Electricity tariff to go haywire as govt withdraws subsidy
• Stronger regulatory NERC needed to avoid profiteering, says ex-NLC scribe
• Aremu says spike indicates hard year for workers
The Nigerian Electricity Regulatory Commission (NERC) confirmed, yesterday, that some electricity consumers in the country would pay more for energy to reflect inflation trend and Foreign Exchange reality. That is what the Multi Year Tariff Order (MYTO) recommends for the sector. Although the MYTO for other distribution companies, apart from the Ibadan DisCo, was not released by NERC at the time of filing this report, consumer may need to get ready for increase in tariff from now to 2024.
There are also indications that the Federal Government would not subsidise any class of consumer by the end of this year as NERC planned to enforce 100 per cent remittance for all DisCos by the end of the year bringing to zero DisCos tariff shortfall, which stands at about 24, 521 for Ibadan DisCo.
NERC had in a released yesterday said: “in compliance with the provisions of the Electric Power Sector Reform Act (EPRSA) and the nation’s tariff methodology for biannual minor review, the rates for service bands A, B, C, D and E have been adjusted by N2.00 to N4.00 per kWhr to reflect the partial impact of inflation and movement in foreign exchange rates.”
Denying earlier reports that 50 per cent increase had been approved for electricity tariff, NERC said tariff for customers on service bands D & E (customers being served less than an average of 12hrs of supply per day over a period of one month) remained frozen and subsidised in line with the policy direction of the Federal Government.
However if fully implemented through 2024 and compared with the pre-September tariff, all electricity consumers in the country would witness increase in tariff up to about 120 per cent in an event of full cost reflective tariff, especially those under class A, B and C. In fact, by second quarter of this year, some consumers, who were under Class D and E would have been paying N59 against the N26 they are currently paying for every kilowatts peer hour.
Although Nigerians are yet to come to terms with the last increase in electricity tariff, the new Multi Year Tariff Order (MYTO) for Ibandan DisCo, which was signed by NERC Chairman, Sanusi Garba, empowers DisCos to increase tariff.
But most consumers in the Ibadan area may not experience any significant increase in their tariff as the non maximum demand (MD) and maximum demand consumers, classified under band A would keep paying current tariff of N62.33, N61.33 and 59.70 for every kilowatts for the first half of 2021. However, their tariff would increase by about N7 by the second quarter of 2021 and may increase to N74.12 by the first quarter of 2024.
GIVEN the liquidity crisis in the market and inability of the distribution companies to remit promptly, NERC had set a remittance threshold for the DisCo last year. The new order has jerked up the remittance for the DisCos as Ibadan DisCos has seen it minimum remittance increased from 29.4 per cent to 60.30 per cent.
The document dated December 30, 2020 overruled the previous Order NERC/2028/2020.
Recall that labour unions and the Federal Government had been at loggerhead following increase in the pump price of premium motor spirit as well as the increase in electricity tariff.
After series of outrage and outright rejection by consumers who cited poor power supply and the impacts of COVID-19, DisCos had in October last year started the implementation of a service-based reflective tariff (SRT) structure.
BEFORE NERC issued a denial to the reported 50 per cent increase, the news had generated a groundswell of rejection as distraught Nigerians complained that another spike was coming as citizens are yet to adjust to the recent one.
The immediate past General Secretary of Nigeria Labour Congress (NLC), Dr. Peter Ozo-Eson, said the development underscored urgent need to establish resistance organisations to tackle incessant increases in electricity tariff and pump price of petrol.
Ozo-Eson, who stated this in a chat with The Guardian yesterday in Abuja, explained that since electricity is monopolistic in nature, it required strong state regulator to protect the interest of Nigerians.
He said: “I believe that given the non-competitive nature of petroleum downstream sector, not just in Nigeria, but worldwide, it is a monopolistic sector, the need for the protection of consumers from exploitation calls for the emergence of a strong regulator. That means that such a regulator will be able to effectively do its work. Some of us are worried that regulatory effectiveness of critical sectors such as the petroleum and electricity sectors have been a suspect in the last few years.”
He insisted that Nigerians must come together to form a citizen-led group to resist exploitation by agencies of government.
“Nigerians have to decide how to protect themselves either by coming together to establish a very strong consumer association that can confront these monopolies whether it is in the petroleum sector or in the electricity sector. I think that this type of voluntary association is the direction that we have to go.”
A former vice president of NLC, Issa Aremu, said the hike indicates a bleak year for Nigerian workers.
He said COVID-19, inflation and non-payment of salaries by various state government were other huddles that would likely mar the year.
The National Coordinator, All Electricity Consumer Protection Forum, Adeola Ilori, alleged that NERC had been inconsiderate of electricity consumers, saying that many of its policies were not in favour of the masses.
“It is obvious that the NERC is no longer capable of doing its functions as stated in Section 32 of the Constitution. It is also obvious that they are ready to foist anything on consumers as long as it satisfies the whims and caprices of the hegemonies in the power sector.
“We can no longer fold our arms, believing that every policy must be targeted towards the poor masses in which their purchasing power is being eroded and while the people in power continue to frolic.”
An Ibadan resident, Arakunrin Abisoye, said he was finding it difficult to keep up with the already hiked tariff. “It has affected me negatively thus far. There is never a justification for this inhuman act on average citizens. I’m raging right now,” he said.
IBADAN-based labour activist and human rights lawyer, Femi Aborisade, and Oyo State chapter of the Nigeria Labour Congress described the hike as an open declaration of war against the masses by the Federal Government.
In separate statements made available to The Guardian in Ibadan, the Oyo State capital, the NLC through its Chairman, Kayode Martins and Aborisade called for mass action against government.
Martins said: “It’s like they have made up their minds to make life difficult for the masses. Their main concern is how to enrich their pockets at the expense of the masses.
“I want all the meaningful Nigerians to oppose the move as this is just the beginning, we don’t know where they are taking us if we keep quiet.”
The labour activist and human rights lawyer Aborisade said: “Ordinary people and their organisations, trade unions and young people, including the army of the unemployed must organise to resist peacefully.”
MEANWHILE, a source in the Presidency said there was no adjustment in tariff. It said the only changes were FX and inflation relative to the time the last tariff was approved.
“No customer in Nigeria will experience any increase beyond 3.5/kWh; this means that on every N5000 recharge, customers will receive approximately 3-4 kWh less than they did under the previous tariff (i.e. a person would receive 97kWh instead of 100kWh).
“Adjustment for inflation/FX are consistent with the provisions of existing electricity pricing regulations and allows for workers and employees to be compensated appropriately in line with inflation.”
It added that all critical stakeholders were working to reduce costs of major inputs to the power sector to bring end user tariffs down.
It said it was in line with discussions with the labour centres.