Nigeria Employers’ Consultative Association (NECA) has justified the hike in electricity tariffs announced by the Nigerian Electricity Regulatory Commission (NERC), describing it as a condition for an improved power distribution.
NERC had at its “December 2019 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2020,” which was dated December 31, 2019, disclosed that the electricity tariffs being paid by consumers would increase in April 2020.
Reacting to the proposed hike, NECA Director-General, Timothy Olawale, told THISDAY that “though the proposed increase in tariff might cause a shock from the consumers’ perspective, it is, however, a necessity in order to get the power sector back on track.”
The issue of tariff has remained topical in the sector shortly after privatisation. While the customers have said tariff review should only take place after there has been improvement in electricity supply, service providers, on the other hand, said for service to improve, the right charges must to be paid.
“The argument has always been the chicken and egg argument, a cyclical one. Putting the matter in context therefore, the issue of the increase is intended to enable the sector realise what can be described as right price for the product. It is with this right that more investment can be attracted and consequently, improved service,” he said.
Speaking on the challenges of regular power supply and imperative for appropriate pricing of electricity, the NECA boss noted that “tariff reviews are expected. There had been minor and major reviews to adjust all the variables that make up the tariffs such as generation volumes, FX price among others. All these play a role in determining the tariffs.”
According to him, “NERC for some reasons has delayed implementation of minor reviews that should normally occur bi-annually by regulation. The NERC tariff order in June 2019 took all these into account and adjusted the variables to ensure a cost reflective tariff.
“Cost reflective tariff is important to ensure the provider of the commodity or service can cover operational and capital expenses and most importantly stay in business and deliver on service. While the DisCos have had six minor reviews totalling 16 per cent, micro and macro-economic indices have affected the ability of the DisCos to meet their cost. However, the generation companies (GenCos) have had several reviews bringing their percentage increase to about 116 per cent.”
While urging the DisCos to justify the proposed tariff hike, Olawale said “consumers and businesses are not averse to paying appropriate price for electricity consumed,” adding: “The major contention has been estimated and sometimes outrageous billing for power not consumed, implications on cost of living and cost of doing business without a guarantee of commensurate improvement in quality of service.”
He said: “The DisCos would do well to fast-track the provision of prepaid metres, the GenCos should ensure availability of power for the DisCos to distribute and government should support the DisCos to curb the rampant incident of electricity theft across the nation.
“The NERC should live up to its responsibility and ensure strict adherence to regulations. While we note the political consideration that goes into the issue of appropriate pricing and the timing of same because of the multiplier effect of hike on the society, we urge that the larger interest of the nation should guide all stakeholders to enable Nigerians and the business community enjoy 24 hours uninterrupted power supply they crave for.”