Proposed increases in electricity tariffs announced last month have not been implemented because the Nigerian Electricity Regulatory Commission (NERC) and the electricity distribution companies (Discos) are yet to agree on new rates, BusinessDay has been told.
Sam Amadi, chairman of NERC, said on Monday that the electricity regulator is still in a prolonged process of scrutinising the multiple requests submitted to it by the Discos.
There have been insinuations that with the planned raise which ought to have been announced on November 1, the cost of electricity could go up by as much as 40 percent, although the regulator denies reports of an impending 49.9 percent hike, saying it was still reviewing details of applications it has received from electricity distribution companies (Discos) calling for upward tariff adjustments.
Amadi told BusinessDay that he does not yet have an idea of what the new electricity rates would be but that he expects to be briefed by the review team today (Wednesday).
“The technical team working on the tariff review is busy with the work at a location outside of the Commission’s headquarters and it is not until they return Wednesday (today) that I can know exactly what shape the whole process will take,” said Amadi.
He further said, “it is after that, that the next round of consultations with the Discos will commence in order to arrive at a commonly agreed tariff.”
This is contrary to the optimism expressed October 14 by the NERC boss at a public consultation for the review of tariff applications submitted by Discos, that the review would be concluded in October for its possible declaration in November.
This has continued to give room for speculations in the media and anxiety among electricity consumers, private and commercial.
Reports indicate that the Discos are proposing to NERC, an average increase of 49.4 per cent in electricity tariffs for residential customers and a hike in the rates payable by commercial consumers by an average of 21 per cent.
Biodun Ajifowobaje , the managing director of Ikeja Electric, reacting to this development, said having cost reflective tariffs is the only way the electricity sector can survive: “Our ten-year tariff schedule went through the regulator’s process. The truth is that whatever is realised from the tariff is used to fund the entire value chain of the power industry – generation, transmission, NERC, and others.”
Ajifowobaje said when the investors are calling for a cost –reflective tariff, they mean tariff that must pay for everything along the value chain. “If the tariff is cost-reflective, the only thing that distribution companies keep is less than 20 per cent of the entire money made”.
According to him, NERC brought out guidelines and one of the guidelines is that they must meet their customers and agree on pricing terms. “We had to do public consultation with the Manufacturers Association of Nigeria as well as other stakeholders and consumers. After that, we made our initial presentation to NERC. The regulator looked at it and referred us back to the customers again, to tell them what the new tariff would be after all cost parameters have been considered.
“We have made that input and have submitted our tariff plan to NERC, waiting for its final approval. NERC had admitted that there is no way tariff review would be done without having a form of increase.”
The Ikeja Electric boss said the electricity sector needs tariffs that will support the entire value chain of the power sector for efficiency and sustainability , adding that they expect that the resultant cost-reflective tariffs would help reposition the sector for improved service delivery.
However Ken Okoha, President, National Association of Nigerian Traders (NANT)had insisted that there was no basis for any such increments in electricity tariffs in Nigeria without significant improvements in the quality of service, as this would cause more businesses to fold up by losing the value of their investments in electricity tariff hikes.
This, according to him, would result in accelerated unemployment and poverty among the Nigerian masses.
Electricity consumers have been kicking against the planned increase in tariff, as they claim that there is nothing on ground to justify the action. They say electricity supply is not steady yet, so as to warrant the increase. But the operators are saying they cannot effectively make the much need investment because they don’t make enough revenue to cover their operational costs.
Consequently, the generating companies are owing gas suppliers, while the distribution companies in turn are not able to pay the generations companies for the power supplied them.
Olusola Bello & YANGE IKYAA
