A Review of the Nigerian Energy Industry

Power firms kick against tariff reduction

18 March 2015, Lagos – The announcement of the reduction of electricity tariff by about 50 per cent by the Nigerian Electricity Regulatory Commission is causing tension among power distribution companies, who have kicked against the move.

Power2The Discos had anticipated recouping their Aggregate Technical, Commercial and Collection losses from consumers based on the provisions of the Multi Year Tariff Order 2.1.

Before the official cut of the tariff by NERC on Tuesday, the MYTO 2.1 order, which took effect on January 1, 2015, allowed the Discos to recoup their losses from customers by passing the bulk to ‘paying’ consumers for losses incurred from ‘non-paying’ consumers.

Our correspondents gathered that a meeting between the regulator and some of the companies held in Abuja on Wednesday, where the Discos made their position known to NERC.

Senior officials of some of the Discos told one of our correspondents in Abuja that the tariff reduction would lead to the tightening of the revenue sources of the power firms.

According to them, the cut in tariff came at a time when the country is faced with a weak national currency and the supply of power from the generation companies is nothing to write home about.

Officials of three distribution companies located in the South-West, South-East and North Central regions told one of our correspondents that although they had met with the regulator, there were doubts as to whether the time was ripe to announce a reduction in tariff.

One of the officials, who spoke on the condition of anonymity, said, “It is not about reducing tariffs, I think the MYTO 2.1 would have been allowed to continue. It was on the right path to help the Discos deliver power efficiently.

“With the reduction, the Discos will be left with limited resources. Of course, you know that residential customers have not started paying the increased tariff. Theirs will only start in June; so, why the haste to cut down rates? The truth is that the reduction is unfavourable to the Discos and it will lead to financial difficulties and may trigger fear among the workers.”

Another official admitted that the cut was not in the interest of the Discos but stressed that the development would make the power firms to develop effective ways of collecting their bills.

The official said, “It doesn’t favour us (Discos) but I believe it will make some of us look inwards and develop how to generate revenue effectively. I know of a power firm that its average marketing staff covers about 3,000 customers and collects bills from these customers. This number is too large and most times, the marketer fails to even collect bills from half the number of customers that he covers.

“So, more than 60 per cent of the ATC&C losses is as a result of the inability of some Discos to collect bills. If the Discos can scale up their ability to collect bills by employing more people, this will boost finances.”

But reacting to the development, the Managing Director/Chief Executive Officer, Nigerian Bulk Electricity Trading Company Plc, Mr. Rumundaka Wonodi, stated that the ATC&C losses of some of the Discos were in excess and that NERC was not comfortable with the situation, hence the tariff cut.

“The tariff that we work with is the wholesale tariff between us and the generation companies. To some extent, I think the incorporation of some of the collection losses were in excess and I guess the commission is having consultations with the distribution companies on that issue,” he said.


– Punch

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