Tariff Review & Power Failure: Increase at this time is irreconcilable

MAY 18th, 2022, there were indications reflecting that the Nigerian Electricity Regulatory Commission (NERC) had commenced another review of electricity tariff. The Commission in a notice of minor review of the Multi Year Tariff Order (MYTO), contained in a statement titled, “Notice of Compliance in Respect of the Biannual Review of the Revenue Requirements of Licensees,” made the disclosure. The notice came two weeks after the Commission unveiled the new rates for electricity tariff which took effect on February 1, 2022.

NERC in the notice signed by its Chairman, Engr. Sanusi Garba posted on its official website had stated: “Pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA), the Nigerian Electricity Regulatory Commission adopted the Multi-Year Tariff Order (MYTO) Methodology in setting out the basis and procedures for determination of licensees revenue requirements and review of electricity tariffs in Nigeria. The methodology provides for Minor Reviews (every six months), Major Reviews (every five years) and Extraordinary Reviews in instances where industry parameters have changed significantly from those used in the operating tariffs to such an extent that a review is required urgently to maintain the viability of the electricity industry. We wish to clarify that such reviews do not automatically translate to an increase in tariffs. Indeed where the impact of improved efficiency in operating parameters for individual licensees exceeds the impact of changes in macroeconomic parameters, end-user tariff may be reduced as exhibited in some tariff classes under MYTO 2022. In compliance with EPSRA and other relevant industry rules, this notice is issued to inform the general public and industry stakeholders of the Commission’s intention to commence the processes for the July 2022 Minor Review of MYTO 2022 to consider changes in relevant macroeconomic indices, generation capacity and CAPEX required for evacuation and distribution of the available generation capacity in compliance with extant rules.” The statement trailed fears that the Commission had once again reviewed the tariffs with upward scale, a development the Commission reacted to saying in early May that it was yet to commence the statutory bi-annual review.

Although, the Commission had stated that the review may not necessarily translate to increase in tariff, it is much note-worthy that reviews recently have, more resonating, recorded hike in tariffs. The increase in tariffs have however, been coming at the instance of worsening supply of power. Controversies over the irreconcilable narratives of upward review of tariffs and worsening records of power failure with epilepsy of unreliability, have made lamentations close to thought recently.

Early May, NERC had  confirmed adjustments to electricity tariff regime across 10 DisCos with increases ranging from 5-12 percent. The adjustment to the Multi-Year Tariff Order (MYTO) took effect from February 1, 2022, according to the regulations issued by the Commission as observed on its official website on Wednesday May 04, 2022. In justification for the increase, NERC had stated that it was to “ensure that tariffs payable by consumers are commensurate with and aligned with the quality and availability of power supply committed to customer clusters” by the DisCos, adding that the adjustment would ensure that prices charged by the DisCos “are fair to customers” and are sufficient to allow the DisCos “to follow recover the efficient cost of operation including a reasonable return on the capital invested in the business.” NERC had also emphatically stated that the adjustment would also “ensure sustained improvement in reliability of supply in line with the DisCos capital expenditure (CAPEX) proposals and performance in improvement plan.”

Earlier, six DisCos had earlier gotten approval from the NERC to increase tariffs. According to a document issued on December 29, 2021, and signed by Sanusi Garba, NERC Chairman, and Musiliu Oseni, Vice Chairman, the new tariff took effect from February 2022. Port Harcourt Electricity Distribution Company (PHEDC), Jos Electricity Distribution Company (JEDC), Kano Electricity Distribution Company (KEDC), Kaduna Electricity Distribution Company (KEDC), Ikeja Electricity Distribution Company (IKEDC) and Ibadan Electricity Distribution Company (IBEDC) were the six DisCos that NERC had initially approved. According to NERC, some of the indices considered for the tariff increase include gas price, inflation, exchange rate, US inflation rate, and available generation capacity. The document  disclosed that for A-Non MD customers who paid N56.16/kWh in January 2022 will now (February to December 2022) pay N60.67/kWh). Also, B Non-MD customers who paid N56.64/kWh in January 2022 will now pay N59.64/kWh. It added that E-MD2 customers who paid N50.72/kWh in January 2022 will now (From February 2022) pay N54.22/kWh.

Recall last August 2021, NERC had directed DisCos to commence the collection of Service Based Tariff (SBT) from September 2021, which was targeted at increasing the cost of electricity by over 50 per cent, in order to enable the government end subsidy in the electricity sector. This came amidst demands for improved services and mass deployment of prepaid meters nationwide.

Power failure recently, with echoes of collapse of the national grid, informing total blackout have been frowning at Nigerians. Businesses and households have been left to lament the scorching narratives of power failure. Accusations and counter-accusations of the failure of power supply among the three tiers of the power architectures from the Generation, Transmission to the Distribution arms, have not ceased to take course. As no arm of the architecture can be exonerated, it is quick to state that the overarching deficiencies of the sector to provide reliable power supply, is a function of operational and infrastructural inefficiency from all sides.

It has become necessary for the Government to look into the deficiencies of the sector to fix same, as Nigerians would only be concerned and interested in a working output of electricity supply from an effective power architecture, against the phenomenon of trade blame among the tiers of the operation chain. The government should, as the regulator and driver of the system, give an elaborate intervention to the power sector to lift it from the mire of deficiencies which have continued to worsen the Country’s business environment with strains, hitting harsh blows on the economy. It is lamentable that upward review of tariffs would keep taking course while Nigerians suffer dwindling supply of power from soarer conditions to distasteful sensations. The two variables pose conditions which are irreconcilable and unjustifiable.