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Electricity consumers and labour unions are reportedly irked by latest tariff hike foisted on Nigerians by the Nigerian Electricity Regulatory Commission (NERC) based on the Multi-Year Tariff Order (MYTO). The new tariff regime comes at a time non-improvement in power supply and questionable bills are still fuelling general discontent; and is being viewed in some quarters as akin to ‘robbing Peter to pay Paul’.
The Chairman of the Nigerian Electricity Regulatory Commission (NERC) Dr. Sam Amadi, announced on May 21 that a new electricity tariff regime would start from June 1, 2014 based on the approval of the Multi-Year Tariff Order (MYTO) review. Amadi was however quick to justify the need for ‘a minor review (increase) of electricity charges in the country.
The MYTO review, he emphasized, has reduced the fixed charge component of the tariff that would have been an additional burden on electricity consumers. “We have reduced the burden on consumers without altering the revenue requirement of the DISCOS and asking them to go out and serve consumers and collect energy charge. In absolute terms, all consumers are paying less if you consider that fixed charge is the highest charge. But even in relative terms, it is only R2 consumers who have slight increase in energy charge,” he explained.
According to him, this minor review of the MYTO “will give confidence to investors and other stakeholders that the new Nigerian electricity market is maturing fast” as well as stimulate further investments needed to revive the sector. This is also good for the consumer because he can have faith that the operator will not fool around with pricing, he said. He noted that “without the review, a residential consumer in Benin would be paying N1, 500 as monthly fixed charge. But after the review, he will pay only N750. This is the story everywhere. Fixed charge has to be reduced.”
He explained that the variables such as inflation and exchange rates, gas price and available generation capacity, are weighed against electricity prices for possible review every six months to ensure that the power sector remains financially viable and is able to attract investment. “What we do every March 31 is to draw the line on the price and data available from officials’ custody. For example, we get inflation rate from the CBN and NBS, the same for foreign exchange. We, then, take these rates at that time and look at the cost of gas and the available capacity and use it to make estimates.
“We have biannual minor reviews and every year, by June 1, when the MYTO came up in 2012, it becomes another fiscal year for the tariff. So with this biannual review, we just finished, the rate is more than or less than five percent aggregate; so, there will be a review. That is how the model is,” he added.
The latest review, according to Amadi, shows certain significant changes than projected. “For instance, whilst MYTO had projected an inflation rate of 13 percent, the inflation as at March 30, 2014, the cut-off date for the reviews, is 7.8 percent which is 5.2 percent less than projected. Similarly, MYTO projected an exchange rate of $1 to N178. But the March 30, 2014 data from the Central Bank of Nigeria (CBN) shows a rate of N157.30 to $1, which is 11.6 percent less than projected.
Opposition to the hike
Despite attempts by the NERC to placate electricity consumers and other stakeholders following the tariff review, criticism has greeted the new electricity price regime. Labour unions, consumers and other stakeholders who spoke to TheEconomy condemned the tariff review. The Trade Union Congress (TUC) described the tariff hike as anti-people and anti-labour.
In a statement signed by Bobboi Kaigama and Musa Lawal, its National President and Secretary-General respectively, TUC argued that the MYTO review was another deliberate attempt to exploit the already impoverished masses of the country. To us, the move is queer, uncalled for, and another deliberate attempt by some cabal to further exploit the already impoverished masses of the country, especially as the power supply and distribution situation has remained comatose even after the privatisation of the sector, contrary to the Federal Government’s promise to tackle the inherent challenges.
“The income of the average Nigerian cannot accommodate the extra cost of living that any increase in price of power would provoke; neither can the social fabric withstand the negative fall-outs of such ill-advised action. We demand that the Commission jettisons the idea or risk incurring the wrath of workers and other Nigerians,” it added.
