In spite spiralling inflation and cost of living, some Nigerians are to further contend with higher electricity tariffs, as the Nigerian Electricity Regulatory Commission (NERC) on Wednesday approved a 241 percent upward review of electricity price in the country.
The price review would affect consumers classified under the elite Band A category of customers who would henceforth pay an average of N225 per kilowatt hour (kWh), about N159 per kWh above the current tariff rate of N66 per kWh.
the Vice Chairman of NERC, Musliu Oseni, announced the price review In a media presentation in Abuja on the state and status of the electricity sector in Nigeria.
He said the increment in the tariffs payable by other categories of consumers, namely Bands B, C, and D, would however remain frozen in line with the government’s directive to electricity distribution companies (DISCOs) to halt the implementation of the new rates announced by NERC under the 2024 multi-year tariff order (MYTO) last January.
Customers classified under Band A category of consumers are those who enjoy a minimum of 20 hours of electricity supply from the DISCOs daily.
“The Nigerian Electricity Supply Industry (NESI) currently has about 800 feeders categorized under Band A. But upon the review of those feeders’ performance, the Commission has now reduced it to under 500 feeders, which means that about 17 percent now qualify for Band A feeders. These feeders only service 15 percent of total electricity customers connected to the feeders.
“The Commission has issued an order, titled; “April Supplementary Order” with effect from today (Wednesday, April 4, 2024)”, he said
NERC said the review was pursuant to the provisions of the Electricity Act 2023, which allow a licensee operating in the Nigerian Electricity Supply Industry (“NESI”) to charge rate sufficient to recover the full cost of its efficient operation, including a reasonable return on the capital invested in the business.
The Commission said the determination of such rates was subject to extensive reviews, having regard to the imperative for protecting customers, while allowing investors to recover sufficient revenue to incentivize
investments necessary for continuous improvement in service delivery.
Recently, the Federal Government unveiled a transition policy towards a more targeted subsidy regime aimed at mitigating the impact of changes in macroeconomic parameters, while protecting vulnerable customers and fostering investments targeted at providing efficient service delivery in the NESI.
Following a review of the tariff applications submitted by the 11 DISCOs in line with the
established regulations and Business Rules. the Commission said an analysis of the Performance Improvement Plans of the licensees, including a public hearing revealed the need for the tariff application to be considered to ensure a financially sustainable electricity market and supply for the Nigerian economy.
Consequently, the Commission said upon due consideration of the tariff applications approved
revised rates affecting ONLY customers classified under Band A service category, which constitute about 15 percent of the total customer population of over 12 million.
The Commission said empirical service data confirmed that this class of customers have truly received the committed level of service of at least 20 hours of electricity supply from the DISCOs.
Under the revised tariff Order, DisCos are under an obligation to provide customers classified under Band A service category a minimum average supply of 20hrs/day measured over a week’s period .
“All other customers under Band B to E Service category, and representing 85% of customers population would not be affected by the current review of end-user tariffs. All DisCos have been provided with mandatory targets for investments and migration of more customers to Band A service category,” the Commission said.
With the newly approved tariffs, NERC said subsidies for the 2024 fiscal year are expected to reduce by about N1.14 trillion in furtherance of the Federal Government’s realignment of the subsidy regime.
To ensure effective monitoring and enforcemnt, the Commission said it has established a monitoring framework leveraging on technology to give the public visibility of the service agreement with their service providers, while an enforcement and compensation mechanism has also been put in place in the event of service failure.
The state of infrastructure in NESI, Oseni pointed out, varies from one location to another, adding that the customers to be affected by the tariff increase would be those living where no investments in infrastructure are required to meet the 20 hours of electricity supply, constituting less than 15 percent of the customer population.
The increment in electricity tariffs is coming on the heels of last Monday’s announcement by the Nigerian Midstream-Downstream Petroleum Regulatory Authority (NMDPRA) of an increase in the price of natural gas, which is a major source of energy for power generation in Nigeria.
As part of the enforcement, monitoring and evaluation mechanism, Oseni said DISCOs have been mandated to set up rapid response teams in different locations the feeders that would be affected by the rate review are located.
Also, he said the DISCOs have been mandated to publish the contacts of the rapid response teams in each of the locations where the customers that would be affected by the new rates reside.
In the latest tariff order, NERC said DISCOs have been warned that those who fail to meet the service commitments for seven consecutive days, their feeder would be downgraded immediately to the service level they would be able to provide service on the feeder.
Besides, he said where a DISCO fails to meet the service commitments for two consecutive days, it must publish an explanation, in addition to a bulk SMS contact to the affected customers on the feeder on why it was unable to meet the service required for the period.
Where a DISCO fails to meet the service level to the Band A customers ffor a month, it would not only bee downgraded the feeders, but would be made to pay compensation to the customers in line with existing order.
On the setting up of a situational room, Oseni said the Commission currently has a team of in-house staff to ensure they are on ground as they monitor the performance of the DISCOs near real-time.
“They are expected to provide feedback and directive to the field officers of the DISCOs, apart from the Commission staff in the situational room of the Transmission Company of Nigeria,” he said.
