Speculations of plans to raise electricity tariffs up by 40 percent barely a few weeks after the removal of the petrol subsidy have triggered anger among customers, OPEOLUWANI AKINTAYO writes
While it is mandatory for electricity distribution companies to regularly evaluate tariffs every six months, the recent speculation that there might be another increase in tariffs in July was met with dissatisfaction from customers. They are worried that they have yet to recover from the removal of the petrol subsidy at the end of May, which shot prices up from less than N200 per litre to around N500. Electricity consumers believe that any upward review in electricity tariffs would worsen their woes.
Discos did a minor tariff in December and the next one was due for July.
A purported circular from Abuja, Eko and Ikeja Electric to their customers and seen by The PUNCH said, “Electricity units were set to jump by 30-40 per cent in just over a week.”
The circular blamed the planned increase on the floating exchange rate.
“Dear customers, electricity tariffs are set to go higher on July 1st due to the floating exchange rate.
“MYTO 2022 set the exchange rate at N441/$1, which may now be adjusted to about N750/$1.
We may be looking at a base tariff of N100 per kWh for Band C (12–16 supply hours per day).
“Bands A (20 hours and above) & B (16–20 hours) will be much higher”, the circular read.
It advised customers with prepaid meters to purchase energy units in bulk before the price increment takes effect on July 1.
“If you have a prepaid meter, buying bulk energy units for your home or office before the end of the month may help you make some savings before you have to buy at the new rate.
“For those on post-paid (estimated) billing, a significant increment is imminent in your monthly billing, starting from August,” it stated.
Although The PUNCH reached out to a spokesperson for Ikeja Electric, Ayeni Akinola, he described the circular as “fake”.
The Assistant Manager of Communications at the Nigerian Electricity Regulatory Commission, Mary Anavhe, also told our correspondent that there was no plan to increase electricity tariffs.
“There has not been any decision yet. We will get back to you whenever a decision is reached,” she said in a WhatsApp message to our correspondent.
When The PUNCH reached out to spokespersons for Eko Discos and Ibadan Electric, Babatunde Lasaki and Busolami Tunwase and the Executive Secretary for the Association of Nigerian Electricity Distributors, Sunday Oduntan, Lasaki and Oduntan did not pick up their calls, nor did they respond to the SMS sent to them on the issue.
However, Tunwase referred our correspondent to NERC for an official response.
“We are not responsible for tariff increase or decrease, NERC is. We only carry out such directives from NERC,” she said in a WhatsApp message to our correspondent.
Meanwhile, a former spokesperson for Kano Disco, Ibrahim Shawai, confirmed the report of an imminent increase to The PUNCH.
“It is true, but I am no longer working with KEDCO,” he told our correspondent.
The new spokesperson of KEDCO, Sani Bala Sani, did not respond to the calls and messages.
In a twist of events, the Discos and NERC made a detour and told their customers to disregard reports of a planned increase in tariffs.
In an appeal statement, the Abuja Electricity Distribution Company asked its customers to disregard the planned tariff increase as approval for such an increment had not been received.
“Please, disregard the circulating communication regarding the review of electricity tariffs. Be informed that no approval for such increments has been received. We regret any inconvenience,” the Disco wrote to its customers.
The MYTO is a framework NERC uses to determine electricity tariffs in Nigeria. It provides guidelines for a structured approach to calculating and reviewing tariffs to ensure transparency, cost recovery, and sustainability in the power sector.
It provides a 15-year tariff path for the Nigerian electricity industry and undergoes regular reviews to account for changes in factors such as inflation, exchange rate, gas price and generation capacity.
Major reviews are conducted every five years, during which all inputs are reviewed in consultation with stakeholders, while the minor reviews are done bi-annually, which involve collecting actual data from the National Bureau of Statistics, Central Bank of Nigeria and System Operations Unit of Transmission Company of Nigeria.
In 2015, the average tariff across Discos and classes of end-users was N25 kilowatt. And on September 1, 2020, the average tariff was reviewed upward to N60 per kilowatt and later went up to N64 in 2022.
