18 August 2015, Abuja – Power consumers who do not receive electricity supply will stop paying the fixed charge, the Nigerian Electricity Regulatory Commission has said.
According to NERC, power distribution companies have agreed to review the fixed charge in a way that consumers who do not receive power supply will be exempted from paying it.
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.
Section 32 of the Electric Power Sector Reform Act 2005 mandates NERC to approve a tariff that allows investors to recover their prudent cost with reasonable return on the assets invested in the business.
The Chairman/Chief Executive Officer, NERC, Dr. Sam Amadi, while reacting to a query by the Senate regarding the collection of electricity fixed charge by Discos, stated that although the fixed charge component in bills was not illegal, the commission had been able to intervene in the matter.
The senators had, in the query last week, asked NERC to explain the basis for the Discos’ inclusion of a monthly average 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 billing as well as payments made by consumers for meter installation in their homes.
Speaking at a briefing in Abuja on Monday, the NERC boss said, “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 remodelling 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 its approval is fair and reasonable, and ensures the survival of the new electricity market and improves quality of supply to consumers.”
The commission, however, made it clear that abolishing the fixed charge component of the electricity tariff would adversely affect the entire system, especially with regard to investments to upgrade the system.
Amadi 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.
He noted that the fixed charge was originally not tied to electricity consumption by consumers, adding that with it, the market would pay power generators their capacity charges to cover their capital cost, fixed operations, maintenance cost and part of their tax cost.
Amadi said, “NERC respectfully argues that the fixed charge that consumers pay in the electricity market is neither illegal nor fraudulent.
“Fixed charges, appearing in different names, are part of electricity markets across the world. The difference in Nigeria could be that we don’t have a good supply of electricity because of the legacy problem of lack of generation capacity, therefore consumers often pay fixed charge for epileptic or no power supply.”