NERC’s higher tariff review: For DisCos’ light or darkness?

While Nigerians in the Band A electricity tariff category are coming to terms with the burden of a rate hike, the electricity sector may remain in a precarious state due to inefficiencies that have persisted for over a decade. Regrettably, customers are likely to continue bearing the brunt of these shortcomings, as some stakeholders suggest that the DisCos may be taking the consumers for a ride as a result of lax enforcement of ground rules, KINGSLEY JEREMIAH and WALIAT MUSA report.

Since the Federal Government privatised the electricity sector, the Nigerian Electricity Regulatory Commission (NERC) has implemented the Multi-Year Tariff Order (MYTO) over five times.

In 2020, the NERC noticing that electricity generation and supply remained between 3,000 and 4,000 megawatts, introduced the Service-Based Tariff (SBT) to be reviewed two times yearly. This system created different customer bands – from A to E, to charge consumers based on the number of hours of electricity supply. However, the outcome across the bands was disappointing.

While the President Bola Tinubu-led administration halted the planned review of the SBT tariff in July last year, his government opted for subsidy payments, which served as a shortfall between the actual tariff and the allowed tariff.

But seeing that subsidy had climbed to over N2.5 trillion, Tinubu backpedalled last month and gave his nod for a tariff review, which saw the Band A rate leap from N66 kilowatts per hour (KWh) to N225 KWh. The regulator directly blamed the increase on galloping exchange rates, inflation, and gas prices, all of which were a result of the policies of the current administration.

This week, the 11 Distribution Companies nationwide announced a reduction of N19 from the Band A tariff, bringing the May tariff to N206.80 KWh. From every indication, NERC is now sticking to a monthly tariff adjustment to reflect an average exchange rate per month.

Most stakeholders believe that a tariff increase alone would not solve the problem in the power sector even as the hourly peg by the regulator would remain impossible because all players in the power sector – the Transmission Company of Nigeria; the power generation companies, and mostly, the DisCos do not have the infrastructure to back a 20-hour supply to the about 1.5 million customers under Band A.

Currently, Nigerians pay for poles, transformers, oil, and electric cables, in addition to struggling to get meters that they even pay for. In addition to that, they do not have a fair hearing when the system cannot keep to promises even at NERC forums. Chances that this would change under the current NERC guidelines and the provisions of the Electricity Act are slim.

On the flip side, the power sector is on the verge of bankruptcy. The tariff adjustment suggests a way to bolster revenue generation for the sector and improve its financial viability. The reverse is the case under shrinking purchasing power, and a dying manufacturing sector due to excessive energy costs. Besides, the increase is more of subsidy removal, which passes the burden of the government to the consumer.

In a sector with high losses, especially aggregate technical commercial and collection losses, the tariff would remain flawed. There is, therefore, a need to address underlying inefficiencies before the implementation of the tariff hike.

This aligns with the questions that many have continued to ask in the wake of the increment, which include: “How can a nation raise electricity tariffs without first improving power generation and supply to fulfil promises made alongside the tariff increase? How can customer satisfaction be achieved without addressing infrastructure issues? How can tariffs be raised just weeks after a national grid collapse that plunged the nation into a total blackout?

Besides, these hapless citizens also question whether the Minister of Power, Adebayo Adelabu, or the regulator are out to deliberately exploit consumers. They are amazed that a country would adopt tariffs akin to countries with robust electricity sectors, which are marked by extensive infrastructure, dependable power supply, adaptable tariff frameworks, and a plethora of choices for consumers when selecting service providers.

Indeed, the promise of a 24-hour electricity supply was supposed to justify the high tariffs, but the failure to deliver on this promise means that consumers are effectively paying more for the same unreliable service, which has led to growing resentment.

Presently, experts are of the view that the country’s economic conditions cannot uphold, or maintain these newly introduced tariffs as she lacks the necessary infrastructure and economic robustness that would help businesses absorb such elevated tariff rates.

Indeed, they fear that this situation would precipitate a surge in commodity prices, as production costs would escalate, ultimately culminating in higher prices for goods and services.

Interestingly, the implementation of the increased tariff, like the consumers feared, has faltered from the beginning as DisCos are sweating to maintain a continuous 20-24-hour supply to affected customers. This inability has eroded consumers’ confidence in the government’s capacity to address the longstanding epileptic power supply.

Unfortunately, without adequate consumer trust and investors’ confidence, the sector is unlikely to achieve the necessary infrastructure development and service delivery advancements, thereby hindering the country’s overall economic growth and development and further exacerbating the sector’s woes.

