Menu

Tariff

electricity-960x587

What hike in electricity tariff means – Nigerians

, ,

Ibadan, July 17, 2023: Stakeholders in the electricity sector in Ibadan have said that the proposed hike in electricity tariff will inflict more hardship on Nigerians who are already feeling the heat of petrol subsidy removal.

The Principal Partner, Utilities Consumers’ Rights Advocacy Initiative, Mr Shadrack Akinbodunse, said that there had never been corresponding performances from distribution companies (discos) to justify every new tariff regime.

Akinbodunse noted that power supply had been getting worse since the privatisation of the sector due to what he called poor planning for expansion and failure to make timely provisions for obsolete equipment.

According to him, mass meter deployment, as promised by the discos during privatisation, had also become a mirage, while old and obsolete meters were not replaced, in disregard to an order by Nigerian Electricity Regulatory Commission (NERC).

“It’s a known fact that the Multi-Year Tariff Order (MYTO) pricing framework is essential to the survival of discos but it also goes with their corresponding performances to justify every tariff regime.

“Till date, there has never been any tariff regime justified with measurable performances by discos, yet they keep increasing tariff.

“This is unfair and an open injustice to electricity customers across the country. The discos should justify their present tariff and stop short-changing Nigerians,” he said.

Akinbodunse also claimed that there had been age-long open cheating and extortion by electricity workers, especially any time power equipment developed fault in any community.

“Most times, they tell customers that there is no provision for repair or replacement of faulty power equipment in their stores.

“Most community development associations (CDAs) have now become a conduit pipe to milk people through power supply fault and activation of new installations.

“In view of the above, we strongly condemn electricity tariff hike in any form,” he said.

Also speaking, the Director-General, Manufacturers’ Association of Nigeria (MAN), Mr Segun Ajayi-Kadir, said that higher electricity tariff would directly increase the cost of production for manufacturers.

“Already, we have power constituting between 28 and 40 per cent in the cost structure of the manufacturing industry.

“So the impacts of the new tariff hike on the manufacturing industry will be intensive, particularly on metal processing, heavy machinery and chemicals manufacturing.

“A spike in electricity tariff will also erode the profit margin of the manufacturers and reduce their ability to expand operations and create new jobs.

“There is high probability of the activities of small and medium-scale enterprises (SMEs) being paralysed with the proposed hike in tarrif.

“There may also be a decrease in the revenue collectable by government, while manufacturers will ultimately pass the additional cost to the consumers of their products,” he said.

Ajayi-Kadir called on the Federal Government and NERC to ensure improvement in electricity generation, transmission and distribution.

This, he said, would lead to regular electricity supply in the country, rather than increasing the tariff on the present 4000MW which was grossly inadequate.

“Government should also ensure that at least 90 per cent of electricity consumers are metered to ensure consumption- reflective electricity bill payment.

Also, Mr Kehinde Aina, a consumer, said that it was improper to effect any hike in electricity tariff when an average Nigerian was still grappling with the hardship caused by removal of petrol subsidy.

NERC, through a recent public notice, said the request for rate review was premised on the need to incorporate changes in macroeconomic parameters and other factors affecting quality service, operations and sustainability of the companies.

NERC had stated in the notice that discos’ request for rate review was in pursuant to Section 116(1) and 2(a and b) of the Electricity Act 2023 and other extant rules.

Consequently, the commission had invited the general public for comments on the rate review applications by the distribution licensees.

Electricity-Power-grid

Confusion over electricity tariff increase

,

Electricity Distribution Companies (DisCos) have denied increasing tariff from July 1, 2023, throwing the market into confusion.

The DisCos clarified that they had not got the approval of the Nigerian Electricity Regulatory Commission (NERC) to hike tariffs.

Also, the Abuja Electricity Distribution Company (AEDC) backtracked on its earlier announcement of a tariff increase, barely 18 hours after it issued a notification.

An economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the proposed review smacked of insensitivity.

His position is in line with that of the Manufacturers Association of Nigeria (MAN) and other business organisations.

The AEDC, in a public announcement to its customers, urged them to ignore its previous announcement of upward tariffs review.

The company noted that NERC was yet to approve the increase.

It said: “Please, disregard the communication circulating in the media regarding the review of electricity tariffs.

“Be informed that no approval for such increment has been received. We regret any inconvenience.”

