NERC: No Huge Increase in Electricity Tariff

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• Says Discos must demonstrate greater operational efficiency

Chineme Okafor in Abuja

Ahead of the biannual review of electricity tariffs in the country, which is expected in June, the Nigerian Electricity Regulatory Commission has said there will not be any big increase in bills paid by electricity consumers.

The newly inaugurated Chairman of NERC, Professor James Momoh, stated this in an interview with THISDAY at the weekend in Abuja, saying NERC would only endorse minor changes in power cost that would also be tied to improvements in service quality and operational efficiency on the part of the 11 electricity distribution companies in the country.

He disclosed that a team of experts had been constituted by the commission to determine the actual costs of producing and supplying electricity to Nigerians.

Under the Electric Power Sector Reform Act, 2005, NERC established a methodology for determining electricity tariffs in the Nigerian Electricity Supply Industry and subsequently issued a tariff order, the Multi-Year Tariff Order, which sets out tariffs for the generation, transmission, and distribution of electricity in the country.

Momoh said regarding the imminent review of the electricity charges, “There are three timescales for doing this. There are things we will do in a hurry to make sure the MYTO changes. I am not sure we are going to encourage a big change that will get the economy of the country in trouble and customers will be upset. No, I don’t think that will be what we will recommend. We are going to look at it properly and maybe do a little change, which is just so small, so that everybody will be happy.

“Then we will ask for targets, we will ask Discos to increase their efficiencies and invest more in technology, and we will encourage new options so that we won’t rely more on the Discos. Embedded generation, eligible markets, are the things we will encourage.

“We will divide our solutions in different timescales and over a long time, the market will become competitive. There will be a systematic change in the system and it will not be in June everything will change.”

Commenting on the power cost debate, where Discos have persistently called for increment, which has been opposed by consumers, Momoh stated, “Between 2015 and 2017, there was no commission and, therefore, no leadership to contribute to the debate. Now, we have a commission and a chairman. We are going to engage, even though my colleagues have been engaging in terms of providing leadership to the industry, to make sure that the cost of power is understood and made clear to the customers, Gencos, Discos and TCN.

“It is an on-going discussion and we will like to be a regulator that mediates between the customers and operators.”

Momoh added, “Again, we might ask for subsidy from the government to the market to make sure that nobody is left out,” alluding to existing subsidisation of power consumption for certain categories of consumers, particularly, the underprivileged.

Against the background of complaints about the lack of transparency in the determination of the consumption subsidy, the NERC chairman promised that the commission would make the process of calculating tariffs clearer to Nigerians.

He said, “Cost reflective tariff is a big statement that has not been defined well in Nigeria and I want to define it one more time in Nigeria.

I have put together four engineers in NERC and they are calculating very quickly what it costs to generate (for instance) one kilowatt of power to 180 million people, what will it cost for 50 million people to use it, and the mathematics will unfold the truth.

“We need to understand if it means, do I have to pay the actual price of power that accounts for losses, guarantees efficiency and reliability, because we have to be on both sides of the coin.

“We have to balance the equation – what am I willing to pay? It cannot be a one-sided market, we have to agree in a forum where the customer, Gencos, and Discos will be assembled and we will discuss what it costs to generate power in Nigeria given our incomes.

“I don’t want customers to go back to candles and diesel, I want everyone to use electricity and that is why I will appeal to everybody to talk straight about losses and how to reduce them. I don’t want to pay for losses – what we call ATC&C losses – we need to minimise our leakages.

“If we reduce leakages, find cheaper sources of energy and open up competition, hopefully everybody will come in and at that point you will be forced to minimise wastes and leakages as a service provider.

“We are going to bear in mind that there is a constant we will add and that is, we don’t want operators to be out of business, we want them to make money, but don’t make so much money that you will be out of business, and don’t put all your energy in trying to collect money from small customers who are just turning on their light bulbs and watching television only. Let’s encourage big businesses that will be happy to pay more and will turn the energy into money.”