Lagos — The media space is currently being bashed with anger against the Nigerian Electricity Regulatory Commission, NERC since the release of the minor tariff review which will slightly increase charges once in full operation.
While some have termed it a conspiracy between the Commission and distribution companies, DisCos to increase bills when electricity consumers are yet to get value for the current charges- services are still bad in major areas across the country, others see the increase as necessary to boost services in the electric utility market.
However, there is a need for a breakdown, for instance, of the amount consumers, especially residential consumers under the R2 (those using the single and three-phase lines) class will begin to pay under the new tariff year.
Under the 2016 – 2018 Minor Review & Minimum Remittance Orders for the 11 DisCos, Abuja DisCo’s consumers who currently pay N24.30 kWh will have their charges increased to N31.96 by 2020, projected to hit N33.34 by 2021.
Enugu DisCo will add N9.28 to the current charges of N30.93- N40.21 kWh.
Customers under Kano DisCo who currently pay N22.50kWh will pay N33.51 by 2020.
Consumers under the Benin DisCo will pay the highest- N40.65 as they currently pay N31.27kWh will increase to N40.65, and N42.13 by 2021.
The new tariff under Eko DisCo will see consumers pay N30.74 from N24kWh current price, while Ibadan DisCo customers will move from N32.49 to N24.97kWh, while those under the Ikeja DisCo will pay N28kWh and N29.68 by 2021.The current rate is a minimum of N21.30kWh.
Customers under the Kaduna DisCo will have a minimum of N6.69 added to the current N26.37kWh. By 2020, the rate will become N33.06 and N35.05 by 2021.
While those of Jos DisCo will pay additional N9.33kWh to current N29.81kWh, pay N39.14 under the new regime and N48.96 by 2021, those under Port Harcourt DisCo will increase its current charge of N30.23kWh to N39.56kWh in 2020, and vend at N43.03kWh by 2021.
Yola DisCo now under the federal government after being returned by investors will increase charges from N5 above. Consumers currently pay N23.25kWh. Rate will increase to N37.66kWh by 2021.
NERC said the approval of the minor review of the 2015 Multi-Year Tariff Order on August 21, 2019, is to account for changes in macroeconomic indices for the years 2016, 2017 and 2018, thus providing certainty about revenue shortfall that may have arisen due to the differential between tariffs approved by the regulator and actual end-user tariffs.
In a statement, the Commission said it will “continue to undertake periodic reviews of electricity tariffs in accordance with prevailing tariff methodology. In all instances of such reviews and rulemaking, the Commission shall widely consult stakeholders and final decision shall take due regard of all contributions”.
Nigeria is still grappling with reports of the increase although, the new Order ought to have taken effect from July 1st of this year. The next minor review will take effect on 1st January 2020.
How the new tariff was reached
Inflation rate: The actual yearly average inflation rate of 15.6%, 16.5% and 12.1% for the years 2016, 2017 and 2018 respectively were utilised for the review based on the data obtained from the Nigerian Bureau of Statistics, NBS. A projection was made for the year 2019 based on the average of the period January to June 2019.
Exchange Rate: In line with the provisions of the Regulation on Rate Review for the Nigerian Electricity Supply Industry, NESI, CBN official exchange rates were used in this review. The average NGN/USD exchange rates of N255.90, N308.80 and N309.14 were used for the years 2016, 2017 and 2018 respectively. The MYTO – 2015 provides for a premium of 1% above the CBN rate as transaction cost and this was applied in the current review. The applicable NGN/USD exchange rate for 2019 is computed as N306.90 +1% premium = N309.97.
US rate of inflation: The data on the US rate of inflation was obtained from the website of the US Bureau of Labor Statistics (http://www.bls.gov) for the years under review. The actual average rate of inflation for each year was computed and applied in this review whereas the average official rate of inflation from January to July 2019 was applied for the 2019 projections.
Gas Price: The price of natural gas for the power sector has been regulated since the inception of MYTO in 2008. The Commission has maintained a gas price of US$2.50/MMBTU and gas transportation cost of US$0.80/MMBTU for this review. However, other generating companies had contracted different gas prices outside the regulated rates as provided in their respective individual Gas Sales Agreements, GSAs.
Capital Expenditure Allowance for TCN: The Commission reviewed the capital expenditure, CAPEX allowance for TCN to MYTO – 2 level. This it said is in line with the provisions of the MYTO Methodology which provides for the revision of the financial model due to changes in available generation capacity and associated CAPEX required to evacuate and distribute the revised available capacity. The Commission said it will make adjustments to the capital expenditure allowance for TCN at the next review on the basis of verifiable information submitted by the organisation.