FG slashes electricity tariffs by 50 percent

The federal government has announced a 50 percent slash in electricity tariffs.

Sam Amadi, chairman and chief executive officer of the Nigerian Electricity Regulatory Commission (NERC), said the reduction was approved following complaints against the increase in tariff of different consumer classes by industrial and commercial consumers under the Manufacturers Association of Nigeria (MAN).

According to Amadi, the tariffs were high in the first place because power distribution companies were passing on collection losses to consumers, raising final tariffs by as much as 80 to 103 per cent

He said the commission invited the CEOs of power distribution companies for talks following the complaints, after which it reviewed the technical and financial assumption of MYTO 2.1.

“The review shows that the major underlying cause of the skyrocketing increase in the tariff is the huge Aggregate Technical, Commercial and Collection (ATC&C) losses, which are passed through to consumers. In some DISCOs ATC&C losses increased tariff by as much as 80-103%,” Amadi said.

“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. The removal of collection losses from customer tariff has reduced tariff by more than 50 percent in some places. Please note that the reduction does not affect the CBN facility and its repayment.”

On Monday, March 9, 2015, NERC had issued a new order to the effect that henceforth collection loss, which is defined as the “amount billed but not collected”, would not be automatically passed on to consumers of electricity.

“Consequently, 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,” Amadi said.

“This new order now amends the MYTO 2.1 and has reduced the tariff to be paid by all class of consumers. In the review MYTO 2.1, the Commission followed due process and the regulatory principles. The EPSR commits the Commission to ensuring full recovery of prudent costs for efficient operators.

“The Commission is obligated to make sure that only prudent and efficient costs are passed to consumers. The principle is to ensure that the distribution company operates efficiently and provide quality and affordable services to consumers.”

He reiterated NERC’s commitment to the principle of cost- reflective pricing and to the development of an efficient and financially viable electricity market, saying: “These are important to support the investment that is needed to ensure the electricity supply industry meets the needs of the Nigerian economy.”

“The decision to review tariff is completely compatible with the terms of the privatisation and has been reviewed with the Bureau for Public Enterprises (BPE),” he added.

“NERC and BPE are working together to advocate for series of fiscal policies that will foster easier access to investible capital to further increase capacity and enhance reliability in the sector.”