Through the Nigerian Electricity Regulatory Commission (NERC), the Federal Government on Wednesday approved an upward review in electricity tariff.
NERC Chairman Sanusi Garba, who broke the news in Abuja, said it would cost the government between N120 billion to N130 billion monthly (N1.6 trillion) to subsidise electricity this year.
Asked for how long the government will pay the subsidy, Garba said: “Any time the government takes a decision on subsidy, we will take it into consideration in our next tariff.
In other words, even if there is an upward review of the cost of electricity, the government will be absorbing the increase for as long as it can.”
The Multi Year Tariff Order (MYTO) took effect from January 1.
According to the NERC, non-maximum demand (MD) customers of the Abuja Electricity Distribution Company (AEDC) band will retain the N68.20 per kilowatt tariff.
The review has affected the cost reflective tariff for the bad, which was N88.47 in 2023 but now N124.42 this year, indicating a N35.95 increase per kw. It means that the government has subsidised N35.95 for consumers in the category.
Under the Eko Electricity Distribution Company (EKEDC) band, non-maximum demand (MD) customers, who paid N67.48 last year, will still to pay the same price this year. However, their cost reflective tariff has moved N89.03 last year to N114.84 this year. This indicates a subsidy of N25.81 per kw.
Garba, however, explained that the cost of kilowatt of electricity differs from one Electricity Distribution Company (DisCo) to the other, owing to their economic peculiarities.
The chairman said: “The commission has issued a tariff order that was just posted on our website yesterday (Tuesday).
“The tariff order contains the appropriate tariff the DisCos should be charging if they have to remain in business and the rules are very clear about the tariff order: some 110, some 120 and 130.
Different DisCos have different parameters, efficiency levels and so on.
“But we have published what they should charge. We have also published the amount they are allowed to charge based on government policy because government has decided for now because of the living crisis, and so many things to in the meantime continue subsidizing electricity.
“So, if you check the order you will see that tariffs are not going up but the in the order, you will see what the DisCos should be charging.
“You can also see in the order the amount of subsidy the government will be providing to cover the gap, what they should charge that they are not allowed to charge without subsidy.
He hinted of a provision to make sure that distribution companies pay what they are entitled and what they are obligated to pay because DisCos are in the business of buying electricity from Nigerian Bulk Electricity Trading Company Plc (NBET) and distribute to end – use customers.
Garba explained: “So, they have an obligation to pay for that energy. Any distribution company that fails to honour its financial obligations to the market will be subjected to regulatory intervention by the commission as provided in the Electricity Act.”
The chairman noted that commission has decided to set aside some fund (Meter Acquisition Fund (MAF) from the electricity market revenue for metering.
According to him, the fund will be ring-fenced to serve as guarantee to lenders that fund metering loans, adding that the commission has clearly identified that the challenge of metering is financing.
It is not rocket science. So, the rate of metering has so far adversely been impacted by the inability of the DisCos to raise the required capital from the banks,” Garba said.
He said: “Another challenge has been that meters have been part of the assets of the distribution companies with a lifetime of 10 years.
“So, if you are going to match the revenue with the assets, most of the banks in Nigeria will not provide long term financing.
“We now decided that okay from the market revenue, we will set aside a fixed amount that is ring-fenced and dedicated for the provision of metering.
“We are not saying that the money that are taken from the market on a monthly basis is the money we are going to use to buy meters.
It is just to assure potential lenders that there is a pathway to pay for either loan the DisCos are going to get to provide the required meters.”
The DisCos, he said, are required to unbundle their subsidiaries.
The chairman stressed that no state will be allowed to manage distribution in more than one state.
The states that have enacted their Electricity Act, according to NERC, are Ondo, Ekiti, Edo, Lagos, Enugu, and Anambra.
He added that Lagos, Edo and Kaduna are work in progress. Other states are working on the law.
The NERC boss also noted that the commission can novate some of the responsibilities to the states and train their personnel.
Garba revealed that a deadline has been given to the bank managing Kaduna Electricity Distribution Company to divest, because power is not its core business.
He noted that the deadline has elapsed, adding that the commission has removed the board and management of Kaduna DisCo.
Garba said: “The situation now is that we had earlier given deadline to core investors which are now be represented by acquisition Afrexim and Fidelity. We have given them a deadline within which to divest.”
“I am sure you know that power is not their core expertise to the distribution companies. So, deadline has been given to them to divest their shares and move on. “This hasn’t happened within the timeline they were granted. Therefore, to make sure this happens the commission has to intervene.”
