NERC Reducing Electricity Tariff By 50%
NERC, (Nigerian Electricity Regulatory Commission) made the announcement that a reduction of 50% in the tariff regime had taken place. This is said to be a direct response to the many complaints from users of industrial electricity regarding the huge tariff hike. While there is hope that the reduction is not being motivated by politics and will also be sustained for as long as humanly possible, it has proven to be a wonderful demonstration of NERC’s responsibility of consumer protection.
In an editorial that was published on March 16th, we called for a downward review of the tariff, which officially took effect on January 1st, to take place immediately. This review showed that the tariff came as the result of a special review that was conducted under the Multi-Year Order (MYTO 2.1). This tariff hike, in essence, dampened the overall happiness that was felt when PHCN, which stood for Power Holding Company of Nigeria and was privatized in 2013, was dissolved. The response from NERC to the consumers has, since then, been seen as a prompt and positive one. Before the tariff regime was effectively slashed, manufacturers under MYTO 2.1 saw an increase of an astonishing 500% on all of their bills. For example, this effectively brought a N25, 000 bill to N2, 500,000. This was seen as being an extremely outrageous situation due to the overall power supply not seeing any kind of significant improvement ever since 2013, which is when the sector became privatized.
Dr. Sam Amadi, NERC Chairman, acknowledged that, despite the 50% reduction in the tariff regime, petitions were coming in from many different consumers, most notably groups of industrialists who called themselves MAN, which stood for Manufacturers Association of Nigeria. Their petition noted that issues such as business collapses and massive job losses could be considered far-reaching consequences of a high electricity tariff. NERC also made it known that they consulted with the Bureau for Public Enterprises before deciding on the 50% reduction. In the end, the existing MYTO 2.1 will effectively be amended, meaning customers will be able to pay a reduced tariff amount. Residential consumers were generally paying between N650 and N750, as well as energy charges of N4 per kilowatt hour. As a further result of the reduction, energy costs will also be reduced by 50%. Nigeria following in the footsteps of other countries that takes into great consideration the concerns and complaints of many different customers is a fact that is seen as extremely positive.
It is also heartening that NERC has effectively ceased every collection loss transfer from customers who don’t pay their bills to those who do. That is the one thing that caused the tariff to skyrocket in the first place. Furthermore, it is seen as a positive that discos should be responsible to collect revenue from all of their customers, the failure of which should not lead to a higher tariff, especially for certain groups of customers. In order to reassure all Nigerians that the 50% reduction is not motivated by politics, it is highly suggested that the 2015 Electric Power Sector Reforms Act should be amended to allow NERC to ensure that all efficient operators recover any costs of both supplying and producing electricity. In addition, it is also hopeful that discos will not come up with ways of issuing bills higher than those that are approved by NERC.
In fact, discos should be required to keep in mind what the far-reaching consequences of how high tariffs can affect economic development. Protests against the tariff hike organized by small and medium-scale industry owners have recently taken place in Aba, Onitsha, and Nnewi. The government has proven that they are invested in the public interest by slashing the rates. There are many different firms that would have been forced to close shop if the government had not made the decision to review the rates. These firms include major consumers of electricity, such as paint and concrete businesses. An increase in the fixed charge is seen as an unnecessary. All in all, the overall power supply challenge is a national problem that the government should be reminded of and should also solve by addressing what drives costs up in the power sector, such as foreign exchange rates and inflation, in addition to the availability and cost of gas. We are happy to join NERC in doing everything possible to ensure that a tariff is affordable and a financial burden is lifted from customers all across the country.