Electricy supply: New tariff, old worries

By Tobias Pius

The Nigerian Electricity Regulatory Commission (NERC), the body saddled with the responsibility of regulating the affairs of the nation’s power sector on Monday 31 August 2020 surprisingly gifted Nigerian’s with a not so warm “ember-month” gift package —100% tariff increment for kilowatts per hour usage of electricity with effect from September 1 2020, in a period where the nation’s citizenry are already faced with insurmountable problems such as petrol price increase, tax increase, to name but a few.

The tariff increment from NERC, which was halted earlier on in the year by the National Assembly, was without restraint as it still went live, despite the lawmakers prevailing on the distribution companies (DisCos) to shelve the increment plan for later — say the first quarter of 2021 at least when, hopefully, the current economic challenges the nation is faced with might have subsided.

NERC tagged the new tariff “Service Reflective Tariff” which simply means the more hours you enjoy electricity supply, the more the bill you have to pay, with customers now categorized into maximum demand and non-maximum demand customers, unlike previous categories of residential, commercial and industrial customers. It also places customers on a single-phase who receive at least 12-16 hours of supply to be charged the new premium.

Prior to the new tariff implementation, a Lagos residential customer for example under Ikeja Electric on a single phased meter receiving a minimum of 12 hours of supply was charged N21.30 per KWh of electricity, but the new hike has now raised it by 100 percent to N42.73 per KWh, and a residential customer under Eko Distribution Company receiving at least 12 hours of supply will now pay N43.01 per KWh against the previous N24.00 per KWh. Similarly, a residential customer under Abuja Electricity Distribution Company on single-phase receiving between 12 to 16 hours of supply will now be charged N45.69 per KWh, up from N24.30 per kWh

NERC went as far as listing a couple of factors that prompted their decision to hike the billing which include: inflation rate; global gas price (which has increased since 2015); Nigeria exchange rate; US exchange rate; average kilowatt sold by DisCos; unit cost of power generation; and aggregate technical collection and commercial loses. Electricity distribution companies, like Kaduna Electric and Port Harcourt DisCo, have begun implementing this new service tariff.

Abdulazeez Abdullahi, head, corporate communications, Kaduna Electric, speaking on the new development said: “This isn’t a blanket increase but one only intended to improve hours of power supply and more efficient delivery”.

But in-spite of Abdullahi’s words aimed at winning Nigerians over, a vast majority of the country’s populace haven’t hidden their cynicism towards the new development. A country as big as Nigeria where the average electricity supply consumers enjoy falls is in the range of 8 to12 hours per day, irrespective of the service category they belong, does not make sense for a vast majority of these consumers, considering the amount they get charged monthly, especially in the form of estimated billing.

This new development even drew comments from Atiku Abubakar, Nigeria’s former vice president, who in a tweet dismissed and tagged the new tariff increase as “ill-timed and ill advised” as he further stated that Nigerians need a stimulus and not an impetuous disregard for their challenges coming out of the COVID-19 lockdown having not earned an income for months for no fault of theirs.
It is the discomfiture such a tariff increase brings on citizens at a time like this that elicits reactions such as this cynical one from J.K. Holmes, a media commentator, to Kaduna Electric’s Abdulazeez Abdullahi’s comment.

According to Holmes, “the equipment for power generation, transmission and distribution aren’t truly service reflective. Running high costs on outdated machines and poor protection on installations due to years of neglect and little investment will not cut it as more efficient service delivery as far as I’m concerned”.

Uche Uwaleke, president of the Association of Capital Market Academics of Nigeria, on his part, also condemned the electricity tariff hike and insisted that the timing was improper. He said “But for the timing, I would have welcomed it wholeheartedly. Amidst COVID-19 and its negative impact on firms and households’ pockets, Nigerians will have to grapple with increase in Value Added Tax (VAT), pump price of fuel, exchange rate and now electricity tariffs”.

Uwaleke, who is also the chairman, Chartered Institute of Bankers of Nigeria, Abuja Branch, feels that despite his support towards “a cost-reflective tariff structure for the electricity sector that promotes private investments, the effective take off date should have been deferred till at least Q1 of 2021”.

In an attempt to douse the situation, Abdullahi of Kaduna Electric has reassured customers that his office and the NERC nationwide are working closely with Meter Asset Providers to speedily deploy meters to customers as directed by the federal government, although some areas are still short of meter supplies, which drew the criticism of Olufemi Adewole, a Lagos resident.

Adewole who falls within the 8-hour per day consumer bracket in Lagos finds the whole scenario quite humorous calling it a Frisbee game, pointing out some of the shortcomings of the NERC and reiterated how their meter supply lapses cost the DisCos a penalty of supplying free electricity to customers if such meter payment doesn’t get entered few weeks after paying for them. In an attempt to cushion such penalties customers are kept on hold after applying to receive their meter and are continuously being charged frivolous estimated bills in the process, a situation Adewole said, has made him decide not to upgrade to receiving 12 hours supply thereby maintaining his old payment rate.

A scrutinisation of the contract signed by the DisCos with the government when they took over the assets of the companies shows that they were meant to increase rates after a period of five years. However, some of them argue that Nigerians expect distribution companies to keep the same tariff even after five years as if they are immune to economic realities like inflation, devaluation, increase in the cost of gas, and increased cost of generation.

From an investment point of view, the argument is also put forward that investors will not be attracted to a sector where rates are fixed for five years regardless of the cost of doing business.

However, no matter the relief the DisCos get from this tariff increase, consumers feel it is unfair on them, especially because power supply remains epileptic, requiring that regulators and operators put in more effort towards improving on infrastructures like transformers, new poles, power cables and installation of prepaid meters for consumers. That way, they say, everyone will be fine, as long as there’s a guarantee of improved services.