Electricity tariff hike: Paying more for darkness

“The tariffs shall remain the same as they presently are (i.e. 2015 levels) until April 1, 2020 when there will be a slight increment to cater for tariff shortfalls which shall be gradually passed on to the consumer until this is fully completed by the end of 2021.”

–      Sunday Oduntan, spokesperson for Association of Nigerian Electricity Distributors

The knotty issue of electricity tariff has once again reared its ugly head so early in the new year. The Nigerian Electricity Regulatory Commission on Saturday, January 4, 2020 announced the immediate review of electricity tariffs in the country from January 1. The order was issued to the 11 electricity distribution companies on December 31, 2019, but published on the commission’s website last Saturday. Signed jointly by the Chairman of the Commission, Joseph Momoh, and the Commissioner for Legal, Licence & Compliance, Dafe Akpeneye, the order was titled, “December 2019 MYTO Minor Review Order”, for the 11 Discos.

The various tariff reviews for all categories of consumers – except those consumers classified as residential (R1) – ranged from 59.7 per cent for consumers in Ikeja to 77.6 per cent in Enugu. Under the new order, electricity consumers in Ikeja who used to pay about N13.34 per kWh since under the 2015 MYTO, when the last review was carried out, will from January 1 this year pay N21.80 per kWh, the same as their R2 counterparts. Their counterparts in Enugu, who used to pay about N17.42 per kWh, will, under the new order, pay about N30.93 kWh from January 1. Their R2 and R3 counterparts who paid about N19.31 and N27.11 per kWh since 2015, will now be paying N34.28 and N48.12 per kWh. Residential (R2) and R3 consumers in Ikeja, who have been paying N13.34 and N26.5 per kWh since 2015, will now pay N21.30 and N21.80 per kWh. Residential consumers are those categorised as those using singe phase and three-phase meters and electricity consumption of about 50 kWh on premises with flats exclusively for residential purposes.

Since this news broke over the weekend, a lot of dust has been raised by different segments of society. The Nigerian labour unions expectedly condemned the increase saying that the Federal Government was taking back the new minimum wage recently approved for workers for which many of them in the states had yet to enjoy. More so, coming on the heels of the recent increase in the Value Added Tax from five per cent to 7.5 per cent. On Tuesday, January 8, 2020, I was a guest analyst on “Burgami”, a magazine programme of Vision 92.1 FM as well as “Nigeria Today” on NTA News 24 where the issue was the topic of discussion. Before I delve into my opinion on the new tariff regime, let me highlight some of the defences being put forward by the operators and the regulator of the Nigerian power sector.

To me, the chairman of NERC, Prof. Joseph Momoh, was being clever by half when he said there was no hike in the electricity tariff. Hear him, “We wish to provide guidance that the minor review implemented by the commission was a retrospective adjustment of the tariff regime released in 2015 to account for changes in macroeconomic indices for the years 2016, 2017 and 2018 thus providing certainty about revenue shortfall that may have arisen due to the differential between tariffs approved by the regulator and actual end-user tariffs”.  He went on to say, “The commission therefore wishes to notify the general public that no tariff increase has been approved by the commission vide the order.”

The spokesperson for the Association of Nigerian Electricity Distributors, Sunday Oduntan, quoted in the opening paragraph, last Monday, however had this to say. “In view of the foregoing, we state emphatically that there shall be no change or increase in the existing electricity tariff until April 1 when the new adjusted tariffs shall begin to gradually reflect the dynamism of our macro-economy.” He said NERC was empowered by the Electric Power Sector Reform Act to carry out minor reviews of the Multi-Year Tariff Order 2015 twice a year and that an accurate electricity tariff assisted in ensuring efficient power supply delivery from generation through transmission to distribution. In addition, he opined that accurate tariffs assure stakeholders and participants of their costs recovery and Return on Investment and make the business viable.

I find it a wrong-headed approach to first approve an increase in tariffs before the nationwide consultation that the NERC chairman is pledging to embark on in the next three months. Again, I disagree with the use of minor adjustment for a 78 per cent increase in tariff. That is a massive increase and is completely at variance with the minor review envisaged by the Electric Power Sector Reform. Furthermore, if the EPSR Act asks NERC to carry out minor reviews of the Multi-Year Tariff Order 2015 twice a year, why doing a three-year review in one fell swoop? Can the distribution companies and their regulator, NERC, justify this hike in good conscience?

For clarity purposes, I am not against paying more for a service being enjoyed. However, over the decades, from the time of the Electricity Company of Nigeria to the National Electric Power Authority to Power Holding Company of Nigeria down to this era of privatisation when we now have the triumvirate of power generation, transmission and distribution companies, electricity has remained epileptic all over the country with questions being asked about the billions of dollars sunk into the various power projects without anything significant to show as value for the huge funds invested in the sector.

I think there should have been considerable improvement in the supply of electricity before this hike would be approved for the DISCOs. Also, the knotty issue of metering of consumers has not been effectively tackled. About 70 per cent of electricity consumers are still being subjected to estimated billing. This is unacceptable! What was initially pledged were free meters for consumers, later we were asked to pay for the meters while the cost of purchase would be used to get electricity in return. It was named CAPMI. Information garnered from the website of NERC has this to say, “The Nigerian Electricity Regulatory Commission  as part of the strategy of fast-tracking the roll-out of end-user meters had, in the year 2013, introduced the Credited Advanced Payment for Metering Implementation scheme. Following the recurring customer complaints about non-delivery of meters despite full payment by customers, the initiative was wound down with effect from November 1, 2016. However, reports available with the Commission indicate that many customers who have paid for meters under CAPMI have to date remained unmetered without any satisfactory justification by the distribution companies.” Imagine that!

Now, they have come up with MAP. MAP means Meter Asset Provider. This is an independent third party granted a permit by NERC to provide metering services which may include meter financing, procurement, supply, installation, maintenance and replacement. In line with the new metering regulation, Meter Asset Providers are going to be primarily responsible for providing metering services, which had been solely provided by the DisCos up till now. Despite this new arrangement, the metering gap is still very huge with many consumers who had paid for meters yet to be supplied.

Isn’t it possible for individuals and companies to buy their meters in the open market just as we purchase mobile telephones while the telecommunication companies provide the activation and recharge cards? Why should DISCOs be the middlemen between the meter manufacturers and electricity consumers?

Before the April 1 due date for the implementation of the new electricity tariff, I’ll like to see the following: Significant bridging of the huge metering gap; improved electricity supply to consumers; prompt trouble-shooting and attention to complaints of consumers; and wide civic education on the rights of electricity consumers. The Federal Government should also carry out independent forensic audits of all the power generation, transmission and distribution companies in order to ascertain their solvency and technical capacities. The funds that these companies promised to inject into the sector never got in and government needs to know why they have been underperforming. The Federal Government should also pay all the outstanding debts owed by its Ministries, Department and Agencies while individuals should also strive to pay their genuine debts while eschewing electricity thefts.