The foreign exchange rate used in determining the 2015 tariff was N198.97/$. The local currency devalued to N383.80/$ in 2020 and further weakened to N441.78/$ in 2022. A dollar currently sells for over N750 at the official forex market.
The inflation rate used in the 2015 MYTO was 8.3 per cent, accelerated to 12 per cent in 2020 and worsened to 16.97 per cent in 2022. The inflation rate was 22.41 per cent in May.
Experts have projected inflation to hit 30 per cent by the end of June due to the naira devaluation and petrol subsidy removal.
While NERC’s projected tariff for July 2023 was expected to take into consideration subsidy removal and increase the previously frozen tariff band D and E. The tariff for band D is expected to increase from N54.59/kilowatt to N62.16, while band E would be up from 37/kilowatt to N61.16 on average. The average increase across the bands is projected to rise to N67/kilowatt. Industry experts expect the new average tariff to be about N88/kilowatt for the sector to recover the cost.
Poor electricity supply
Electricity consumers and experts have argued that despite the upward review of tariffs, electricity generation and supply have not improved.
NERC promised that generation would stabilise at least 5,000 megawatts starting in July 2022.
However, one year after NERC’s promise, electricity generation was still below 5,000MW. According to the Systems Operator, generation by the 26 plants was 4,139MW on June 26.
Generation of a little above 4,000MW is a far cry from at least 30,000MW experts say Nigeria needs to reach sufficiency.
NERC issues new licenses
In the fourth quarter of last year, the federal government issued 50 new power generation and metering permits. NERC stated that it approved the issuance of two new generation licenses with a combined capacity of 56.50MW, and authorised the amendment of two on-grid embedded generation licenses. The Commission also approved 13 mini-grid permits and 14 registration certificates for mini-grids with individual capacities below 1MW.
It also granted approval for the amendment/renewal of seven captive power generation permits with an aggregate capacity of 65.36MW.
On metering, NERC said applications from seven meter installers, three meter manufacturers, and two meter importers were also approved by the commission in 2022/Q4.
Power generation and metering have continued to pose a huge challenge in the Nigerian power sector, with generation stagnating below 5,000MW in the past two years.
The commission explained that inadequate meter deployment to end-users continued to be a “challenge” in the Nigerian Electricity Supply Industry.
Subsidy removal and CBN policy impact
Since the official announcement of fuel subsidy removal by the new administration, the purchasing power of most workers has dwindled, with many struggling to meet basic needs. The removal of the subsidy led to an over 100 per cent increase in petrol prices nationwide.
Also, the Central Bank of Nigeria on June 14, announced the unification of all segments of the Nigerian forex market, collapsing all windows into the Investors & Exporters window. Consequently, the value of the naira depreciated to N770/$ from N462/$ at the Investors and Exporters foreign exchange window.
This has informed the push by Discos to review tariffs upward.
NLC, MAN call for caution
Reacting to the planned hike in electricity tariffs, the Nigeria Labour Congress recently warned against the move, stating that the massive increment would be resisted by Nigerians.
“We believe that not even these figures are a justification for this reckless proposed tariff increase. The issue of capacity to pay and quality of service delivery is not only germane but superior to any rationalisation by market logic,” the Congress President, Joe Ajaero, said in a statement.
Also, the President of the Manufacturers Association of Nigeria, Francis Meshioye, in an interview with Arise TV, asked for a reduction of electricity tariffs for manufacturing businesses.
“There should be no increment on the tariff currently; rather, the government should look at a way to give us a special tariff on electricity to be able to mitigate the overburdened expenses of the manufacturing industry in the country,” he proposed.
According to him, the members of the association currently spend up to 30 per cent of their operating costs on energy.
He urged the government to subsidise by 15-20 per cent to make local companies competitive.
Senator Shehu Sanni lamented on Twitter, “Some power distribution companies have issued a notice of an impending electricity tariff hike; that is soulless. No reasonable person will support such a policy. Yes, we have wealthy people, but we are still a developing country.
“It is unfair for the Federal Government to take off fuel subsidies, make plans to increase electricity tariffs and then hike vehicle duties by 40 per cent. They are simply being unfair to Nigerians.”