Two days ago, the AEDC issued a public service announcement that it would increase its tariffs effective from Saturday because of the exchange rate that has soared from N441 in 2022 to N750.

But the recanting of AEDC on its previous announcement is not surprising given the sensitive nature of the subject.

Sources said the DisCo may have buckled under pressure to put the review on hold.

DisCos contacted feigned ignorance, saying that NERC is the appropriate body to speak on tariffs.

They also clarified that they had not received a directive on tariff increase from NERC.

General Manager, Public Affairs of NERC, Dr. Usman Abba-Arabi, could not be reached by phone for confirmation.

Messages sent to his Whatsapp number had not been responded to as of last night.

“We have not been advised or directed on such. The NERC is the only body that can order us on tariffs review and we have not received any correspondence on this from NERC. So, we are also watching the speculation that has filled the air,” a senior manager in a leading Lagos-based DisCo said.

Top officials of some DisCo, speaking on condition of anonymity, noted that going by the development in the forex market, consumers needed to be aware that what operators budgeted for at the old exchange rate of N441 to a dollar has since spiked. The implication is that more money is expected to be pumped into providing the required service to consumers.

Electricity tariff review, either increase or decrease, is a bi-annual exercise as provided for in the Multi-Year Tariff Order (MYTO) schedule for the sector.

Relying on Section 76 of the Electric Power Sector Reform Act (EPSRA) 2005, the NERC adopted the MYTO methodology for electricity pricing in Nigeria, which sets out the basis, pricing principles and procedures for effecting minor and major reviews of electricity tariffs in Nigeria.

The MYTO provides a tariff path for the electricity industry, with biannual minor reviews to take into account the impact of changes in a limited number of parameters, specifically inflation, dollar exchange rate to naira, natural gas price and available generation capacity, and major reviews every five years.

Similarly, Section 9 of the ‘‘Regulation on Procedures for Electricity Tariff Reviews in the Nigerian Electricity Supply Industry’’ allows for Extraordinary Tariff Review.

The proposed increase is coming in spite of the fact that operators have not been able to meet the threshold of supplying, at least, 5,000 megawatts a year after signing contracts with NERC.

NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent. Currently, the inflation rate is 22.41 per cent, a figure that experts say may hit 30 per cent by the end of the month, given the floating of the naira and petrol subsidy removal.

 Yusuf faulted the proposed increase, saying that the timing is wrong. He said though DisCos are private companies, their services are of great social significance.

He said: “It is often a dilemma when the private sector is playing a dominant role in the delivery of a service, which is social in nature or quasi-social. Nonetheless, it is difficult to accept the exchange rate argument to justify the increase. The truth is that for over 80 per cent of companies, product pricing has always been based on parallel market exchange rate, or close to it.

“Not up to 20 per cent of companies had unfettered access to the official forex window for all their forex needs.”

Yusuf said the forex unification argument being put up by the DisCos cannot justify the proposed tariff increase.

The CPPE boss, an advocate of a free market economy, nevertheless warned that contemplating such an increase at this period when Nigerians are still grappling with the shocks of the fuel price increase is wrong.

He said: “It is most inappropriate and even insensitive to come up with a price increase of such magnitude at this time when many households are still struggling to adjust to the phenomenal increase in petrol prices.

“We need social stability for any business to thrive. Many other businesses are also impacted by the exchange rate unification. But not many have increased prices so phenomenally.

“The DisCos seem to be taking advantage of monopoly privileges.

“We recommend that both the timing and rate of tariff changes should be reviewed in the interest of social stability.”

Additional report from the Nation

NLC 1

NLC kicks against increase in electricity tariff

, ,

Abuja, June 23, 2023: The Nigeria Labour Congress (NLC) has called for the shelving of the proposed plan of electricity tariff hike by July 1 for the collective good and safety of Nigerians.

Mr Joe Ajaero, NLC President, said this in a statement titled “Shelve this tariff hike” and made available to newsmen on Thursday in Abuja.

According to Ajaero, the plan to increase electricity tariff by 40 per cent by July 1 would further compound the current hardship of ordinary Nigerians.

“The massive increase is explained away as a response to the over 100 per cent increase in the pump price of premium motor spirit (PMS).

“Details reveal a movement in inflation from 16.9 per cent to 22.41 (threatening to needle 30), and a shift  in exchange rate from  N441 to N750.

