NERC: FG Blocking Take-off of New Cost-reflective Electricity Rates 

By Chineme Okafor in Abuja

Electricity rates charged to consumers in Nigeria by their various electricity distribution companies (Discos) may likely remain as they are for now because the federal government is not disposed to allowing a new cost reflective tariff take off, the Nigerian Electricity Regulatory Commission (NERC), has said. 

NERC, said it had conducted statutory reviews of the tariffs charged by the Discos to factor in extant changes such as inflation rates, exchange rates, and generation capacity, in their components but that the government had as a matter of policy, decided that the new rates be suspended.

A presentation made by a Principal Manager, Tariff and Rates at NERC, Aisha Mahmud, during a workshop organised for journalists in Abuja on Friday by the Association of Power Generation Companies (APGC) – an umbrella body of all the power generation companies (Gencos) in Nigeria, made it clear the commission had done what it ought to do on the review of electricity tariffs, but that the government was holding it back from implementing the new rates. 

“We have done the review but waiting for government to implement it. It is a matter of policy,” said Mahmud, in response to a question on why the commission has held back its implementation of the tariff it reviewed.

 She also disclosed that from the last minor review the commission did, an average of N51 per kilowatt hour was the outcome, adding that most consumers in the residential cadre would not be able to afford the rate, and NERC had advised the government on either subsidising electricity consumption or consider other economical alternatives.

Just few days back, the 11 Discos stated that financial shortfalls from the backlogs of tariff reviews that were done but not implemented by the NERC had risen to N460 billion.  

They claimed the backlogs were as a result of a 2015 decision of the NERC to freeze the residential-2 (R2) tariff cadre and removal of collection losses from their tariffs which resulted in a shortfall of N187 billion, the smoothening of the tariff for 10 years in 2016, which also resulted in another deficit of N227 billion, and additional changes in the tariff as a result of NERC’s refusal to activate the minor review of the tariff in the second part of 2016, which resulted in another N46 billion. 

Also, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, had recently claimed that the last government of President Goodluck Jonathan, arm-twisted the NERC to suspend its implementation of the 2015 electricity tariff to enable it win the presidential election that year, his claims were however roundly debunked by a former chair of NERC, Dr. Sam Amadi, who said the decision of his team to suspend the tariff was entirely theirs and not in any way influenced by the government of the day then. 

Similarly, Mahmud, disclosed that an application for an extraordinary transmission tariff review requested by the Transmission Company of Nigeria (TCN) to enable it undertake its operations was under consideration, and that it would go through public consultation before an outcome on it will be known in 2018. 

“We have received TCN’s request for a review of its tariff, but as you know, it has to go through public consultation before anything decision on it can be reached, and by next year we should have a cost-reflective tariff for TCN,” she added.

 

In her remarks, the Executive Secretary of APGC, Dr. Joy Ogaji, explained that a comprehensive plan to address the financial challenges of the power sector was relevant, and options should be explored by the government as soon as possible.

 

According to Ogaji: “Nigeria chose to create state enterprises. They were the product of post-independence policies grounded in the honest and sincere belief that state enterprises could provide better services and create more jobs than could the private sector. And some years ago, Nigeria chose to sell those state enterprises. It chose to sell its state owned enterprises because those enterprises have failed us.

 

“Since the transfer of power assets to core investors on November 1, 2013, a lot of opportunities and challenges have emerged. And they are being addressed. A lot has been happening, a lot has been achieved, and a lot more are in the works. The end result is to significantly improve the lives of Nigerians. The vision of ensuring that the players in the power sector contribute to making Nigeria great is still there.”

 

“To this end, generation companies as partners in progress with the federal government in building the nation’s economy. With the dwindling commercial performance in the Nigeria Electricity Supply Industry (NESI) due to the liquidity crunch, a comprehensive plan with realistic timeframe to deal with all the liquidity issues will definitely send positive and promising signals to potential investors as well as generation licensed investors.

 

“Gencos are appreciative of the government’s efforts at exploring several measures to bridging the gap, however, options such as compelling NBET to use its capitalisation to make the Gencos whole, timeous payment of international customers monies to Gencos, payments of all outstanding of Gencos monies as well as the 20 per cent shortfall on the N701.9 billion payment to Gencos will be a fantastic and a holistic plan the Gencos and their lenders as well as the gas suppliers will highly recommend,” she noted.