By Dennis Mernyi
Abuja
Thrice in about five years, electricity tariffs have been reviewed upward by the Federal Government amidst complaints of dipping power supply and its crippling effect.

The negative impact of the increase has taken a toll on Nigerians across all strata of the society- manufacturers, industrialists, entrepreneurs, corporate organisations, and individual consumers of electricity in the country.

As Nigerians bear the burden of paying higher within this period for electricity, it has rather become a daily challenge that power supply in the country has worsened which means, Nigerians are paying for darkness.

Many factories and industries have packed up since they cannot afford to run extra power sources for production.
Similarly, many homes go with no power for days, sometimes for months. They still pay or subscribe in case power is eventually restored. It is hoping in a vacuum and living in a nightmare.

Just a year ago, precisely January 1, 2021, the government through the Nigerian Electricity Regulatory Commission (NERC) increased the electricity tariff from N2 to N4. NERC explained that the increase is to reflect an increase in inflation and foreign exchange rates.

Justifying the purpose for the tariff increase NERC’ s Assistant General Manager (AGM), Government, External and Industry Relations, Mr Michael Faloseyi, said although tariff increase for Bands D and E (Customers getting power below 12 hours daily) remain ‘frozen’, he, however, admitted that the tariff rates for even these classes of customers were ‘adjusted’ upward.

“In compliance with the provisions of the Electric Power Sector Reform Act (EPSRA) 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 kilowatt-hour (kW-hr) to reflect the ‘partial’ impact of inflation and movement in foreign exchange rates.

NERC insisted that the latest tariff hike for the DisCos reflect varied increment percentage from 25 per cent above. It maintained for instance, that customers of Ibadan DisCo will pay an average of N46.5 per kWh from January to June 2021, rising from N34.1 as of December 2020, its order signed by NERC Chairman showed. The increase for this DisCo is N12.4 or 25 per cent.

In all these figures and calculations, electricity consumers across the country have argued that they are not at any time consulted by NERC on the reason for the persistent increase.

They are of the view that both the figures and percentages churned out by the commission anytime the cost of electricity was increased are at best an imposition since the charges they are confronted with are always in different forms.

However, a revised Multi-Year Tariff Order (MYTO) signed by the new Chairman of NERC, Engr. Sanusi Garba on December 30, 2020, and the new tariff increase took effect on January 1, 2021, and supersedes the previous Order NERC/2028/2020.

In the new revised Service-Based Tariff (SBT) Order NERC/225/2020, the commission said it considered the 14.9 per cent inflation rate rise in November 2020, foreign exchange of N379.4/$1 as of December 29, 2020, available generation capacity, US inflation rate of 1.22 per cent and the Capital Expenditure (CAPEX) of the power firms to raise the tariff.

Though, the exchange rate at the moment over a year ago since the last increase is around N450 per dollar yet NERC has since remained silent as consumers groan and continue to lament.

This was to be effective till June 2021 while a Cost Reflective Tariff (CRT) expected to raise the new cost higher will be activated from June to December 2021, the NERC Order revealed.

During this period, NERC has developed a system for sculpting electricity tariffs. Initially, before the privatization of the power sector, electricity tariffs were generally expected to be non-cost-reflective, meaning investors would initially under-recover on their investments.

However, the tariffs were meant to rise to a cost-reflective level, ultimately resulting in investors over-recovering their investments in the power sector and reaping substantial profits necessary to encourage competition and investment in the sector.

Many of the investors who bought majority shares in the Distribution Companies (Disco) obtained letters of comfort from the federal government of Nigeria providing assurances that the electricity tariffs would be increased to ensure the viability of their business operations.

The First Multi-Year Tariff Order (MYTO) model introduced in 2008 (MYTO 1) was slated to be applied from 2008 to 2012. Subsequently, following a major review of the method in June 2012, MTYO 2.0 was issued and it was to remain effective from 2012 to 2017.

Following a minor review in December 2015, NERC issued a new MYTO called the MYTO 2.1 that was to take effect from January 2015 to 2018. In 2015, NERC revised and amended the MYTO 2.1 by removing the collection loss component of the electricity resulting in the MYTO 2.1 (amended).

The uproar created by the removal of the collection loss factor resulted in NERC issuing an MYTO to reinstate the collection loss thereby translating to MYTO 2015 which was meant to cover the period from 2015-2024.

The MYTO spelt out the method for determining and reviewing tariffs based on assumptions on certain variables outside the control of the DisCos including the inflation rates in Nigeria and the United States of America, the Naira to United States Dollar exchange rate, gas prices, and available generation capacity.

To facilitate the transition to and maintenance of cost-reflective tariffs, the MYTO was meant to undergo biannual minor reviews and major reviews every five years and where necessary, tariffs were to be adjusted to reflect any changes in the underlining assumptions.

Between 2015 and 2019, the average electricity tariff climbed from N12 kWh to about N32kWh and was slated to go up again by about 30 per cent in 2020.

Sadly, investors that took over the running of the electricity distribution carved out from the defunct Power Holding Company of Nigeria in 2013 demanded a cost-reflective tariff.

In June 2015, the Nigerian Electricity Regulatory Commission issued new electricity tariffs that became effective for commercial and industrial consumers from April 1, 2015.

While small business owners who subscribe or pay for electricity still depend on alternative power supplies like generation plants and solar energy to sustain their businesses.

An operator of meat and fish stocked cold room at Kurudu, Karshi Road, Abuja, Mr Ejike Ukwu, lamented that he spends a minimum of N115,000 monthly on electricity subscription but he has to spend at least an extra N80,000 on diesel to power and service his generator.

“You can see this business, we can’t operate without power. I have standby generators. I spend at least N80, 000 monthly on diesel and servicing because the electricity is even not there, this is aside from spending over N115, 000 every month to pay for an electricity subscription.

“The situation is worse in the past few years since the government has increased tariff on power consumption,” he stated.

The story of Alhaji Yaabagi Danusa owner of Dasali Industries who specialises in milling and processing of agro produce in Suleija is not different as he also decries the poor power supply to his facility amidst the high cost of paying for electricity that is always not available.

According to him, “Sometimes I am forced to shut processing for months when it becomes obvious that we will be operating at a loss if we continue to depend on fuelling and servicing the generating plants.

“The tariff is too high. I pay very huge money to get power but it is not there. Most times I have to depend on a generator for several weeks and we get nothing at the end of production”, he lamented.

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In Abuja particularly, the Abuja Electricity Distribution Company (AEDC), the distribution agency meant to feed the territory and its neighbouring states will be shut down at some point by staff because they are owed salaries and allowances, and residents are left to carter for themselves.

For instance, staff of the AEDC in protest against management for non-payment of salaries and other entitlements shut down operations of the company. The entire territory and the other states were thrown into darkness for many days until the intervention of the Minister of Federal Capital Territory, Mohammad Bello when the action was suspended and normalcy was later restored.

NERC has remained mute as the crises lingered and the situation worsened even when Nigerians continue to lament the incessant and unjustifiable tariff increase.