A Review of the Nigerian Energy Industry

Fixed charge reduction temporary, say power firms

07 October 2015, Lagos – Against the backdrop of growing agitation from many quarters for the removal of electricity fixed charges, most of the electricity distribution companies in the country have proposed a temporary reduction in the charges.

Dr. Sam Amadi, NERC.
Dr. Sam Amadi, NERC Chairman

The Discos stated this in their 10-year tariff plan submitted to the Nigerian Electricity Regulatory Commission, copies of which were obtained by our correspondent on Tuesday from the commission’s website.

According to the tariff review guidelines from NERC, in filling their tariff applications, Discos shall reduce fixed charge from customer bills by increasing the energy charge.

The power firms, including Ikeja, Eko, Ibadan, Enugu, Yola, Jos and Kano Discos, said there was a risk in reducing the fixed charge component of cost recovery, that market-related fluctuations in the future, which they feared might result in an under or over-recovery of costs because tariffs, would no longer correspond with the fixed and variable components of NESI costs.

They said, “It may therefore be prudent to consider the proposed reduction in the fixed charge as a temporary measure that may be reversed when electricity supply in Nigeria is no longer chronically suppressed by shortage of generation capacity.”

Ikeja Disco proposed to reduce the fixed charges by 25, 35, 40 and 50 per cent, adding that, “The fixed charges from 2017 will grow at the rate of 7.9 per cent.”

According to the new fixed charges, R2-S (residential) and C1-S (commercial) customers will pay N375 as against N750, while R2-T customers will pay N450; R3 will pay N13,134, down from N26,269 and R4, N82,087 as against N164,174.

Eko Electricity Distribution Company said it proposed the removal of fixed charges in naira per month, replacing it with a naira per unit charge.

It said, “EKEDC has proposed a removal of monthly fixed charges using the following methodology. The fixed charge is changed to energy per unit and transferred to the energy charge of the same tariff class to avoid cross-subsidisation and to maintain expected income.”

It said the additional unit from the conversion of fixed charge in naira per month to naira per unit was added to the energy charge and this would serve as the basic for tariff analysis.

Enugu Electricity Distribution Plc said the percentage reduction of the fixed charge per customer class was transferred to the energy charge of the same tariff class to avoid cross-subsidisation and to maintain expected income. The reduction ranged between two per cent and 48 per cent.

  • Punch
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