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Longer darkness, higher tariff for electricity consumers

By Emeka Anuforo (Abuja)   |   28 December 2015   |   3:25 am  
Power plant

Power plant

Having got married, Kunle felt the need to acquire a bigger space for his new family. He acquired a three-bedroom apartment in Ojodu area of Lagos state. For him, it was a dream come true as he began to acquire home appliances and gadgets.

After spending barely a month in the new apartment, he received his monthly utility bill for the electricity he hardly consumed for less than six hours a day.

At an estimated bill of N14, 192.89 slammed on him by the Ikeja Electricity Distribution Company (IKEDC) for the period, little did he know that he was being inducted into a societal norm of estimated bills for services hardly rendered.

After several petitions to the management of Ikeja Discos to no end, he now looks to the Nigerian Electricity Regulatory Commission (NERC) to intervene.

Kunle is not alone.  Almost all consumers of electricity in Nigeria have one negative bill, related misadventure or another. Yet electricity supply has continued to be irregular without any clear remedy in sight.
In Nigeria, access to electricity remains elusive for many households and where there is access, it is either limited in supply with a corresponding huge cost for inefficient service.

Similarly, acquiring pre-paid meters has become an illusion for more than 50 percent of electricity consumers, according to official figures.  Despite this challenge, the authorities have chosen to increase tariff as a condition for improved electricity supply.

Across the country, the story is almost the same with many electricity consumers lamenting the huge cost of services that were never rendered.
Indeed, the nation’s electricity sector has been termed a terrible irony as a population of over 170 million people jostle for a share of less than 4,900 megawatts of generated power.
For instance, peak generation in the previous week was 4,223 megawatts, while the average generation in the week was put at 3,934 megawatts.

Rated as the biggest economy in Africa, Nigeria presents a situation that many find puzzling.
Poor electricity supply and “crazy” bills seem to have become the singsong of consumers who have endured untold hardship and inconveniences occasioned by the absence of reliable and efficient electricity.
Indeed, as power supply continues to depreciate, distribution companies seem to have found an easy means of fleecing consumers through bills that do not reflect the accurate consumption.
Such bills that have been dubbed “crazy” usually come in the form of estimated bills where the electricity distribution company gives the customer an estimate that far exceeds what that customer could possibly have consumed within the billing period.

Similarly, acquiring pre-paid meters has become an illusion for more than 50 percent of electricity consumers, according to official figures.  Despite this challenge, the authorities have chosen to increase tariff as a condition for improved electricity supply.

A new electricity tariff announced on Monday by NERC officials is expected to take effect from February 1, 2016.
The Multi-Year Tariff Order (MYTO) 2015 Distribution Tariffs (2015-2024) which contains the new tariff structure, and obtained by The Guardian, highlights the exact amount to be paid.

…No electricity distribution company is allowed to connect new customers without metering the customer first. This is to close the wide metering gap of over 50 per cent and reduce the high incidence of collection losses in the Nigeria Electricity Supply Industry (NESI).

Under the new tariff announced by NERC on Monday, R2 customers covered by the Abuja Electricity Distribution Company (AEDC) who currently pay N14.70 per kilowatt-hour (kWh) this year will witness an increase by N9.60.
This means that the customers will pay N24.30 per kilowatt-hour from February 1, 2016.
By NERC’s classification, R2 consumers are residential customers with single or three- phase meters.  They are further classified as consumers who use their premises exclusively as a residential house, flat or multi stories house.

Consumers covered by the Ikeja electricity distribution areas who pay N13.21 kwh will pay different rates from February 1. Those with single-phase meter will pay N21.30 kwh, while those with triple phase will pay N21.80. Ikeja Disco covers Abule-Egba, Akowonjo, Ikeja, Ikorodu. Oshodi and Shomolu.

For consumers covered by the Eko Disco and paying N15.63 kwh this year will start paying different rates once the new tariffs kick off. Single-phase customers will pay N24.00 kwh while those with three phases will start paying N25.79 kwh.  Eko Electricity Distribution Company covers Lagos Islands, Ajah, Ibeju-Lekki, Ikoyi, Mushin, Ebute – Meta, Ijora, Badagry, Festac, Apapa and Surulere.
Single-phase meter electricity consumers in Kaguna, Sokoto, Kebbi and Zamfara covered by Kaduna Disco who currently pay N17.00 kwh will soon begin to pay N26.37kwh while those with three-phase meters will now pay N28.05 kwh.

Single-phase meter consumers covered under the Benin Disco will page N24.08 kwh while those with three phase will pay N24.45kwh. The two classes of consumers currently pay N14.82 kwh. Benin Disco covers the states of Edo, Delta, Ondo and part of Ekiti.

The same R2 consumers under the Yola Disco territory who pay N15.00 this year will now pay N23.25kwh (for single phase meter users) and N24.75 for three phase meter users. Yola Disco covers Adamawa, Borno, Taraba and Yobe States.
For the Port Harcourt Disco, all R2 customers in Rivers, Bayelsa, Cross River and AkwaIbom states will pay a flat rate of N24.91kwh. They currently pay N15.09kwh.

