The Nigerian Electricity Regulatory Commission (NERC), has disclosed that an upward review of payable electricity tariff has become inevitable in view of the lingering financial crises in the country’s power sector. Consequently, electricity customers are soon to pay an average of N51 per kilowatt of electricity, which constitutes 62% increase for residential (R2) customers who are currently paying an average of N30/kwh. This was disclosed at the Commission’s training workshop held on Friday, 13 October, 2017, at the FCT Abuja.
The announcement came as a rude shock to most Nigerians who had before now commended NERC on its earlier firm position against any tariff increase, especially for the low-income earners who constitute about 70% of electricity consumers in the country. By this latest development in NERC’ position, many Nigerians fear that the regulatory body may have finally compromised by succumbing to mounting pressure from operators of the power industry, most especially the DISCOs which had always lamented a very poor tariff rates that are unfriendly to business.
NERC explained that the actual tariff of N51/KWH was arrived at based on the economic fundamentals considered when carrying out minor tariff reviews, adding that the commission had completed the process for the new tariff but had yet to receive an approval from the Federal Government to announce its implementation. In justifying this new position, NERC explained that the increase has become necessary in order to avert a total collapse of business in the sector. According to NERC, the current price of N31 paid by consumers for a unit electricity in the country makes no business sense for the Distribution Companies which buys the same unit at N68 from the Gencos. In order to guarantee business sustainability and a reasonable return on their investments, the cost-reflective tariff of N70/kwh would be the ideal, the Commission argues. Most operators agree that the proposed N51/kwh still constitutes huge sacrifice on the part of the companies.
The imminent increase in electricity tariff is also targeted at other classes of consumers including commercial and industrial whose charges are expected to increase from an average of N42 per kwh to N68 per kwh.
The Electricity Consumers Association of Nigeria, ECAN, an advocacy group which appears to be championing the interest of the consumers against unfair regulations and actions may also have relaxed in its activities to stop this latest development if the recent comments from that body are anything to go by. The Executive Secretary of ECAN, Mr. Goodluck Enyinna, was recently quoted as saying that DISCOs should request the MDAs to resolve its huge indebtedness to the power sector as a way out for the DISCOs to meet their obligations. However, Nigerian electricity consumers expected the Association, as a civil rights advocacy group, to unequivocally condemn the planned increase and the falsification of facts that the companies are insolvent to the tune of N460 billion as a result of poor tariff regime. This may be seen as having a soft spot for the DISCOs by ECAN. The Consumer Protection Council too has not reacted to this latest announcement.
Many energy and economic experts have warned that further increase in electricity tariff across the various classes of consumers is sure to have negative ripple effects on the country’s already fragile economy as the costs of many consumer goods will also go up. Many manufacturing companies and small-scale businesses depend on electric power for their production. It is not known whether the NERC planned increase will pass through the National Assembly which is expected not to approve its implementation in the interest of the masses.
Electric energy has become a most essential and indispensable commodity in most economies of the world. This has led to a number of reforms in the industry in many parts of the world including Nigeria. However, unlike other countries where the reforms have largely succeeded, Nigeria continues to wallow in darkness in spite of the privation of the industry since November 1, 2013, a situation that has reinforced the call for a reversal of the reform. Consumers are being ripped heavily through estimated billing to pay for the gross inefficiency and corruption that have always characterized the sector.