Nigeria’s electricity sector is undergoing a season of reforms, though coming 40 years late
Electricity pricing without commensurate electricity supply in Nigeria remains the common heartache to Nigerians. Small businesses and the urban poor are the worst hit of this problem.
NERC’s mandate is to ensure that electricity is adequate, safe, reliable and affordable. In January 2006, PHCN requested an average increase in its tariff by 60% from the tariff that had been operative since 2002. The Commission considered this along with the industry’s performance over recent years. The Commission found it necessary to adopt a holistic and scientific approach to correct pricing of electricity over time to ensure gradual sector development through the instrument of a cost reflective and fair tariff regime.
The increase, which would mostly affect customers within the tariff classes of Residential-2 (R2) and Commercial-1 (R1), would however not affect the total amount payable by consumers as fixed charge components that are usually embedded in their monthly electricity bills. It also indicated that according to the design of the MYTO framework, certain electricity distribution networks within the Nigeria Electricity Supply Industry (NESI) would rather witness some level of reduction in the various components of their monthly electricity tariff to consumers. According to him, R2 customers in Abuja distribution network would have for instance paid N985.92k as monthly fixed charge, if its projections for these macro-economic variables were the same.
“The NERC on, May 21, approved the review of the MYTO. This review will take effect on June 1 and it has reduced fixed charge component of the tariff that would have taken effect on June 1.
“The MYTO provides for bi-annual reviews that will take effect on June 1 and December 1 to ensure that some critical and financial variables underlying electricity tariff in Nigeria are still realistic and current. These variables are the rate of inflation, exchange rate, gas price and available generation capacity,”
“The NERC on, May 21, approved the review of the MYTO. This review will take effect on June 1 and it has reduced fixed charge component of the tariff that would have taken effect on June 1.
“The MYTO provides for bi-annual reviews that will take effect on June 1 and December 1 to ensure that some critical and financial variables underlying electricity tariff in Nigeria are still realistic and current. These variables are the rate of inflation, exchange rate, gas price and available generation capacity,” Amadi said.
He further stated: “To ensure that the Nigerian electricity market remains financially viable and able to attract investment to improve capacity and reliability, electricity prices are indexed to changes in these variable. The review shows that the aggregate of these variables have changed by plus or minus five per cent of the MYTO figure; the changes are significant changes.
“For instance, while the MYTO had projected an inflation rate of 13 per cent, the inflation as atMarch 30, the cut-off date for the reviews, was 7.8 per cent which was 5.2 per cent less than projected. Similarly, MYTO projected an exchange rate of $1 to N178 but the March 30 data from the CBN shows a rate of N157.30k to $1, which is 11.6 per cent less than projected.”
Perhaps the strongest link to an all conclusive conversation with all stakeholders is the open disposition of NERC as an institution. Nigerian institutions are known for being indifferent, unresponsive and slow to the concerns of the consumer and investors alike; however at NERC several checks and balances have been put in place to ensure that the organization is more responsive and live up to its mandate on a daily basis. According to Dr. Amadi the FOI bill and the Stakeholders Public Forums are some of the mediums that the general public interfaces with them.
Economically, public power supply in Nigeria today costs and average of =N=22 Per Kilowatt-Hour while self-generated capacity (mostly diesel-driven) costs anywhere from =N=50 to =M=70 Per Kilowatt-Hour, depending on the cost of fuel used. This explains why Nigerians often say they are willing to pay anything for constant, steady, clean power supply. It is also clear that the model of government ownership of various businesses, including utilities such as electricity and telecoms is discredited in favour of ownership and management by the private sector. Nigeria can no longer afford not to have an efficient electricity market that meets the needs of all sectors of the economy. This is why the Federal Government is determined to complete the reforms mandated in The Electric Power Sector Reform Act (EPSRA), 2005.
On Meter Acquisition:
Meter acquisition remains one big headache that has continued to cause sleepless nights to several consumers. Here is a step-by-step guide on acquiring a meter.
The regulatory rules on metering may be summarised as follows:
- The quality standard for all types of meters to be used in Nigeria is set out in the metering code (available on the NERC website, www.nercng.org).
- There are various types of meters, fit for specific purposes – consumer meters, industrial meters, grid meters, etc. The type that concerns most of us is the consumer meter, used in residences and small businesses. Any and every type of meter in use belongs to the electricity company that serves each customer. Each meter is to be provided by that company
- This means that consumers who are connected to an electricity distribution network are not normally required to pay for meters connected to their residences. This is because the fixed charge (ranging between =N=500 and =N=750 monthly) paid by each consumer is meant to cover the cost of the assets used to serve the customer, including meters.
- Each customer to whom a meter is supplied is, however, obliged to pay the cost of accessories/materials used to connect the meter to his/her home. There are as many as eight types of meters for which standards have been set in the metering code referred to above and there prices range from about =N=15,000 for the simplest type to about =N=55,000 for the most sophisticated type.
- As of today, electricity distribution companies have continued to be inefficient in collecting their revenues and they still carry an excessive operating cost base, thus reducing the monies available to acquire customer meters. Therefore, rather than allow customers to continue suffering while waiting for the privatisation core investors to take over these distribution companies and deliver meters en masse as promised, The Commission devised a scheme called the Credited Advance Programme For Metering Impelementation (CAPMI).
- CAPMI enables a customer to pay upfront rather than in monthly instalments the cost of a meter, have the meter installed within 45 days of paying for it and get refunded the cost of the meter only (excluding connection labour costs and accessories/materials) plus interest at 12% Per Annum within three years of that payment via a full rebate of all fixed charges until the customers advance payment is fully refunded. Hitherto, distribution companies made customers buy meters and still collected the fixed charge, which was very wrong.
Alkasim Abdulkadir is currently an Editor at Citizensplatform.net Online News portal and Contributing Editor at The Trent.
The opinions expressed in this article are solely those of the author.
