Nigerian Government Orders 78% Hike In Electricity Tariffs

Nigerian Government Orders 78% Hike In Electricity Tariffs

The Nigerian Electricity Regulatory Commission (NERC) on Saturday announced the immediate review of electricity tariffs in the country from January 1.

The order was issued to the 11 electricity distribution companies (DISCos) on December 31, 2019, but published on the Commission’s website on Saturday.

Signed jointly by the Chairman of the Commission, Joseph Momoh, and the Commissioner for Legal, License & Compliance, Dafe Akpeneye, the order was titled “December 2019 MYTO Minor Review Order” for the 11 DISCOs.

New tariffs

The various tariff reviews for all categories of consumers — except those consumers classified as residential (R1) — ranged from 59.7 per cent for consumers in Ikeja to 77.6 per cent in Enugu.

Under the new order, electricity consumers in Ikeja who used to pay about N13.34 per kWh since under the 2015 MYTO when the last review was carried out will from January 1 this year pay N21.80 per kWh, same as their R2 counterparts.

Their counterparts in Enugu who used to pay about N17.42 per kWh will, under the new order, pay about N30.93 kWh from January 1.

Their R2 and R3 counterparts who paid about N19.31 and N27.11 per kWh since 2015, will now be paying N34.28 and N48.12 per kWh.

Residential (R2) and R3 consumers in Ikeja, who have been paying N13.34 and N26.5 per kWh since 2015, will now be paying N21.30 and N21.80 per kWh.

Residential consumers are those categorised as those using singe phase and three-phase meters and electricity consumption of about 50 kWh in premises with flats exclusively for residential purposes.

The affected DISCos include Abuja Electricity Distribution Company, Benin Electricity Distribution Company, Enugu Electricity Distribution Company, Eko Electricity Distribution Company, Ibadan Electricity Distribution Company, Ikeja Electricity Distribution Company, Jos Electricity Distribution Company, Kaduna Electricity Distribution Company, Kano Electricity Distribution Company, Port Harcourt Electricity Distribution Company and Yola Electricity Distribution Company.

The order, the Commission said, supersedes “other orders issued on the subject matter, and shall take effect from January 1, 2020.”

The R3 consumers who use maximum demand low voltage who have been paying N26.5 per kWh in Ikeja will now be paying N36.49 per kWh, compared to their counterparts in Abuja who have been N27.20 per kWh since 2015, who will now be paying N47.09 per kWh, same as their R4 consumers.

The review also affected the tariffs for other categories of consumers, namely commercial, industrial and special.

Commercial consumers are those who use premises for any purpose other than exclusively as residence or as a factory for manufacturing goods.

The industrial consumers are customers who use their premises for manufacturing goods including welding and iron monger.

The special customers include those involved in agriculture (excluding agro-allied enterprises involved in processing), water boards, religious houses, government and teaching hospitals, government research institutes and educational establishments.

Under the new tariff order, commercial customers who have been paying between N20.45 and N27.20 per kWh since 2015 will now be paying between N37.39 and N47.09 per kWh.

Their industrial customers who have been paying between N20.95 and N27.22 per kWh in Abuja, will now be paying between N36.07 and N47.09 per kWh under the new dispensation.

Also, those in the special category who have been paying about N20.06 per kWh in Abuja since 2015, will now be paying about N35.74 per kWh.

Enabling law

NERC said the order was pursuant to Section 32 and 76 of the Electric Power Sector Reform Act aimed at providing a cost reflective tariffs that ensures prices charged by licensees are fair to consumers.

Besides, such prices are supposed to be sufficient for licensees to operate efficiently to recover the full costs of their activities, including reasonable returns on the capital invested in the business.

In issuing the order, Section 17 of the MYTO 2015 expects that changes in the variables in the economy outside the control of DISCOs, including inflation rates, foreign exchange rates, gas prices and available electricity generation capacity will be taken into consideration.

The order will also reflect the market shortfall for years 2019 and 2020 as well as determine the minimum remittances payable by the DISCOs in meeting their market obligations on the allowed tariff to allow the settlement of invoices by Nigerian Bulk Trading and the market operator.

NERC said the new order updates was based on actual changes in macroeconomic variables in generation capacity as at October 31, 2019, including inflation rate of 11.3 percent for January to October 2019.

The order was also based on exchange rates of N306.9 plus one percent premium which is about N309.97 to the dollar and gas price of $2.50 per million metric tons BTU and gas transportation cost of $0.80 per MMBTU

Basic assumptions that guided the review included exchange rate of N310, generation cost of N23 per kWh, transmission cost of N7.8 per kWh, transmission and admin cost of N3.99 per kWh

Under the new tariff order, NERC insists “All DISCos are obligated to settle their market invoices in full as adjusted and netted off by the applicable tariff shortfall.”

“In the determination for compliance to the minimum remittance threshold in this Order, the Commission shall consider verified receivables from MDAs (ministries, departments and agencies) for the settlement period and DISCos’ historical collection efficiency for MDAs.

“The commission shall hold the TCN (Transmission Company of Nigeria) responsible for deviation from the economic dispatch order that adversely impact on the base weighed average cost of the wholesale of energy.