New power investors demand increase in electricity tariffs

PHCN25 September 2013, Abuja – As the federal government shifts the handover date of the assets of the Power Holding Company of Nigeria, PHCN, to the new buyers from October 1 to 2 as a result of the Independent Day anniversary celebration, the successful investors are already demanding for an increase in electricity tariffs.

However, the Nigerian Electricity Regulatory Commission (NERC) has assured the new investors of getting their certificates of ownership next month.

The assurance is coming as the Manufacturers Association of Nigeria (MAN) has stated that the in-house installed power generating capacity of its members was 5,150 megawatts, translating to an average monthly expenditure of N2 billion on diesel and gas.

Speaking Tuesday at the Third Worldstage National Electricity Power Conference 2013 in Lagos, the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, said the agency had been contending with pressure from the new owners of PHCN assets, adding that one of such demands was for the increase in electricity tariffs.

Amadi, who was represented by the Secretary to NERC, Mrs. Ada Ozoemena, said the investors based their demand on the assumptions made by the commission in the Multi-Year Tariffs (MYTO), which they said was inaccurate.

The NERC scribe said though the private investors may have some valid reasons for their demand, they should take over the assets first and be seen to have done something before the agency would be able to discuss the issue of tariff increase.

“They (new investors) are already asking for an increase in tariffs and they have some reasons, which are valid. They have told us that the assumptions that went into the MYTO were inaccurate. Of course, we used 40 to 50 per cent loss in transmission. So, they are asking for increase in tariff. We have been holding roundtable discussions with them,” he said.

Amadi stated that as a commission, NERC had told the investors that any tariff increase for now would be suicidal, stressing that the agency was still defending the last increase in tariff.

“But we have been talking to them, telling them that they have to take over these companies first; they have to try and be seen to have done something before we can even hold discussions on another tariff increase. So, that is where we still are,” he added.
He stated that the handover of the assets to the new investors had been shifted from October 1 to 2 as a result of the Independence Day anniversary, explaining that NERC and the investors were also trying to sort out the accounting issues of the successor companies.
“I mean the date is October 2 but of course, energy has been bought ahead. The energy has been paid for to the PHCN companies. So, these new owners that are coming in want to make sure they get their money. But I have been told it is an accounting process,” he said.

Also speaking at the event, the President of the MAN, Chief Kola Jamodu, said the members required 4,850MW of electricity but were getting 1,018mw from the national grid.
Jamodu, who was represented by the Chairman of the Infrastructure Committee of MAN, Mr. Reginald Odiah, said the members installed 5,480units of diesel/gas-powered generators which was generating 5,150mw, translating to monthly expenditure of N1.95billion, excluding electricity bills from the PHCN.

“It is sad that 40 per cent of our production cost goes into the provision of electricity as against five to 10 per cent in other developed economies. As a result of this and other infrastructural deficiencies, cost of manufacturing in Nigeria is about two times that of Ghana, four times that of South Africa and approximately nine times that of China,” he said.

He listed the consequences of poor electricity supply to the members of MAN to include, high cost of production, uncompetitive pricing; low production capacity; inability to contribute optimally to Gross Domestic Product (GDP); poor returns on investment and closure of factories.
Meanwhile, the NERC has said the new owners of the successor generation and distribution companies will receive their certificates of ownership from the federal government in October.

NERC’s General Manager, Government and Consumer Affairs, Dr. Tony Akah, said yesterday, that: “On October 2 or there about, we are going to handover the certificates of ownership to all the distribution companies to these private people. When we do that, the PHCN will hands off.”

Akah made the disclosure at the occasion of the Power Consumer Assembly (PCA) organised by NERC to enlighten grassroots consumers of power on the status of the reform programmes in the Nigerian power sector.

The PCA event was hosted by the Sapele Local Government Area of Delta State, in continuation of the commission’s ongoing power reforms enlightenment campaign.
NERC had noted that the PCA was aimed at providing Nigerians details of the reform process to enable them demand for accountability and transparency in electricity service delivery.

Akah stated that although the present challenges in the power sector would not disappear overnight upon the emergence of the private owners, but there will be improvement in electricity service rendered to customers.

– This Day

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