We believe not even these figures are a justification for this proposed tariff increase.

“The issue of capacity to pay and quality of service delivery are not only  germane but superior to any rationalisation by market logic. The service providers in spite of sundry support have not been able to meet the threshold of 5,000 megawatts,” he said.

The NLC president said that the proposed hike would lead to a ripple effect by other product or service providers in the country.

He noted that the ordinary Nigerians needed to be protected from these economic vagaries that is suddenly thrust on them.

“We would want to advise apostles of the Market who have called NLC all sorts of names to check their conscience. The rate at which they are going is highly combative and combustible,” Ajaero said.

He called for more novel interventions to cushion the effect of these tariff hikes on majority of Nigerians.

“In light of this, our  advice is that this proposed tariff  hike should be shelved for our collective safety.”

Tariffs

NECA urges stoppage to proposed tariff increases

, ,

The Nigeria Employers Consultative Association (NECA) on Sunday urged the Federal Government to suspend the implementation of its proposed tariff increases in the manufacturing sector.

In a statement issued in Lagos, its Director-General, Mr Adewale-Smatt Oyerinde, also called for the reversal of the 2023 Fiscal Policy Measures (FPM).

He advised government to revert to the 2022 FPM roadmap designed to lapse in 2024.

The approved 2023 FMP includes Supplementary Protection Measures for the implementation of the ECOWAS Common External Tariff (2022 – 2026).

It includes increased excise duty on alcoholic beverages, cigarettes and tobacco products; introduction of excise duty on single-use plastics and Import Adjustment Tax levy on vehicles of 2000 cc and above.

Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed confirmed President Muhammadu Buhari’s approval of the 2023 FPM on May 12.

NECA stated, however, that the newly-introduced FPM and tariff increases were not only worrisome, but also landmines for businesses in the affected sectors.

“While government’s new FPM will largely affect manufacturers, it also has the potential to disrupt organised private sector’s value-chain with consequential effects on Nigerians as a whole.

“While we understand government’s revenue challenges, the proposed increases will spike production costs and reduce the competitiveness of Nigerian manufacturers in local and international markets.

“With recent reports of unemployment rate hovering above 40 per cent, the economy will be further hard-pressed to withstand the likely loss of jobs that will follow these increases,’’ NECA stated.

Its director-general stressed that the proposed increases, if implemented could aggravate smuggling and stifle growth of businesses in affected sectors.

Oyerinde added that it could promote the production of fake products, reduce purchasing power of Nigerians and ultimately reduce government’s projected revenue across board.

“With more than 60 different taxes and levies currently being paid by businesses, the best that government can do is not to overburden the sector or cause relocation of many more to other climes.

“With about 20 bills pending at the National Assembly with financial implications for businesses, government will do well not to overburden the organised private sector.

“The 2023 FMP, as proposed will neither promote economic growth nor achieve the long-term revenue projection of government,’’ Oyerinde stressed.

ships

Shippers Council, NPA express displeasure over PTOL tariff increase

0

The Nigerian Ports Authority (NPA) and the Nigerian Shippers’ Council (NSC) have called Port and Terminal Operators (Nig) Limited (PTOL) to order over its increase in tariff.

Mrs Rakiya Zubairu, Head, Public Relations, NSC, disclosed this in a statement in Lagos on Thursday.

She said that PTOL’s arbitrary increase of charges without consultation with its landlord, the NPA, and the Port Economic Regulator, NSC, ran foul of its lease agreement and government regulations.

Zubairu said that this was discussed at a recent meeting of NPA, NSC and PTOL which took place at the head office of NSC in Apapa, Lagos.

She said that the meeting was convened by the Acting Executive Secretary of the NSC, Ms. Ifeoma Ezedinma.

According to her, Ezedinma pointed out that such acts would attract sanctions, as the council, through public notices, visits and correspondence, was always advising regulated service providers to obey the law.

Citing Clause 5:5 of the lease agreement between NPA and PTOL, Mrs Ugo Madubuike, NPA’s General Manager, Monitoring and Regulatory Service, said the increase in charges was in contradiction of the Contractual Agreement.

Clause 5:5 states: “The lessee shall not make any increase in the operation rate unless agreed to in writing by the parties and any required persons or governmental authority has been obtained”.

Shippers council and NPA advised PTOL to present their proposed increases for negotiation through official channels as soon as possible, the statement said.

