ELECTRICITY TARIFF HIKE AND MATTERS ARISING: MY OPINION

ELECTRICITY TARIFF HIKE AND MATTERS ARISING: MY OPINION

 Electricity is a product, it is made from raw materials; some of the raw materials are gas, power plants; they are also related. So, the issue of tariff is the single issue of price; when the raw materials of course go up, the price cannot stay the same.” – Babatunde R. Fashola (Minister for Power, Works and Housing)

The news of the massive nationwide protests orchestrated by trade and labour unions, aggrieved manufacturers as well as stakeholders and concerned Nigerians to voice their discontentment with the newly effected Multi-Year Tariff Order (MYTO 2.1) dominated most media headlines in the previous week. The protesters besieged the offices of major electricity Distribution Companies (DISCOs) bearing placards and singing solidarity songs decrying the new electricity hike as totally unacceptable, exploitative and impoverishing; the move by NERC to review upward the prices of electricity consumption in the country.

Perhaps, I heard about the new electricity tariffs when I watched the interview with the immediate past chairman of NERC, Dr. Sam Amadi on Channels Television sometimes in December last year. For the records, NERC (the Nigerian Electricity Regulatory Commission) is the umbrella regulatory agency in the country’s power sector and it is charged with the sole responsibility of providing rules and regulations that ensures the nation’s electricity supply value chain popularly referred to as the Nigerian Electricity Supply Industry (NESI) is investor-friendly as well as customer/consumer-centric.

In consequence, you would not sound out of place if you describe it as the NCC or the CBN of the electricity sector because it provides oversight functions and ensures that every player in the industry participates according to the laid down rules of engagement.

The Revised Multi-Year Tariff Order (2.1)

 In the tariff order, significant changes were made to how the Electricity distribution companies (Discos) would charge customers/consumers henceforth; the billing segmentation for residential and commercial customers is enumerated. N702.11 to N123, 321 for Abuja distribution network, N750 to N155, 923 for Benin, N781.13 to N226, 797 for Kaduna, N750 to N118, 501 for Eko, N650 to N106, 446 for Enugu, N624.95 to N106, 311 for Ibadan, N750 to N98, 447 for Ikeja, N775 to N164, 782 for Jos, N669.90 to N141, 795 for Kano, N700 to N148, 835 for Port Harcourt and N750 to N137, 141 for Yola distribution companies.

Apparently, the increased tariff regime exempts consumers in the R1 and R2 categories who make up the largest number of residential consumers (for six months only) whose consumption of electricity is strictly for non-commercial, but regular day-to-day home use.

The Merits

The previous paragraphs were dedicated to the explanation of what the new tariffs would look like in the new price regime using the Multi-Year Tariff Order (2.1) billing segmentation. The advantages of the new arrangement are highlighted and discussed in preceding paragraphs;

     I.        Pay As You Consume (PAYC) - While commenting on the new electricity tariff regime, Dr. Sam Amadi explained that going forward, electricity consumers in Nigeria would no longer pay the fixed charge included in monthly electricity bills issued by the 11 electricity distribution companies (Discos) in the country but will pay higher tariffs for electricity consumed.

He stated further that the new tariff regime has effectively removed the contentious fixed charges for all classes of electricity consumers in the country. The fixed charge is that component of the tariff that commits electricity consumers to paying an approved amount of money mostly on a monthly basis, irrespective of whether electricity is consumed during the billing period or not.

    II.        A Reviewed Dispute Resolution Process - Another advantage of the new tariff regime is that any over billed customer would only be required to pay his last undisputed bill as the contested bill goes through the dispute resolution process. NERC equally said Discos would have to meter all its customers, as the metering policy it signed into law would be strictly enforced and for those willing electricity customers who paid for meters under the Cash Advance Payment Metering Initiative (CAPMI) but are yet to be metered within the allowable 60 days, they would no longer be billed by the electricity distribution companies under the new tariff regime until they are metered by the Discos and the Discos will not disconnect them.

'There is zero tolerance for overbilling of customers, an unmetered customer who is disputing his estimated bill would not be expected to pay the disputed bill' Dr. Sam Amadi opined. “He would pay his last undisputed bill as the contested bill goes through the dispute resolution process. This is a departure from the old practice which prescribed that customers should first settle the bill while the dispute resolution was in process,” added Amadi. 

The arguments against the new tariff hike is centred solely on the non-consultation of relevant stakeholders before implementation, most of the aggravated manufacturers expressed their regrets and noted that the hike would only result into massive downsizing of staff, relocation or closure of business.  One of the manufactures would voiced his feelings, the Ikeja branch co-ordinator of Steel Manufacturers Group of the Manufacturers Association of Nigeria (MAN), Mr. Felix Okojie said that the new tariff by NERC has put manufacturers in a very tight operational corner. Okojie further explained that a comparative analysis of the cost of energy in Nigeria against other countries around the world showed that Nigerian businesses pay the highest electricity charges in the world. His words; “The MYTO 2012 to 2017 which was supposed to operate for five years constituted our long term planning. So, coming at the middle to increase and not just a mere increase but an increase of almost 44 to 45 per cent is completely destructive. In some areas, it is 100 per cent”

He added: “The explanation that they have the right to adjust it any time is completely new to us. Maybe that is internal administrative thing but even if they would have that, since we are the major stakeholders, they should carry us along”

Conclusion

An article titled, “Opportunities for Off-Grid solutions in the Nigerian Power sector” published by Financial Nigeria (January 2006 Edition) explained in explicit terms the challenges inhibiting the NESI to effectively and efficiently meet the ever-increasing electricity demand of Nigerians. The article concluded that 'Nigeria can only achieve the desired increase in generation with a balanced blend of on-grid and off-grid power projects. A balanced approach could potentially lead to an accelerated journey to full electrification in Nigeria'.

More importantly, it also noted that one of the challenges the sector is faced with is “Liquidity issue in the NESI” resulting from non-cost reflective tariffs. “The DISCOs, being the cash collections in the power value chain were unable to collect sufficient revenue to pay their power bills which should sustain the rest of the value chain”. This is one of the justification by NERC for the unreasonable hike.

My opinion - I totally agree with the above assertion and I would like to commend the Minister's effort in revamping the dilapidated power sector. This morning, I learnt that he was on an inspection tour to some power plant in Niger State yesterday but if you ask me, I think the controversial hike is unpopular and un-called for in light of the current economic situation in the country and the fact that electrical power; being a product (according to the Minister) should first and foremost be adequately provided before any upward review of price can be negotiated and accepted. Please forgive me for been so opinionated. 

God Bless Nigeria.

 Olusanya, Oluwole Sheriff