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Manufacturers threaten to shut down over high electricity tariff

25 February 2015   |   9:32 pm
  • Warn of looming job losses, accuse NERC of giving preferential lower rates to some firms • Commission to introduce micro-grids power generation model for industrial clusters CITING lopsidedness, the Steel Manufacturing Group of the Manufacturers Association of Nigeria (MAN) yesterday warned that the new tariff order Multi Year Tariff Order (MYTO 2.1) which…



• Warn of looming job losses, accuse NERC of giving preferential lower rates to some firms

• Commission to introduce micro-grids power generation model for industrial clusters

CITING lopsidedness, the Steel Manufacturing Group of the Manufacturers Association of Nigeria (MAN) yesterday warned that the new tariff order Multi Year Tariff Order (MYTO 2.1) which became effective last month (January 1) was paralysing most companies in the country.

  They have, therefore, threatened to shut down their factories if the situation continued.

  From January 1 this year, the Nigerian Electricity Regulatory Commission (NERC) approved a new tariff for industrial/commercial consumers, while freezing increase for residential consumers for six months.

  The manufacturers made their position known at a NERC stakeholders’ meeting held in Abuja, yesterday.

  Meanwhile, NERC has announced plans to engage industrial clusters to form Special Purpose Vehicles (SPV) that can procure additional power dedicated to their industrial clusters.

  Chairman of the MAN Steel Manufacturing Group, Sunil Goel, who made a presentation on behalf of his members, tasked NERC to go back to the old MYTO which was initially scheduled to run till 2017.

  He said: “As steel manufacturers and other consumers on tariff D3 are DISCOs most prominent consumers/customers, and electricity being the most critical input to our production process, we want to reiterate the following obvious facts and the impacts of the new hike on electricity tariff on our production and its adverse effects on our planned long term projections which were actually based on MYTO 2012-2017 tariff order.

  “The MYTO 2012-2017 which was meant to run for five years, formed the basis of our members’ long term planning which your sudden increase has now seriously interrupted. As we are not informed of the revocation of the MYTO order, we consider your sudden action unfair to our members.”

  Goel said that the increase between 44 per cent and 45 per cent was too astronomical and not appropriate.

  He added: “The market/consumers will not be able to absorb any increase as the market is already saturated.

  “The current hike in tariff price underscores the principle of fair play, as the differential prices from one DISCO to another also constitute a disadvantage to market players in terms of competitive sales. Presently, the steel industries are working on a very low profit margin of less than one naira per kg, and this cannot sustain seven to eight naira differential prices amongst competing companies. The survival of companies based on this is therefore doubtful. We may as well start contemplating shut down should the Commission insist.

  “From comparative findings made, Nigeria is demanding N28.28 per kwh as minimum unit charge, while other African and industrialised countries elsewhere in the world demand as low as between three to N21 per kwh as their minimum price. Examples are China, India, Russia, USA, Canada, Angola, etc.”

  The manufacturers recalled how the sector was crucial to national development, especially considering its potential for employment generation, revenue generation, and contribution to national GDP.

  The body  said that the new tariff introduced by NERC  if implemented, would paralyse most companies on Tariff D3, lead to reduction of labour force and hours of work, lead to increase in prices of commodities, especially iron rod and consequently make same unaffordable for the common man, lead to complete factory closures, and adversely affect revenue generation to Discos.

  The group, therefore, urged NERC to continue to operate on the old MYTO rate, pending the life of its tenure (2017). They also implored NERC to consider and approve a uniform tariff for all steel manufacturers in Nigeria regardless of wherever they may be located, rather than giving some companies a preferential lower tariff advantage over the others because of their location.

  Responding, Chairman of NERC, Dr. Sam Amadi, who said that his commission would continue to listen to complaints from customers and mandate utilities to serve their customers better, however, said that before the review, the processes were fully advertised on radio, our website and newspapers.

  He said:  “Industrial and commercial customers have complained about some aspects of the prices they pay for supply of electricity. Some complained about regional disparity in prices. Others complain about the percentage increase in energy cost.    

  Underlying these complaints is the fact of increasing energy cost and its negative impact on global competitiveness of Nigerian industries. Truly, the cost that businesses and industries pay in Nigeria is high. But the highest portion of this cost comes from self-supply of electricity. If power from the grid is stable and adequate we will see significant decrease in the cost of energy. How to increase energy supply to industrial and commercial consumers in Nigeria is the most important and urgent challenge we face.

  “Although our regulatory interventions are leading to licensing of independent power producers who have financial and technical capabilities to generate more megawatts, we expect that it will take a couple of years before we see significant increase in available capacity because of the lead time required to construct and commission power plants.  What this means is that if we don’t develop quickly and innovate the framework to increase power available to business and industries high cost of energy might frustrate Nigeria’s economic growth aspirations.”

  He added: “As a regulator, NERC is very clear on its responsibility. Our mandate is to ensure availability of reliable and adequate electricity to Nigerian businesses and homes.  In pursuit of this responsibility, we undertake many activities that are all geared at providing incentive for efficient and safe production and supply of electricity. The ultimate criterion for this efficiency is the quality of service which customers receive.

 Protection of customers is, therefore, our prime commitment.”

  He spoke on how NERC was committed to fair, reasonable and affordable tariff for all categories of customers.

  His words: “NERC has often been caricatured as a ‘tariff’ Commission. We are convinced that getting the tariff structure right in this market is a critical component of series of actions that are required to fix the electricity industry in Nigeria. We don’t have stable electricity in Nigeria, because we have not made the right investments to build capacity.  The huge capacity gap in the sector cannot be met with public finance, no matter how endowed Nigeria is. The business model of the past is what is responsible for the continuing acute shortage of electricity.