100% Electricity Tariff Hike, True or False
Nigeria electricity started back in the 80’s; two sets were installed to serve Lagos. The Electricity Corporation of Nigeria (ECN) was later established in 1951 and in 1962 the Niger Dams Authority (NDA) was established for the development of the Hydro electric power. However in 1972 those two were merged to form the National Electric Power Authority (NEPA) which later became Power holding company of Nigeria (PHCN) in 2005. It is quite unfortunate that with despite the merging and name changing Nigeria spent more than 10 billion dollars from 1999-2007 on the power sector without any positive results.
The process of deregulation commenced in March 2005, as the power sector reform bill was signed into law which enabled Private companies to participate in electricity generation, transformation, and distribution.
Electricity pricing (sometimes referred to as electricity tariff or the price of electricity) varies widely from country to country due to many reasons. The price of power generation depends largely on the type and market price of the fuel used, government subsidies, industry regulation, and even local weather patterns. A specific market allows real-time dynamic pricing, and a more recent option in limited markets to date as typically following the introduction of electronic metering (Pre-paid), prices can even vary between times of low and high electricity network demand. The actual electricity rate (cost per unit of electricity) that a customer pays can often be heavily dependent on customer charges, particularly for small customers (e.g. residential users).
100 PERCENT INCREASE IN ELECTRICITY TARIFF, TRUE OR FALSE
Now that the private sector has been invited to invest in power (in order to fill the huge investment gap that exists) it can only do so if it makes economic sense. In other words, the electricity business must be made profitable and sustainable.
The Nigeria’s electricity distribution companies have long clamored for tariffs that can guarantee commercial returns and regulator, the Nigerian Electricity Regulatory Commission (NERC) has agreed to review tariffs by over 35 percent from April this year but has directed DisCos to ramp remittance to the market by 45 percent to benefit from the review.
On December 31, 2019, the Commission published a review of the Multi-Year Tariff Order 2015 which guides the pricing template for electricity in Nigeria. According to section 17 of the MYTO -2015 order, the tariff should be reviewed twice every year measured against variables such as inflation rate, gas prices and foreign exchange rate and generation capacity. However, this tariff increase while appreciable does not represent a cost-reflective tariff.
Currently, DisCos remit far less than they collect. “The level of collection efficiency during the quarter under review indicates that as much as ₦3.09 out of every ₦10 worth of energy sold during the second quarter of 2019 still remained uncollected as and when due,” NERC said in its 2019 second quarter report released in December 2019.
Recently it was all over the news that there would be 100 percent increase in electricity tariff. The Nigerian Electricity Regulatory Committee (NERC) went further to release an article that debunked this rumor titled “NO CONSIDERATION FOR 100 PERCENT TARIFF INCREASE” it said:
“The Nigerian Electricity Supply Industry (NESI) is not contemplating any tariff increase as none of the industry operators is pressing for 100 per cent increase in electricity tariff.
This clarification is coming on the heels of a speculative media report that created the impression that the Nigerian Electricity Regulatory Commission (NERC) is considering applications from electricity distribution companies requesting for 100 per cent increase in electricity tariff.
Contrary to this wild and speculative media report, NERC has not received any request for 100 per cent increase in tariff from any electricity industry operator as most of them are at this moment pre-occupied with the challenges of improvement in service delivery imposed on them by the existing tariff regime.
The Commission as well as the industry is responsible enough to appreciate the state of the economy, level of power generation, how Nigerians are coping and would, therefore, not make any decision that could further aggravate the challenges faced by the power sector and the economy.
Critical stakeholders in the economy are further advised not to be quick in joining the fray by reacting to baseless media speculation thereby lending credence to rumors and wild imaginations”.