Already, within this short period, consumers are already tired of the avalanche of excuses tendered by DisCos. For Ujey Enebeli, the litany of apologies issued by DisCos for failing to meet up is unacceptable, and the NERC and the Adelabu must share in the blame.

He added that it was ironic that companies that have failed to meet up with the thresholds of bands B to D are now publicly apologising for failing to meet the 20-hour supply commitment to Band A users.

Another consumer, via his X handle @BayoBakare, noted that since the inception of the band system, power supply has dwindled to zero for non-Band A customers as it appears that all the energy is now exclusively reserved for Band A customers .

“This is pathetic. Unfortunately, those on postpaid will be billed outrageously by the end of the month even with the epileptic supply,” he said.
Reacting to an announcement (via a post on X) by the Benin Electricity Distribution Company (BEDC) that there was no service shortfall on their Band A feeders as all 40 of them in their network met the required minimum of 20 hours of supply on April 19, 2024.

Another X user, Abdulsalami, said: “Absolute absurdity! You people should be ashamed of yourselves for taking pride in discriminating against Nigerians based on their location. You’re essentially boasting about providing adequate electricity to affluent communities while leaving the less fortunate with scraps. You’re distinguishing your customers based on their address, which is unacceptable. Your claims are blatant lies, and I’m appalled by your actions, BEDC, KETCO, AEDC, YEDC, MBH, and all other distribution companies. Electricity is a fundamental right that all Nigerians should enjoy equally, just like freedom of speech. Your actions are a disgrace.”

Expressing dissatisfaction with what consumers are going through, the National President of the Association for Public Policy Analysis (APPA-Nigeria), Princewill Okorie, questioned which part of Section 119 of the Electricity Act 2023 (which is related to Consumer Protection and Licensing Performance Standards) that DisCos are complying with.

According to him, DisCos don’t comply with any part of it even when they are given operational expenditure (OPEX). “How do they use the OPEX? They allocate capital expenditure (CAPEX), but how many transformers do they install?”

He further pointed out that consumers who invest in actions that bring about improvements are the same people, who are being asked to pay more. Even when they’re overbilled due to underestimated billing; they are deliberately overcharged.”

Okorie stressed that another reason DisCos behave in this manner is due to the regulator’s skewed backing, and against the consumers. This, he said goes against Section 34(1)(F) of the Electricity Act, which mandates that regulations should be balanced, fair, and just to consumers, licensees, and other stakeholders.

“For example, why is it that after the consumer reports being overbilled, he is asked to wait for 15 days in darkness? Even when you report the matter again to their office, they may not bother to address the issue promptly,” he said.

He claimed that no unit within the executive arm of government is tasked with implementing, or enforcing the Electricity Consumer Protection Component of the Electricity Act stressing, that if such was in existence similar to those for Generating Companies (GENCOs), DISCOs, and the Transmission Company of Nigeria (TCN), it would have been able to raise mounting consumers concerns and ensure that DisCos operate within the ambit of the law.

He asked: “Under the Network Expansion Investment Policy that says that if consumers invest in the network, they should be reimbursed, have they ever done that? Now, when transformers go bad, frustrated consumers will call the DisCos repeatedly to repair these transformers, but no response. When the consumers raise the resources involved and put the affected transformer in shape, they would be compelled to do a letter, and undertaking kind of, claiming to have donated the transformer to the network. All these are done so that the consumers will not recover their investments. The same people, who collect consumers’ investments like this and use them to make money are still the same people, who are accusing the consumers of electricity theft.

“Which investment policy or model in the world stipulates that an investor should buy equipment that a service provider will use to make money without refunding the money to the person who bought it? It’s only in Nigeria that such a thing happens,” he said.

Also, an electricity market analyst, Lanre Elatuyi, told The Guardian that there are evident issues in the interfaces between TCN and DisCos, as well as, constraints within the networks operated by DisCos, which are impeding electricity supply for the expected duration of time across the different bands.

He suggested that there might be a need to downgrade to Band B if there’s no assurance of 20-hour of supply on any feeder. He also emphasised that DisCos and NERC must examine allocated loads to each DisCo, and conduct a study to determine the number of megawatts (MW) needed to guarantee 20 hours of supply to Band A customers, as the study would help to determine if there is a need to procure more capacity bilaterally.

“What we have is subsidy removal for Band A customers alone, while others are still paying tariffs that are lower than the wholesale cost of electricity. The sector needs liquidity to be able to invest in capacity expansion. The DisCos are not too viable financially to invest in their networks for now, and they have no access to long-term funds due to their bankability,” he said.