Once again, the nation woke up to the news of approved increases in electricity tariffs in the Nigerian Electricity Supply Industry (NESI) by the Nigerian Electricity Regulatory Commission (NERC), on Wednesday 21st August, 2019, just as the new Minister of Power, Mamman Sale was sworn into office by the President. Was this because Super Minister Babatunde Raji Fashola lost Power from his portfolio as he is now Works and Housing Minister? Was NERC being prevented from introducing the new tariffs by the former Minister or else, how can one describe the timing of the announcement? Was it a welcome pack for the new Minister into the confusion within the NESI? Was it to test what the responses from consumers would be to an increase in electricity tariffs in the face of epileptic power supply due to lack of investment in power networks and customer metering? Whatever the reason, NERC issued a rebuttal, denying any approved increases, just as the link to the revised tariffs was removed from its website after many stakeholders have already seen it. Reversals and policy somersaults of this sort are not new in the NESI.
The documents from NERC revealed that the increased tariffs were for the minor reviews that should have taken place in the period 2016 to 2018 and took effect from 1st July, 2019. Also, the changes account for cost reflectivity of tariffs in the same period for which the distribution companies (DisCos) have claimed huge revenue shortfalls.
Why was the link to the increase in tariff published in the first place only to be removed and refuted by NERC in a matter of 48 hours? Why was there no proper stakeholder engagement even though NERC claimed it engaged DisCos and some unspecified stakeholders? Is this a case of the independence of the regulator being compromised? Why have prices been jerked up even when the performance improvement plans of DisCos have not been submitted, talk less of been reviewed? Why did NERC carry out a “minor retrospective adjustment of tariffs” and is this legal? What about the High court judgement in 2016 which ruled against any increase in tariffs before commensurate increase in the quantity and quality of power supply?
Under the planned tariff regime, the cost for one unit or kilowatt-hour (kWh) of electricity consumers will pay for depends on where they live in Nigeria, their tariff class (residential, commercial, industrial, special, or street lights), tariff rate and the quantity of electrical energy consumed. Why should the cost of electricity vary from place to place, highest in places experiencing the highest levels of poor customer services? Why in a national grid pool of electricity should the regions such as Benin, Enugu and Port-Harcourt, so close to gas-fired thermal power generating stations, have higher electricity tariffs than places far away such as Kano, Kaduna, and Yola to mention just a few? What is the tariff charging methodology used by NERC? If Nigerians are willing to accept a multi-rate structure for electricity, why is this not applicable to petroleum products?
DisCos have always claimed that the absence of cost reflective tariffs (CRT) is the reason for their poor performance in the last six years. This is far from the truth and can only deceive those without the understanding of power systems that they deal with in power sector agencies. If this were true, can we request them to publish the methodology used in the determination of CRT? Can we also ask NERC to publish how it derived cost reflectivity on the basis of which it increased tariffs? With poor collection efficiency, lack of data and gross under investment in the networks, consumers are merely being short-changed as they pay for inefficiencies, incompetence, losses, under-performance and darkness.
Power System Studies carried out in support of the Nigerian Electricity Roadmap by Siemens put the distribution network capacity and the average electricity available to consumers as 5.5GW and 3.5GW respectively. This simply means there is no improvement to power supply that can take place now even when tariffs are increased because the weakest link has not changed and will not change overnight.
The announcement of increased tariffs was sudden, shocking and disturbing as consumers, the most important stakeholder, have not been duly involved. This, at best, will make already impoverished and aggrieved consumers, consumer advocacy groups and organized labour, to muscle up protests against planned hike in tariffs.
Idowu Oyebanjo MNSE CEng MIET
