Wednesday, August 5, 2020
Home Editorial No to planned hike on electricity tariff

No to planned hike on electricity tariff

The upward review in electricity tariff for all categories of consumers but one classified as residential (R1), of between 59.7 per cent and 77.6 per cent announced by the Nigerian Electricity Regulation Commission (NERC)  recently is not only ill timed and totally unjustified but would further impoverished the majority of customers nationwide.

The hike, coming at a time electricity supply remains epileptic in most parts of the country coupled with the fact that about 55 percent of electricity consumers are reportedly unmetered, we demand that the proposed increment be suspended indefinitely until a holistic solution is found to the lingering challenges confronting the nation’s power sector.

NERC chairman, Prof. Joseph Momoh, and the Commissioner for Legal, Licence & Compliance, Dafe Akpeneye, in an directive titled, “December 2019 MYTO Minor Review Order” ordered the 11 distribution companies, DISCOs to effect an immediate review of electricity tariffs in the country from January 1, which take effect on April1, 2020.

In Naira term, under the approved regime, electricity consumers in Ikeja for example who used to pay about N13.34 per kWh since the 2015 Multi Year Tariff Order, MYTO, when the last review was effected, will pay N21.80 per kWh, the same as their R2 counterparts.

But their counterparts in Enugu, who used to pay about N17.42 per kWh, will, under the new order, pay about N30.93 kWh. 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 customers are those categorized as using singe phase and three-phase meters with electricity consumption of about 50 kWh on premises with flats exclusively for residential purposes.

Recall that the MTYO is a pricing model introduced for “incentive-based regulation that seeks to reward performance above certain benchmarks, reduces technical and non-technical/commercial losses and leads to cost recovery and improved performance standards from all industry operators in NERC”

It should be noted that electricity being crucial to all human endeavours, the issue has been generating mixed reactions with opponents such as labour unions and most consumers vowing to resist the proposal which came on the heels of the new national minimum wage of N30000 which many states are yet to implement and the increment in value added tax, VAT from five to seven and half percent by the federal government effective from February 2020. The angry workers, in our view, have every reason to protest the double increment in charges which according to them, was taking back the anticipated gains of the pay rise approved for them.

However, proponents of the hike in tariff regime, among them operators and the regulator of the nation’s power sector see nothing wrong in the increment on the ground that it is cost reflective and imperative if the much clamored massive injection of fresh capital into power generation and distribution will not remain a mirage.

In the words of Momoh: “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”.

Not surprisingly also, the Nigeria Employers’ Consultative Association (NECA) through its director-general, Mr. Timothy Olawale, while defending the proposal insisted that it was necessary to get the troubled power sector back on track, adding that “it is with this right price that more investment can be attracted and consequently, improved service” while no serious investor would want to invest in the sector if the current cost that is below equilibrium price.

Closely related to this is the previous “minor and major reviews undertaken to adjust all the variables that make up the tariffs such as power generation volumes, forex price” which play a crucial role in determining the tariffs.

 We believe that proponents of price increment, based on their pronouncements seemed to have underestimated the debilitating challenges of the power sector which had gulped tax payers billions of dollars but without any commensurate improvement in electricity generation and supply to domestic and industrial customers who rely heavily on generators for the energy needs at great cost.

Therefore, even though it makes sense that investors in the power sector just like their counterparts in every other business venture have the right to recoup their hard earned investment fairly and squarely, it should not be to the detriment of the customers who are currently subjected to epileptic electricity across and crazy billing system.

Consequently, we demand an immediate stop to their ordeal as no meaningful socio-economic transformation could take p[lace with the use of generators due to high cost of diesel which constitutes a serious drain on their hard earned resources.

Everything considered therefore, it is unreasonable, inefficient and criminal on the part of DISCOs to continuously subject about 4.3 out of their 8 million representing 55 percent of their customers to estimated billing which is at the root of the crazy bills they often complain about.

In other words this unwholesome practice is largely responsible for the unwillingness of most customers to pay for services not enjoyed and dwindling revenue by Discos which the planned hike is envisaged to address. Also, electricity theft through collusion between consumers and some unscrupulous staff of the companies has been traced to the above anomaly.

But the poser is: if the problem is that customers are not paying the current tariff, operators of DISCOs should ask themselves, why is this so? We believe frankly that only a proper assessment of consumption of consumers through prepaid meters would guarantee prompt settlement of bills as nobody would pay for services not rendered or darkness.

It is our view therefore, that a significant bridging of the huge metering gap and improved electricity generation and supply to consumers should be the starting block for a holistic solution to problems of the power sector as this will reduce complaints of crazy and estimated billings, with negative implication on cost of living and doing business.

Similarly, the stand of the director-general of the Lagos Chamber of Commerce and Industry, LCCI, Dr. Muda Yusuf that a comprehensive attempt be made to address the challenges of the sector (generation, transmission and distribution), rather than through the parochial adoption of increment in electricity tariff alone should be food for thought for operators and NERC.

This is the narrow but reasonable path to take moving forward, considering that over the decades, from the time of the Electricity Company of Nigeria to the National Electric Power Authority, to Power Holding Company of Nigeria and the current era of privatization, electricity has remained epileptic all over the country.

We totaling support the recent call by the speaker of the House of Representatives, Femi Gbajabiamila, for the suspension of the proposed hike and the criminalization of estimated billing while the best way out of the power quagmire is for the National Assembly to amend the Power Sector Reform Act in order to remove electricity from the exclusive to concurrent legislative list and allow states to develop and own power projects.

The Federal Government in our view should also carry out forensic audits of all the power generation, transmission and distribution companies in order to ascertain their solvency and technical capacities and why they have been underperforming; carry out a total overhaul of the sector; pay all the outstanding debts owed by its ministries, department and agencies, MDAs to DISCOs; demonstrate political will to step on big toes and sanitize the power sector by reviewing the privatization exercise embarked upon by previous administration while individuals should also strive to pay their genuine debt to achieve the desired uninterrupted power supply in the country.

For a better society

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