A Review of the Nigerian Energy Industry

Nigeria: Electricity tariff – How fair?

electric-meters29 August 2013, Abuja – Professor Chinedu Nebo, before his elevation to the office of Minister of Power, was the vice chancellor of the prestigious University of Nigeria, Nsukka.

He entered Nigeria’s history book as an administrator who brought so much transformation and far-reaching reforms which significantly improved academic standards in that highly respected institution.

Dateline: Thursday August 22, 2013 the minister through his technical adviser Ms. Ifeoma Malo invited me in my capacity as a civil society leader to attend the maiden meeting of select civil society activists to brainstorm on the just concluded transfer of ownership of the 15 electricity utilities created from the unbundled Power Holden Company of Nigeria (PHCN) from the government to new private sector owners and operators.

The minister, alongside the permanent secretary Amassador Godknows Igali, the chairman, Nigeria Electricity Regulatory Commission, NERC, Dr. Sam Amadi and other directors of the ministry briefed the few civil society leaders present, including Mrs. Maryam Uwais and Mr. Eze Onyekpere, about the need to help sensitise Nigerians on how to safeguard vital infrastructure of the electricity power sector from the rampaging vandals to enable the new owners serve Nigerians better.

Predictably, the vexed issue of reviewed electricity tariff came into sharp focus at the forum, even as the NERC chairman responded professionally to series of questions.

It would be recalled that as part of its regulatory oversight NERC recently disclosed that the electricity tariff would be reviewed upward to attract investors to invest their resources and talents to revive the dying sector because without good pricing environment, willing investors may be scared away because they would be unsure of how to recoup their investments.

The move to hike the tariff has come under considerable challenge by a number of Nigerians who are afraid that the prevailing atmosphere of poverty may not allow most Nigerians to afford the high cost of electricity.

NERC’s assistant general manager, Ms. Maryam Yaya Abubakar, in her reaction on the vexed issue said: “The Nigerian Electricity Regulatory Commission has noted the comments of Nigerians on the recent increase in the fixed charges for some class of customers. As a responsible regulator, we are committed to respond to the concerns raised by consumers in the print and electronic media and through social media. We consider it of utmost importance to explain at all times to the consumers that the tariffs they pay are fair, reasonable and necessary to guarantee continuous improvement in electricity supply”.

“NERC wants to make it clear that since June 1, 2012 when the second edition of the Multi Year Tariff Order, MYTO 2, came into force, it has conducted two minor reviews and published its findings on December 1, 2012 and June 1, 2013, as required by the law. A minor review under the multi-year tariff methodology published by NERC in 2012 involves an examination of interest rates, exchange rates, inflation rates and available generation capacity during the preceding six months; and if these report a change of plus or minus 5% individually, such change will be applied to the tariff published for each distribution company”.

NERC stated further; “The changes that some customers have belatedly noticed in their electricity bills were announced by NERC on June 1, 2012. The MYTO stipulates tariffs for the 5-year period from 1st June 2012 to May 31, 2017 based on the expected cost of generating, transmitting and distributing electricity for homes and businesses during these years. This means that the tariff order issued to every distribution company has an approved tariff for 2012, 2013, 2014, 2015 and 2016.

Except there is a minor review of the MYTO, which takes place semi-annually, with results announced on December 1 and June 1 each year, each distribution company is authorized to collect only the approved tariff announced by NERC. An examination of the tariff tables for the respective 11 distribution companies that were published last year shows all the tariffs for the period 2012 – 2017. The total electricity tariff paid by all consumers in Nigeria comprises a single monthly fixed charge and a variable energy charge that is based on consumption”.

It is to be noted that NERC has in the last few weeks engaged the civil society community to throw more light on the unfolding revolutionary steps being put in place by government to deliver uninterrupted power supply at fair and reasonable tariff. NERC must brace up to save Nigerians from unforeseen exploitations that may follow this new ownership of electricity supply.

– Emmanuel Onwubiko, Leadership

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