TUC also criticized NERC for failing to take necessary actions when some variables that trigger-off the tariff review are in favour of the consumers. “For instance, whilst MYTO in 2012 had projected a 13 percent inflation rate, it was at 7.8 percent by March 30, a difference of 5.2 percent. Also, exchange rate of $1 to N178 from CBN data was 11.6 percent less than the projected, at N157.30 per $1 as at 30 March,” TUC stated.
The National Union of Electricity Employees (NUEE) also took a similar position. In a statement signed by Comrade Joe Ajaero, its General Secretary, NUEE argued that tariff review will not augur well for many contrary to official claims.“Our stand is very clear on this; we reject any hike in the electricity tariff,” declared Comrade Ajaero, who is also a deputy president of the Nigerian Labour Congress (NLC).
According to him, the problem in the power sector is not low or poor tariffs but corruption and the desire of the new owners to make money within a very short time without corresponding investment. “Much as the electricity is seen as social and economic necessity, the new owners are going for profit maximization and so the situation will still get worse. Since they didn’t know the financial viability and they bought, this is what will happen and it is just the beginning. We would be lucky if there is no regulatory hijack which will be the end,” Ajaero said.
Many electricity consumers also lashed out at government for failing to deliver on its social responsibilities to its citizens. According to them, the upward review of electricity tariff should have come with appreciable improvement in power supply. “If you consider the amount of money spent by many households in Nigeria in fueling and maintaining generators to power their homes or offices as against the bills on power supply, you will agree that it is quite small. But, to keep jerking up tariff from time to time without any sign of improvement in power supply is unacceptable and that is why no sensible Nigerian will be happy with this latest hike,” declared Mr. Justus Nwachi, a teacher based in Onitsha, Anambra State.
For Mrs. Jumie Owolabi, a restaurant operator in Sango Ota, it is unthinkable that government decided to raise electricity tariff at a time it was supposed to put pressure on the new owners of the DISCOs and GENCOs to improve their service delivery. “Rather than make efforts to improve power supply, the new owners are conniving with government to impose higher tariffs,” she fumed.
Addressing consumer concerns
Even before NERC unveiled the new electricity tariff plan, it had taken necessary precaution to pander to the interest of consumers, ostensibly to avert a backlash. On April 30, Dr. Amadi had proclaimed that electricity consumers will no longer pay fixed charge when it suffered blackout for 15 days in a month. “From today (April 30), any electricity consumer, who has not received continuous electricity supply for a period of 15 days in a month, shall not be required to pay the fixed charge, provided disruption is not due to non-payment of electricity bill or other actions from the consumer like tampering, vandalism, or is totally unrelated to the fault of the Electricity Distribution Company (DISCO)”, Amadi declared.
According to him, the fixed charge is an element of any electricity bill and it is not unique to Nigeria alone. “It is not fixed that it cannot change from year to year. It is fixed because it is fixed for that month,” he said, adding that through such fixed charges, NERC will ensure that DISCOs receive enough money to maintain the network more efficiently.
He pledged NERC’s commitment to regulatory due process and strict compliance with the Electric Power Sector Reform Act and its Business Rules, to ensure that customers are not short-changed by power investors. “Our commitment as a regulator is to not only ensure that Nigerian electricity consumers have access to adequate and reliable electricity but also to provide processes and mechanisms for effective remedies for any violations of service obligations by the service providers in the new Nigerian electricity market,” he said.
Customers, he said, should expect better service, because NERC would step up monitoring of DISCOs’ performance.
While the commission’s decision to avoid a blanket tariff hike in the latest MYTO review may have helped to douse tension and possible nationwide uproar, there are still fears of further protest from labour unions. And with no immediate signs of improvement in power supply, electricity consumers caught in the web of the latest tariff hike are less likely to take the increament in good faith.
“It’s going to be difficult to convince people to pay more for power they did not enjoy, more or less at this time that most Nigerians are struggling to cope with the harsh realities of economic conditions in the country,” Mr. Cliff Nneli, a socio-political commentator said.
Certainly, the latest review of electricity tariff by NERC is tantamount to another poisoned chalice for electricity consumers in Nigeria.