Outrage As Discos Insist On Increased Tariff Before Improved Supply

“It certainly means that there may be higher costs, but I don’t think that an option of not having power is really what we want. The real issue of course is that at the end of the day, some of the cost goes to the consumer, but a cost reflective tariff is an absolute necessity, otherwise, privatization and all of that simply doesn’t make sense.”

The above words by Vice President Yemi Osinbajo recently gave credence to government’s body language for an upward review of electricity tariff as a panacea for increased investment by power sector investors, and for sustainable power supply.

The Vice President, who spoke at the Annual General Meeting of the Manufacturers Association of Nigeria (MAN), in Lagos was emphatic in asking Nigerians to prepare to pay more for electricity.

He said: “One aspect of the problem that I want to speak about, because this also affects manufacturing, is the whole idea of the tariffs. Of course the president of MAN just said that we have one of the most expensive electricity in the world. Now, the truth of the matter is that at this point, if we wanted to have a cost effective tariff, the only way is to service that core value chain, the only way is to ensure that we are paying and compensating the value chain-from generation down to distribution-a cost effective tariff.

“You cannot have that cost effective tariff without some pay. At the moment, (when you compare) how much it costs to produce power, and the amount of power that is generated, the losses on account of distribution are significant. In some cases you have up to 40% losses in distribution, and of course it is the Discos that have to take that burden.

“The Gencos (generating companies) are producing power, but they expect to be paid for all the power that they produce. Now, if 40% of this is lost, it means the Discos cannot collect 40%, but they have to pay for it somehow. So government has to come in and play some kind of role in order to ensure that the whole value chain is paid for.”

Osibanjo went on: “But the most important thing is that the cost of power is reflective of costs that have to be borrowed at every stage of the value chain and today the cost of power, if it’s going to be reflective in any way is simply what it is. It will be very difficult indeed, except if we are going introduce yet another subsidy and by the way, a fair amount of that goes on already in the way that government supports the Gencos and the Discos.

“But I think that we must be ready to accept that for a while, until things stabilize somewhat, tariffs cannot remain at the levels at which they are today, they cannot remain at that level, and that just simply is the truth of the matter.”

Indeed, the nation’s eleven distribution companies have sent proposals to the Nigerian Electricity Regulatory Commission (NERC), demanding an increase in the tariff currently paid by electricity consumers.

Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr Sam Amadi seems to have given a nod to the need for tariff increase, noting that it would guarantee greater supply.

The tariffs, he noted, should take effect in November 12.

He gave further explanation: ‘’From what the power distribution companies (DISCOs) have submitted to the Commission, there is range of tariffs for consumers of electricity. In few DISCOs, consumers would see slight increase in tariffs of between 20 per cent to 30 per cent, while it would be higher by 40 per cent there about. The charging of tarrifs would be based on the cost profile of the Discos, the number of customers available to them and the quantity of power available to them.’’

He went on to justify the planned increase recently. His words: “We are introducing new electricity tariffs in November 2015 in order to capture the realities that the Discos are bringing to the sector. The realities include debts owed the Discos, the increase in the price of gas, rising cost of financing infrastructure used by both the power distribution and generation companies. We are not changing the scientific methodology of fixing electricity tariffs, but we are introducing new tariffs to capture the realities on ground in order to ensure operational efficiency in the industry.’’

‘’Conservatively 20,000 megawatts of electricity is needed to have stable electricity in Nigeria. The reason why the country needs 20,000 megawatts of electricity is because not everybody in Nigeria is connected to the grid. For instance, Dangote Group is off-grid, so also other companies that we cannot include them in the 20,000 megawatts estimate.”

But the proposal by the distribution companies, and the body language of the current administration in that regard is however coming amidst protests by consumers.
 
The National Electricity Consumers Advocacy Network (NECAN) has warned of what it described as dire consequences if the Nigerian Electricity Regulatory Commission (NERC) goes ahead to approve the hike in tariff being proposed by distribution companies across the country.
 
NECAN is particularly concerned that the increase could harm the growth of micro, small and medium enterprises.
 
Similarly, the group has taken a swipe at Discos for failing to provide meters for consumers and for alleged low investment in network expansion.
 
Assistant National Secretary, Mr Obong Eko said:  “NECAN clearly opposes any increase in tariff. There is an outcry from Nigerians that any increase in electricity tariff will amount to very serious consequences to the economy of micro, small and medium businesses.”
 
The group described the Discos as inefficient and accused them of putting the issue of tariff first on the table instead of improving services. NECAN also frowned at how long it has taken for privatisation to lead to improved services.

He noted: “We notice that privatization will lead to efficiency but we are here in Abuja and we conducted a survey where we discovered that Abuja electricity distribution company (AEDC) is not doing enough.”

Also, the Trade Union Congress of Nigeria (TUC) has vowed to resist reported plans by electricity distribution companies in the country to increase tariff.

TUC said the increase is wrong and “lacks human face especially in view of the present harsh economic realities in the land”.

President of TUC, Bobboi Bala Kaigama noted: “Why should the masses be at the receiving end of every wrong and retrogressive policy in the country? Why must they always pay for what the rich consume more of? What sense does it make for a man who earns less than N20, 000 per month to be made to pay over N8, 000 for electricity bill alone within the same month? Why should they pay so much for what they do not use regularly enough, with officers of the distribution companies rarely bothering to read the analogue metres?

Why should these questionable issues that are spared no thought in other climes always take centre stage in Nigeria? Surely, Nigerians deserve a much better deal