Knocks, kudos trail slash in electricity tariff

Goodluck-Jonathan

The decision of the Federal Government to reduce electricity tariff by 50 percent has elicited mixed reactions from Nigerians. The Federal Government had on Tuesday, March 17 announced the reduction in the tariff.

The Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi who announced it explained that President Goodluck Jonathan government took the decision after a careful review of complaints from electricity consumers as well as the impact of high tariff paid on consumers. The tariff slash which came barely two months after Aso Rock announced N10 reduction in the pump price of petrol has been interpreted in some quarters as another vote-seeking gimmick by President Goodluck Jonathan rather than a sincere action geared towards ameliorating the plight of energy consumers.

“The timing of this tariff cut shows clearly that it was more political than a dictate of the market conditions,” argues Mr. Geofery Ukwani, an energy analyst.

“That also was the reason behind the reduction of petrol pump price from N97 to N87 last January. Unfortunately, Nigerians have not been able to benefit from it as many people are still buying fuel above N100 per litre as against the official N87,” he adds.

Mrs. Joy Adedayo, a canteen operator at Oshodi, Lagos, also shared a similar view. According to her, “this is the time when politicians promise ‘Heaven and Earth’ just to win an election. And the moment election is over, you will find out that all they promised was nothing compared to what they are going to gain from the masses,” she told theeconomyng.com.

But Mr. Johnson Ikimi sees it as a welcome development, regardless of whether it was politically motivated or not. “Everybody has been complaining about the latest tariff hike and for government to have come out to slash it by 50 percent is a welcome development. Whether it was done for politics or not, I see it as something good that this government has done,” he said.

Another Lagosian, Isaac Okunniyi who also shared Johnson’s view. He argued that there was nothing wrong in government reversing its policies, especially at this period of economic hardship. “Government has gauged that the masses are not happy with the skyrocketing cost of living across the country, especially the percent of income spent on energy and decided to reduce it. That should be applauded, whether it was done for political expedient or not,” he said.

But Mr. Kelechi Anyanwu, an economic analyst, described the tariff cut as unwise business decision by government. “This is purely anti-investment, anti-business and anti-efficiency. And I do not support it for whatsoever reasons behind such a decision. It makes no sense politically and economically,” he declared.

However, as controversy rages as to whether the decision was politically motivated or not, the Chairman of the Nigerian Electricity Regulatory Commission Dr. Sam Amadi has debunked the impression that the review was a political trump card. The NERC chief insisted that President Jonathan government took the decision in order to ameliorate the plight of electricity consumers who have been complaining about the high tariff.

According to him, after a careful review of the matter, government agreed that it was inappropriate to transfer the collection losses that were controllable by the Discos to consumers. “It is the responsibility of the Discos to collect their revenue from their customers. Failure to do so should not be a penalty to customers who pay their bills. It is clear that removing the collection losses will lead to lower tariffs for consumers.”

Amadi explained further: “The removal of collection losses from customer tariff has reduced tariff by more than 50 per cent in some places. Please note that the reduction does not affect the Central Bank of Nigeria facility and its repayment.”

The approval of the MYTO 2.1 on January 1, 2015 had sparked public outcry. And with the suspension of the tariff hike for the residential class of customers till June 1, 2015, the protest against the new tariff template was spearheaded by the Manufacturers Association of Nigeria (MAN) on behalf of the Industrial and commercial consumers.

MAN had petitioned the NERC asking for a review of the MYTO 2.1, specifically a drastic reduction of their tariff, arguing that such exorbitant tariff was capable of killing their business and leading to massive job losses. The association also threatened to shut down its factories if NERC failed to revert to an acceptable tariff template.

After receiving the petition, NERC reportedly swung into action. And as part of the desperate moves to avert a catastrophic showdown with MAN, the commission on Monday, March 9, 2015  issued a new order, declaring that “henceforth collection loss, which is defined as the ‘amount billed but not collected’, will not be automatically passed on to consumers of electricity.

It went further: “The collection loss for all Discos is set at zero. It is now the responsibility of Discos to convince the regulator of any exceptional circumstances for such loss to be passed to the consumers.”

The NERC added that the new direction came as part of the commencement of the Transitional Electricity Market. TEM is built on bilateral trading between parties and is geared towards ensuring an efficient market where cost reflectivity will lead to more affordable electric services for consumers.

Amadi further explained that as part of preparations for TEM, NERC had issued a tariff review regulation that requires the utilities to consult with relevant consumer classes before presenting a tariff review application to the commission for approval.

By Olisemeka Obeche

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