A Review of the Nigerian Energy Industry

Fixed N750 charge: Electricity consumers allege rip-off by DISCOs


*Over N20bn Collected In Two Years

13 September 2015, Lagos – THE Two Electricity Distribution Companies, DISCOs, in Lagos, the Ikeja and Eko Distribution Companies may have collected well over N21 billion from residents in Lagos in the last two years when they started collecting N750 from every home with electricity meters as fixed charge on power consumption. This amount is based on the assumption that each of the houses captured by Lagos State Geographic Information System, which put the total number of houses in the Lagos metropolis in 2011 as 1,194,525, are metered.

The figure of houses in Lagos, based on the figure from Lagos State, is in conflict with the figure from the DISCOs, which claimed to have 1, 118,000 customers in Lagos State, an indication that they have only collectedN20.2bn fixed charge from consumers in the last two years.

While Ikeja DISCO admitted having 716,000 customers, the Eko DISCO said it has 402,000 customers. But other sources have disputed the figure, saying the houses in Lagos, even in 2011, cannot be less than three million, an indication that the DISCOs may have collected well over N54 billion as fixed charge from electricity consumers since their inception

In Abuja, about 350, 000 of about 700,000 total customers in the entire franchise area of the Abuja Electricity Distribution Company (AEDC) or Abuja Disco are without meters, an indication that the distribution company may have collected over N6.3bn fixed charge in the last two years.

Abuja Disco, which covers the Federal Capital Territory (FCT), Kogi, Nasarawa and Niger states, says it is, however, unveiling a scheme to provide meters to most of these customers.

Managing Director of Abuja Disco, Mr. Neil Croucher in an email exchange with The Guardian, noted that the sum of N2bn has been injected into the company with a view to improving its network assets and infrastructure.

“We will install 500,000 meters; 100,000 per annum, for a period of five years after we must have completed the pilot scheme of free meter installation, totaling 35,000 for which Minna in Niger State and Life Camp in FCT have been selected as test areas.”

The fixed charge is being collected from electricity consumers, whether or not they use electricity from the national grid for the period of collection. The controversial retention of electricity fixed charge nationwide has generated a lot of controversy. The complaints cut across Civil Society Organisations, including students, traders and house owners, who labeled the continued collection of fixed charge by the Electricity Distribution Companies, as illegal.

They question the rationale behind incurring fixed charge whether they have supply or not each month. The reality is that if one buys a N1,500 recharge card, for those using prepaid metre, DISCO collects N750 as fee; if you consume N3,000 a month on analog meters, they give you a bill of N3,750.

Electricity consumers have freely expressed their grievances against DISCOs on the contentious fixed charge of N750, which they tag “illegal and extortionary.” Also included on the list of grievances was failure to supply pre-paid meters already paid for, estimated billings without meter, and poor power supply, even when customers pay monthly electricity bills.

Nigerians have therefore called on the Nigerian Electricity Regulatory Commission (NERC) to discontinue the collection, describing it as nebulous, exploitative and fraud.

The civil society groups argued that the fixed charge should not be an incentive for companies to perform their primary duties or improve on their distribution network. NERC has been at pains to explain the rationale to Nigerians without success, especially as they have seen only marginal improvement in the availability of electricity needed to ameliorate their pains.

The attention of the Senate was drawn recently, when they asked NERC to abolish the fixed rate. The directive was the result of a motion sponsored by former governor of Ebonyi State, and now Senator, representing Ebonyi North Senatorial District, Sam Egwu, who described the fixed rate as “Unfair Trade Practices of Electricity Distribution Companies in Nigeria.” He urged the Senate to compel the abolition of the fixed charge component of the electricity bill, calling it fraudulent and extortion of consumers. The motion was unanimously adopted. The Senate had earlier quarried the commission over the matter. It asked the commission to explain the rational behind the fixed rate, even when there is no consumption.

Reacting to the query by the Senate, Sam Amadi, chairman, NERC, announced that power consumers, who do not receive electricity supply would no longer pay fixed charges.

The Senators had, in the query, asked NERC to explain the basis for the DISCOs inclusion of a monthly fixed charge of N750 in the electricity bills of domestic consumers and others.
They also requested for an explanation on the practice of estimated electricity, as well as payments made by consumers for meter installation in their homes.

Amadi stated that although the fixed charge component was not illegal, the Commission had been able to intervene in the matter.

The NERC boss told The Guardian last week that his commission was in consultation with electricity consumers on the matter.

“In recognition of the negative impact of the fixed charge, the Commission has held several public consultations to ascertain a measure that will guarantee financial viability in the industry and not expose consumers to paying for electricity not consumed.

“Based on the intervention of the Commission, the distribution companies have agreed to find a way to restructure the fixed charge such that a consumer, who does not receive electricity supply, does not pay the fixed charge. This remodeling of the fixed charge will be part of the ongoing tariff review process being conducted by the distribution companies. NERC will continue to ensure that whatever model is presented for approval is fair and reasonable, and ensures the survival of the new electricity market and improves quality of supply to consumers.”

He explained that in as much as the charge was a standard industry practice across the globe, the case of Nigeria was judged by the legacy problem of poor electricity generation capacity.

Amadi, who with difficulty has been in pain defending the DISCOs had said that; “Electricity consumers in Nigeria pay both the fixed and energy charges. While the energy charge is for the actual amount of power consumed, the fixed charge is to recover the capital and fixed cost incurred by the various operators in the industry.”

The Commission, however, made it clear that abolishing the fixed charge component of the electricity tariff would adversely affect the entire system, especially with regards to investments to upgrade the system.

On whether the DISCOs are at liberty to slash the fixed rate, He said, “it is also possible to reduce or even scrap the fixed charge.” According to him, DISCOs could develop or restructure the charge in a way to allow them recover their investment. “That is why they are allowed to consult with their constituency, after which, the Commission can then factor customers’ concerns to ensure that the charge is fair on both consumers and DISCOs.”

The DISCOs said that they would have no option than to comply, if the government decided to scrap the fixed rate, provided it is enforced on all of them.

Nigerians have however, not taken the explanation from NERC seriously as they argued that the fixed rate has been a financial burden on the people. They are asking the Senate, which is probing the power sector to put its foot down on the ill practices of the DISCOs.
Christopher Olanipekun, a Lagos based Architect said he was looking up to the planned hearing by the Senate for him to present a position paper on the matter. According him NERC has not told Nigerians the truth about the fixed charges.

“ How can the Commission say they are charging the fixed rate to recoup their investment? Nigerians should smell a rat in that statement. You can only recoup your investment by making profit from efficient service and not by collecting free money for service not rendered. The Commission should be probed for supporting this illegality. The DISCOs are only empowered by law to issue bills for electricity used at each consumer’s supply address at regular intervals. The bill has to be based on electricity consumed, either with prepaid meter or with analog meter. So you can only be charged for that which you use. The law never provided for charging citizens fixed fees like DISCOs are doing,” he said.
*Emeka Anufuro – The Guardian

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