PTOL’s General Manager Macpherson Nwaukoni, is quoted as apologising for the oversight, while explaining that the action was taken due to losses the company had incurred in the course of operations.

These losses, according to him, occurred as a result of the import ban on certain items, resulting in the company’s inability to meet its obligation to the Lessor, particularly the rental debt they owe to NPA.

He is also quoted as  saying that the comparison of their rates with other terminals revealed that their own charges were much lower.

All these, he said, made operations difficult, leading them to increase their tariffs from 15 per cent to 30 per cent.

He appealed for leniency, explaining that PTOL had not increased charges in 16 years and was currently running at a loss.

The Director, Legal Services Department of NSC, Mr Tahir Idris, advised PTOL to obtain documents on NSC’s legal framework in order to acquaint itself with the regulatory procedures of tariff increase and to be guided to follow right protocol.

According to the statement, the Director, Consumer Affairs, Mr Cajetan Agu, insisted that they revert back to their old rates until due process was followed.

He stressed that their action contravened the contracts they signed upon the lease, and as such they violated the Lessor contract and NSC Act.

NDPHC-660x346

Abuja electric suspends new tariff

0

By Anthony Areh

The Abuja Electricity Distribution Company (AEDC) says it has suspended the Service Reflective Tariff in line with the order of the Nigerian Electricity Regulatory Commission (NERC).

AEDC’s General Manager,  Mr Oyebode Fadipe, announced this in a statement in Abuja.

According to him, customers who are on prepaid meters would have noticed that by now would have noticed that from the modalities for the alignment of the accounts of customers on the pre-and post-paid platforms,” the statement said.

How-electricity-distribution-officials-racketeer-extort-customers-in-need-of-prepaid-metres

Ikeja, Kaduna electricity firms suspend new tariff

0

By Tanko Mohammed

Ikeja Electric (IE) and its Kaduna counterpart have complied with the order of the Nigerian Electricity Regulatory Commission (NERC) suspending the new Service Reflective Tariff (SRT) for the next two weeks.

The electricity distribution companies confirmed their compliance on Thursday.

Ikeja DisCo  said : “Dear Esteemed customers, this is to inform you that we have fully complied with the Order from the NERC to suspend the new Service Reflective Tariff (SRT) for the next two weeks.

” Within this period, the tariffs for all customers shall be based on rates applicable as at Aug. 31. ”

NERC on Wednesday  ordered the 11 electricity distribution companies (DISCOs) to suspend the Sept. 1 tariff increment.

The commission’s suspension order of the Multi Year Tariff  Order (MYTO) 2020  signed by NERC’s Chairman, Prof. James Momoh, was released on its website

The suspension followed a joint communique issued by the Federal Government and the labour unions.

The Federal Government agreed that the recent review in electricity tariffs would be suspended by the commission for a period of 14 days to further consultations  that would to  final negotiations between the parties.

The order by NERC said that from Sept. 28  to Oct. 11, the DisCos must revert all charges to the tariff existing as of Aug. 31.

“This means that  for the next two weeks, electricity consumers having power above 12 hours who were affected by the over 100 per cent tariff hike would revert to their old charges.”

It said as empowered by Section 33 of the Electric Power Sector Reform Act ( EPSRA) 2005, the Minister of Power, Mr Sale Mamman, could issue such a directive to NERC.

Kaduna Electric started implementing the old electricity tariff as at Aug. 31st, 2020 as ordered.

The Head of Corporate Communication, Abdulazeez Abdullahi, made the disclosure on Thursday in Kaduna.

Abdullahi said that the reversal to the old tariff regime was sequel to the agreement reached between the Federal Government and the leadership of the Nigerian Labour Congress (NLC) to suspend the recently approved service based tariff.

“Following the directive of the NERC to Distribution Companies to suspend the new Service Based Tariff, the management of Kaduna Electric wishes to inform its customers and the general public that it has fully complied with the directive.

“Prepaid customer who purchase electricity tokens from today will therefore see the value of the old tariff reflected in their tokens, while postpaid customers will also see the old tariff reflected on their next bill,” he said in a statement.

Abdullahi expressed the hope that the technical committee set up to look into how the service based tariff was arrived at, would conclude its assignment on schedule and allow for the new tariff to be implemented.

He said the new tariff would help to enhance service to customers, improve liquidity and drive investments in the sector.