The Federal Government on
Tuesday announced a reduction in
electricity tariffs by 50 per cent.
It explained that the reduction
which came barely two months
after it cut the pump price of petrol
by N10, followed a series of
complaints by electricity
consumers.
The government through the
Nigerian Electricity Regulatory
Commission added that it took the
decision after it removed the
collection loss component of the
Multi Year Tariff Order 2.1 of the
affected Discos.
NERC Chairman, Sam Amadi, said
the addition of the Aggregate
Technical, Commercial and
Collection losses to the reviewed
tariff that was implemented on
January 1, 2015 was responsible for
the skyrocketed tariff.
The addition, according to him, was
done after the regulatory
commission conducted a fact-
finding tour of the Discos and noted
that it was aimed at ensuring a cost
reflective tariff by passing the bulk
to ‘‘paying’’ consumers for losses
incurred from ‘‘non-paying’’
consumers.
He said although the increment in
residential tariff was pending till
June 2015, the total removal of the
collection loss applied to all
consumer categories, including
industrial and commercial
consumers.
Energy charges vary from one Disco
to another. In Abuja for instance,
residential consumers, based on
the MYTO 2.1, pay N4 per kilowatt
hour, while the amount charged
commercial customers, depending
on their respective category, range
from N23.32 to N37.68 per KWH.
Fixed charges for most residential
consumers is between N650 and
N750 while energy charge has an
average of about N4 for every KWH.
With the new directive, it therefore
means that the energy charge,
which forms the larger part of the
tariff paid by customers when
computed by Discos, will be
reduced by half.
Nigeria has 11 Discos that
distribute power to consumers.
Amadi said the commission
listened to consumers and took full
account of the impact of high tariff
paid by consumers and the
economy and therefore reviewed
the basis of the MYTO 2.1
assumptions.
He explained that after the review,
it was agreed that it was
inappropriate to transfer the
collection losses that were
controllable by Discos to
consumers.
The NERC chief said, “It is the
responsibility of the Discos to
collect their revenue from their
customers. Failure to do so should
not be a penalty to customers who
pay their bills. It is clear that
removing the collection losses will
lead to lower tariffs for consumers.
“The removal of collection losses
from customer tariff has reduced
tariff by more than 50 per cent in
some places. Please note that the
reduction does not affect the
Central Bank of Nigeria facility and
its repayment.”
Since January 1, 2015 when NERC
approved the MYTO 2.1, there had
been several complaints against
the increase in tariff of different
consumer classes.
Industrial and commercial
consumers under the auspices of
the Manufacturers Association of
Nigeria petitioned the commission
asking for a review of the MYTO 2.1
and requested drastic reduction of
their tariff.
MAN had stated that such
astronomical increase in tariff was
capable of killing their business
and leading to massive job losses.
The association also threatened to
shut down its factories if NERC
failed to revert to the rate that was
obtainable before the
announcement of the
“astronomical increase” which took
effect on January 1, 2015.
Amadi explained that the Electric
Power Sector Reform Act and the
Business Rules of the commission
mandated NERC to review its
decision if a complaint by an
interested party has a merit.
He added that pursuant to these
rules, the commission organised
public hearing and received
evidence from consumer classes on
the affordability of the new tariff.
He said, “The commission also
invited the chief executive officers
of the Discos to the hearing to
respond to the case of the
consumer groups. Furthermore, the
commission reviewed the technical
and financial assumption of MYTO
2.1.
“The review shows that the major
underlying cause of the
skyrocketing increase in the tariff is
the huge ATC&C losses, which are
passed through to consumers. In
some Discos, ATC&C losses
increased tariff by as much as 80 to
103 per cent.
“Therefore, on Monday, March 9,
2015 the commission issued a new
order to the effect that henceforth
collection loss, which is defined as
the ‘amount billed but not
collected’, will not be automatically
passed on to consumers of
electricity.
“Consequently, the collection loss
for all Discos is set at zero. It is now
the responsibility of Discos to
convince the regulator of any
exceptional circumstances for such
loss to be passed to the
consumers.”
The NERC boss added that the new
direction came as part of the
commencement of the Transitional
Electricity Market.
TEM is built on bilateral trading
between parties and is geared
towards ensuring an efficient
market where cost reflectivity will
lead to more affordable electric
services for consumers.
Amadi further explained that as
part of preparations for TEM, NERC
had issued a tariff review
regulation that required the
utilities to consult with relevant
consumer classes before
presenting a tariff review
application to the commission for
approval.
by ROTMANLUV 2023-07-08, 17:34
