…new average tariff will likely be N88/kilowatt
…hike will be done silently
NIGERIAN electricity consumers have heaved sigh of relief as the Nigerian Electricity Regulatory Commission (NERC) and the distribution companies (DisCos) shelved plans to implement a 40 per cent hike in tariff on July 1.
Most Nigerian consumers made last-gasp efforts to purchase electricity units before the date. However, the electricity tariff hike was not effected.
For instance, the tariff for power users on Band A which stood at N68/kilowatt-hour as of Tuesday, June 27 remained the same on July 1.
The President, Nigeria Consumer Protection Network, and coordinator, Power Sector Perspectives, Kunle Olubiyo, confirmed the halt in the proposed tariff hike by the DisCos. But, he added, that it might be raised quietly in the near future.
He stated, “Tariff adjustments happen every six months. However, most of us just concluded that the six months was supposed to end on June 30, 2023, and that with effect from July 1, there might be an upward review.
“However, that is not sacrosanct; there is nothing in the books that says it has to be July 1. But, of course, in this month of July, somewhere along the line before this month ends, you may load credit and notice some adjustment.
“We have seen that in the past. There was supposed to be an increase in September 2020, it didn’t come immediately. But between December 2020 and January 2021, the increase was made quietly that now brought the rate for Band A from N24/kwh to N56/kwh, before it was quietly raised again to N68/kwh.”
Talks of a possible increase in tariff had been premised on the multi-year tariff order (MYTO) of NERC, which six-monthly review was calculated to be due in July 1. But as one of the official spokespersons at NERC, Mike Faloseyi, affirmed, there would be no tariff increment now.
A DisCo official confirmed the company would not be effecting any upward tariff review on the date.
A statement on the Ikeja DisCo’s website read, “Public Notice: Avoid Fake News. Dear Esteemed Customer, if the information is not from us on tariff hike, or is not on any of our social media handles, then it is not true.”
Commenting on the development, an energy lawyer and power sector governance expert, Chuks Nwani, who confirmed the suspension of the tariff hike, explained that the DisCos would be justified to effect the upward tariff review “because there is a template for such review every six months as directed by the multi-year-tariff-order of the NERC”.
Nwani said, “There is a template for the review, which does not necessarily require approval. What the DisCos are doing is to key into that template. The last official exchange rate, for instance, is N460 to a dollar, but now with the forex unification, it is above N760. All these will be factored in to pay for gas. Inflation is 22.22 per cent. This is the market reality.”
When asked why DisCos have been rejecting loads and not improving their supply, resulting in huge negative balance sheets for them, Nwani said energy theft had been a major concern for many DisCos, which he said had led to under-recovery in most cases.
“Distribution companies also experience their own challenges. There are issues with energy theft and meter-bypass, which drains their income and makes them to reject loads in key areas there are power theft,” he said.
The projected upward tariff review in July was expected to address fuel subsidy removal and increase the previously frozen tariff bands D and E, increasing the bands from N54.59/kilowatt to N62.16 for band D, and N48.37/kilowatt to N61.16 on average, with an average increase across the bands moving to N67/kilowatt.
Energy experts projected that inflation induced by the floating of the naira and subsidy removal would spike the new average tariff to about N88/kilowatt for the energy sector to recover operational costs..
Over the past week, several media outlets had published the expected 40 per cent rise in tariff, which they hinged on the MYTO, in line with the half-yearly review.
Considering Federal Government’s foreign exchange rates unification, double-digit inflation at 22.22 per cent, and fuel subsidy removal as they affect operational cost, some analysts had concluded it would be difficult for NERC and the DisCos not to hike the tariff in the July 1 review window.
