News - January 5, 2021

Nigerian govt. approves N4 tariff adjustments for consumers

NERC denies reports of 50% tariffs hike

The Nigerian Electricity Regulatory Commission (NERC) on Tuesday said it approved an N4 per kilowatt-hour (kWh) adjustment on the prevailing tariffs for all categories of electricity consumers in the country.

NERC said the adjustment in the tariffs was to reflect the partial impact of inflation and movement in foreign exchange rates in the country.

Reacting to media reports on Tuesday of a 50 percent hike in electricity tariffs in the country, the electricity regulator denied that any approval was granted to hike the electricity in tariffs in the country said to have taken effect from January 1, 2021.

“The Commission hereby states unequivocally that no approval has been granted for a 50% increase in the Tariffs Order for electricity distribution companies which took effect on January 1, 2021.

“On the contrary, the tariff for customers on service bands D & E (customers being serviced less than an average of 12 hrs. of supply per day over a period of one month) remains frozen and subsidized in line with the policy of the Federal Government,” NERC said on Tuesday.

“In compliance with the provisions of the Electric Power Sector Reform Act (EPRSA) and the nation’s tariff methodology for bi-annual minor review, the rates for service bands A, B, C, D and E have been adjusted by N2 to N4 per kWh to reflect the partial impact of inflation and movement in foreign exchange rates,” it added.

By implication, the prevailing tariffs for all categories of consumers would be adjusted with an additional N4 per kWh.

For instance, consumers in service Bands A, B, C and D under the Abuja DISCo franchise are who paid N54.3, N49.75, N47.72 and N45.69 per kilowatt-hour (kWh) respectively last December 2020 would be expected to pay adjusted tariffs of N58.3, N53.75, N51.72 and N49.69 per kWh under the current arrangement. Similar adjustments will apply to all other tariffs for consumers in all the 11 DISCOs.

NERC said the adjustment from N2 to N4 per kWh was to reflect the impact on the tariffs of the parameters it usually relies on to carry out reviews of electricity tariffs in compliance with the provisions of the Electric Power Sector Reform Act (EPRSA) and the nation’s tariff methodology for bi-annual minor review.

Some of the parameters the Commission said it relied on in the latest review include the average monthly inflation rate of 13.1% for the period between January and November 2020 announced by the National Bureau of Statistics (NBS) and the corresponding rate of 14.9% for November 2020.

The other parameters included the average exchange rate of N360.8 to the dollar for January 1 to December 15, 2020 and the corresponding rate of N397.44 to the dollar as at December 29, 2020, which was adopted to project the Naira exchange for 2021 and beyond.

Others included a benchmark of $2.50 per MMBTU gas price, gas transportation cost of $0.80 per MMBTU and gas prices outside the regulated rates for the electricity generation companies with effective gas sales agreements.

Consumer Bands

Service Tariff BandsUnder the service reflective tariff (SRT) system, which categorizes customers into service bands based on the number of hours they receive electricity daily, those in Band A include consumers who receive electricity for between 20 and 24 hours of electricity supply per day.

Those in Band B are those enjoying electricity supply for between 16 to 20 hours a day, while those in Band C are those who receive electricity supply for between 12 and 16 hours per day.

Consumers in Band D, who have either single or three-phase; low voltage maximum demand and medium/high voltage maximum demand (11/33kV) connections, are those who receive electricity for between 8 and 12 hours; Band E are those who get electricity supplies for between 4 and 8 hours per day.

New Tariffs for Ibadan DISCo

Regardless, a review of the Multi-Year Tariff Order (MYTO) No. NERC/255/2020 signed by the new Chairman of NERC, Sanusi Garba, on December 31, 2020 showed new tariffs for consumers in the Ibadan DISCo franschise are

The Ibadan DISCO franchise area covers Oyo, Ogun, Osun, Kwara and parts of Niger, Ekiti and Kogi states.

The order titled: “December 2020 Minor Review of MYTO 2020 And Minimum Remittances Order for IBEDC”, was signed by the NERC Chairman, Sanusi Garba, with the Commissioner Legal, Licensing and Compliance, Dafe Akpeneye.

The Commission said the new tariff order, which supersedes order No. NERC/202B/2020 took effect January 1, 2021 and will exist until it issues either a new minor review order or an extraordinary tariff review order.

A copy of the order obtained from the Commission Twitter handle said it was issued pursuant to sections 32 and 76 of the EPSRA to address the transition to cost-reflective tariffs and the introduction of the service-based tariffs regimes to improve customer service delivery as well as the financial sustainability of the Nigerian Electricity Supply Industry.

A summary of the approved minor review for 2020 and the projected rates for 2021 for consumers in Ibadan DISCOs showed tariff for customers in Band A (non-maximum demand) will increase by 10.98 percent (N6.85) from N62.33 to N69.18 per kWh; Band A MD1, N68.13 kWh, from N61.33 per kWh; and Band A MD2, N61.86 per kWh, from N59.70 per kWh.

Also, tariffs non-MD with an increase from N58.38 per kWh to N66.06 per kWh; Band B MD1, N64.99 per kWh, from N57.33 per kWh, while Band B MD2 will pay N58.72 per kWh, from N56.33 per kWh.

For customers in Band C non-MD, the increase is about 29.13 percent (N14.19), from N48.71 per kWh to N62.90 per kwh; Band C MD1, from N47.99 per kWh to N61.86 per kWh, and Band C MD2, from N46.91 per kWh to N55.58 per kWh.

Consumers in Band D non-MD will pay the highest tariff increase of about 121.5 percent, from N59.76 per kWh, from N26.97 per kWh; Band MD1, N58.72 per kWh, from N44.03 per kWh, and Band D MD2, N52.44 per kWh, from N44.03 per kWh.

For consumers in the service Band E non-MD, the new tariff is N31.81 per kWh, from N26.97 kWh. Those in Band E MD1 are the ones that would have a 4.20% reduction in tariff of N42.18 per kWh, from N44.03 per kWh, and Band E MD2 will pay N47.52 per kWh, from N44.03 per kWh.

NERC said it has computed about N322.3 billion as the tariffs shortfall for IBEDC for 2015-2020, subject to final reconciliation.

The Commission, however, said the government was preparing to transfer the liabilities from the tariffs shortfalls off the financial records of IBEDC to the National Electricity Liability Management Company (NELMCO) so as not to unduly impair the balance sheet of the DISCo.

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