Under the Kano Disco, consumers in Jigawa, Kano and Katsina states with single-phase meters will pay N20.26kwh. They currently pay N16.01. Those with three-phase meters who currently pay N16.01 kwh will now pay N26.41 kwh.

For Plateau, Gomber, Bauchi and Benue covered by the Jos Disco, customers will   pay N26.93kwh in the new regime. Their pay for 2015 is N16.75kwh. Enugu Disco consumers in  Abia, Anambra, Ebonyi, Enugu and Imo State under the R2 class will pay a flat rate of N27.13 regardless of whether they are on the single phase of three-phase meter type. They currently pay 16.44kwh going by NERC’s calculations.

The Ibadan Disco R2 customers in kwara, Ogun, Osun, Oyo and parts of Niger State will pay N24.97kwh effective February 1. They pay N16.11kwh on the 2015 schedule.
Commercial consumers across the country will experience different levels of increase. Some customers will pay the increase of N12.08, others N13.35 or higher.

For instance, C2 consumers under the Enugu Disco coverage will now pay N42.40 kwh. They currently pay N29.05. C3 consumers will pay N42.97kwh. They pay N29.05 this year.
C2 and C3 consumers are described as consumers who use their premises for any other purpose other than exclusively as a residence or as a factory for manufacturing goods.

R1 class of residential consumers won’t witness any change in their tariff structure.  They will continue to pay N4kwh till the year 2024. R1 consumers are considered the lowest income class who live in residences with electricity lifeline of 50kwh. The monthly consumption is considered to be below 50 kilowatts.
Indeed, the tariff structure is not the same across the country but cuts across.

Sam-Amadi-NERC

NERC Chairman, Dr. Sam Amadi

While explaining the reason for the difference in tariff structure across the country, immediate past NERC Chairman, Dr. Sam Amadi said: “In few DisCos, consumers would see a slight increase in tariffs of between 20 per cent to 30 per cent, while it would be higher by 40 per cent or thereabout for others.  The charging of tariffs is based on the cost profile of the DisCos, the number of customers available to them and the quantity of power available to them.’’

While explaining the reason for the difference in tariff structure across the country, immediate past NERC Chairman, Dr. Sam Amadi said: “In few DisCos, consumers would see a slight increase in tariffs of between 20 per cent to 30 per cent, while it would be higher by 40 per cent or thereabout for others.  The charging of tariffs is based on the cost profile of the DisCos, the number of customers available to them and the quantity of power available to them.’’

The new tariff, however, comes with strict conditions for operators, as the 11 electricity distribution companies (DisCos) have now committed to new service delivery conditions as part of a deal they entered with the government.
The contentious monthly fixed charges, which consumers cough out every month as part of their electricity bills, have also been abolished.
It is not immediately clear why government succumbed to the pressure from operators to high tariffs before improved supply

But Vice President Yemi Osinbajo supports the argument for upward review of electricity tariff as a panacea for increased investment by power sector investors, and for sustainable power 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 go to the consumer, but a cost reflective tariff is an absolute necessity, otherwise, privatization and all of that simply doesn’t make sense,” he noted.

The Vice President, who spoke at the yearly 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 MAN President 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 percent 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 percent of this is lost, it means the DisCos cannot collect 40 percent, but they have to pay for it somehow. So the government has to come in and play some kind of role in order to ensure that the whole value chain is paid for.”

osibanjo--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 to 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.
“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.”

According to the Power, Works and Housing Minister, Babatunde Fashola, “The surest way not to have power is to oppose the implementation of the Tariff Order.”

Indeed, the nation’s eleven distribution companies had in the past sent several proposals to the Nigerian Electricity Regulatory Commission (NERC), demanding an increase in the tariff currently paid by electricity consumers. For them, it is a no higher tariff, no stable electricity verdict.

Amadi is optimistic that the new tariff regime would guarantee greater supply.
His words: “We are introducing new electricity tariffs 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.

Also, going by assurances from the Commission, henceforth every disco should meter all its customers.
Amadi assured: “The metering policy will be strictly enforced. For those willing electricity customers who paid for meters under the Cash Advance Payment Metering Initiative (CAPMI) but are yet to be metered within the allowable 60 days, the electricity distribution companies under the new tariff regime would no longer bill them. The discos will not disconnect them. There is zero tolerance for overbilling of customers. An unmetered customer who is disputing his estimated bill would not be expected to pay the disputed bill. He would pay his last undisputed bill as the contested bill goes through the dispute resolution process. This is a departure from the old practice, which prescribes that customers should first settle the bill while dispute resolution is in the process.

Meanwhile, no electricity distribution company is allowed to connect new customers without metering the customer first. This is to close the wide metering gap of over 50 per cent and reduce the high incidence of collection losses in the Nigeria Electricity Supply Industry (NESI).”

The Commission expects the electricity distribution companies to provide better customer service in all aspects of their operations and would hold the electricity distribution companies responsible for their service level agreements.

While the consumers seem to have no other option but to embrace the new regime, there is a huge concern about the ability of the regulator and indeed, the Ministry of Power, to hold the DisCos to account for the commitments they made as condition for the upcoming high-energy consumption charges.



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