED, who refuted the report, said with the present economic recession, it will be unreasonable for the Discos to increase electricity tariff.

This came as the association lamented the continued rise in liquidity deficit which may hit N809.8 billion by end of this year, against N383.2 billion recorded in December 2015.

Addressing what it termed false speculation on tariff hike, Obiaya in an interview with the Vanguard, said, “I did not say we are going to increase the tariff 200 per cent but what I said was because of the changes that have occurred recently, inflation has gone up, the Naira has been devalued for almost three times, the gas pipeline vandalisation have resulted in drop of power generation and we have not written such letter on tariff increase to Nigerian Electricity Regulatory Commission, NERC.

“There has to be recognition of something we all have to partner on. We don’t believe any reasonable person at this time will ask the consumers to pay more in terms of electricity consumption given the recession. So since there are only two parties who meet their obligations to electricity supplied, government or the consumers, we believe the government needs to step in now and vigorously play a role.

“The minor review typically occurs in June by every six months, so the process of the minor review has been ongoing but it is moving into its completion. The other issues of shortfalls of cash reflective tariff have been out there. There is the need for the increased cost of electricity production, and there is the need for the increased cost to be addressed.

“It will reduce the tariff cost reflective, the entire value chain from revenue shortfalls now. And the cost of power now is at N1.00 per kilowatt per hour, but the industry is collecting only 60 kobo per kilowatt hour, there is a difference of 40 kobo that needed to be addressed.”

He also urged the government to step in with sustainable measures to rescue Discos out of the current challenges they find themselves in providing electricity services to consumers in the country. According to him, ANED do not believe that the tariff has been cost reflective, because the current MYTO 2015 assumption was based on N194 to the Dollar, while currently the Central Bank of Nigeria, CBN’s rate has been N364 to the Dollar. Inflation that was nine percent, is currently 17.9 percent.

While the generation assumption under this new tariff was supposed to be over 5000 megawatts, but is currently averaging 3500 to 4000 megawatts. In addition, he said ANED has accumulated N53 billion of MDA’s debt, which has remained unpaid for by the government, and as a result of all of these issues the association owes the GENCOs. He further stated that with addition of the post-privatisation N53 billion debts to that which was owed prior to the handover MDAs’ debt amounts to N93 billion in June 2016.

On payment of MDAs’ debt by the government he said, “The government said they are working on something which the minister said will be paid before the end of the year (2016), but there is nothing concrete in that direction.”

Meanwhile, despite the recent positive development in the power supply across the country, succour may be far yet to come as operators have indicated that debts is still rising and may hit N809.8 billion by end of this year. The figure was N383.2 billion as at December 2015. Babatude Fashola minister of power, works and housing and NERC have recently lamented the huge liquidity deficit in the power sector, which according to them, is halting smooth operations in the sector.

Also Sunday Oduntan, executive director, research and advocacy of the association, explained that the liquidity deficit in the sector is increasing speedily, making it difficult for them to meet metering targets and other regulatory obligations. “The challenges hindering development in the power sector remains liquidity which is way higher than envisaged. You cannot talk about metering without talking about the liquidity issues we have in the sector currently.”

According to him, the industry has MDA debts of over N100 billion while total liquidity deficit in the power sector which was N383.2 billion as at the end of December 2015, will be up to N809.8 billion by end of this year if this situation continues. “All these challenges are impediment to procuring meters for customers in the country.”

He noted that the distribution companies had at the moment metered over 3.3million customers and is left with about 2.7 million customers that are yet to be metered. “We have metered 3.3million customers and those not metered are about 2.7 million. The number is increasing anyway. What we are working on is aggressive metering system.”

Lamenting on other challenges bedevilling the sector and what should be done to address them, Oduntan called on the federal government to reverse the ban placed on bonds issuance by the power sector. “There is challenge in acquiring foreign exchange. When we bought these assets, the dollar was trading at N197 to a dollar, but the situation has changed today, as a dollar cannot be gotten at N350 in the market neither will you see it for N400. That is why the federal government should as a matter of urgency look into bringing back the bonds that was rejected at the National Assembly.”

Oduntan also raised alarm on the high level of meter by-pass across the country, calling on customers to put a stop to such illegal activities as it threatens operations of the Discos.

— Nov 7, 2016 @ 01:00 GMT

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