THERE are indications electricity tariff will soon go up as the Nigerian Electricity Regulatory Commission (NERC) and electricity distribution companies (DisCos) have been meeting this weekend over tariff adjustment.
The ICIR can confirm that the meeting between officials of the regulator and operators, focused mainly on implementing the tariff hike, was ongoing at the time of publishing this report.
The ICIR had reported that the DisCos had applied for a review of their respective electricity tariffs, which they premised on the need to incorporate changes in macroeconomic parameters like inflation, and other factors affecting the operations and sustainability of the companies.
The president, Nigeria Consumer Protection Network, Kunle Kola Olubiyo, who confirmed the ongoing meeting to The ICIR, said the upward tariff review would definitely happen, expectedly with a corresponding increase in service delivery.
“We have had six upward reviews of electricity tariff without a corresponding increase in service delivery. We are still doing poorly on power generation, power transmission, load dispatch, load evacuation and energy load utilisation,” Olubiyo said.
Also, a power sector governance expert and energy lawyer, Chuks Nwani, who also confirmed the ongoing power sector meeting, told The ICIR that the government was gradually preparing the ground to eliminate subsidy payment in the power sector.
“I can assure you there is a discussion ongoing now with all the stakeholders in the power sector working out a possible tariff template to be effected in the power sector. The government seeks to hands off subsidy in the power sector as it has done in other sectors of the economy,” Nwani said.
Notably, the Federal government’s subsidy to the electricity sector has fallen by about 80 per cent between 2019 and 2022, an analysis of the sector regulator’s latest report showed, as power companies ask for an increase in tariffs.
In its third quarter report, the NERC said government’s support for the Nigerian electricity supply industry (NESI) fell from N49.50 in 2019 to N10.17 as at the fourth quarter of 2022.
“The ₦10.17 billion per month support represents a major reduction in the size of government subsidy support to the NESI, which peaked at around ₦49.50 billion per month in 2019,” the commission said in its report.
The document stated that as implementation of government reforms continues, the goal is to eliminate subsidies completely, thereby allowing the market to operate purely on commercial terms without government intervention.
Government’s support to the electricity sector largely falls on the Nigerian Bulk Electricity Trader (NBET), the operator in the electricity value-chain that pays all others.
NERC stated that the introduction of the service-based tariff offered opportunities for DisCos to improve customer service through sustained quality energy supply, providing a clear path to increased revenue without broad-based tariff increases by DisCos.
The Commission believed ongoing DisCos investments in infrastructure and metering initiatives would result in a greater volume of reliable energy supplied to customers, improved revenue assurance and, in so doing, increased collections and market remittances.
Stressing the DisCos are insisting on a rise in electricity tariff as government subsidies fall, the regulator, in a published advertorial, said that the eleven successor electricity distribution companies had filed an application for a rate review with the Commission.
The DisCos want factors that impact on their operational costs, including the increase in exchange rate – which is now about N785 to a dollar – and inflation rate at 22.41 per cent in May 2023, should be reflected in the tariff review, as the last tariff increase was benchmarked on N400/$1 being the official exchange.
“The request for rate review is premised on the need to incorporate changes in macroeconomic parameters and other factors affecting the quality of service, operations and sustainability of the companies,” the document stated.
The NERC 2022 fourth quarter report stated that revenue into the NESI was rising. The total revenue collected by all DisCos was ₦243.65 billion out of ₦332.28 billion billed to customers, translating to a collection efficiency of 73 per cent.
The total collection increased by 15.65 per cent, compared to ₦210.67 billion in the third quarter of 2022.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.