Electricity tariff review is expected to move the power industry to a cost-reflective one, which will provide investors with the right incentives and increased confidence to commit capital. However, experts say regulation is also paramount, reports AMBROSE NNAJI.
Increase in electricity tariff must be matched with improved services, including metering and ending estimated billing.
According to the former Chairman, Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, there is the need for NERC to be realistic in balancing tariff, taking cognizance of the interest of consumers and the electricity distribution companies (DisCos) that also need to recover their costs.
Amadi, who spoke with The Nation on telephone, stated that the most important thing was not increase in tariff but regulation, which NERC, as the body that carries out minor and major tariff reviews, should adhere to.
“It is true that the quality of service is very poor and the operators, especially DisCos, have performed very badly but the sector needs huge investment. Even though the public sector still provides transmission services, the bulk of the funds required to drive the power sector is expected from the private sector.
“Therefore, we have to be disciplined with regulation, such that tariff does not respond too much to political considerations. I think tariff should increase or decrease based on the Multi-Year Tariff Order (MYTO) framework,” Amadi stressed.
The MYTO is a tariff model for incentive-based regulation that seeks to reward performance above certain benchmarks, reduces technical and non-technical/commercial losses and leads to cost recovery and improved performance standards from operators in the Nigerian Electricity Supply Industry (NESI).
Amadi further noted that affordability was important as under-consumption of grid energy because its unaffordability will increase poverty and reduce growth. So, NERC has to ensure that consumers are protected and that the increase is sustainable and affordable, he advised.
The Chief Operating Officer, Ibadan Electricity Distribution Company (IBEDC), Mr. John Ayodele, also admitted that upward review of electricity tariffs would solve the challenges confronting the energy sector.
Ayodele stated this on the sidelines of the public hearing organised by NERC, tagged ‘Investments towards improvement of power supply and quality service in NESI’.
He noted that for better service delivery and availability of energy for use by Nigerians, the review was necessary.
He noted that the price of energy bought by the DisCos had been on the increase apart from the loans from the Central Bank of Nigeria (CBN) which, he said, had to be repaid.
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According to him, a total of N38.9 billion was incurred last year on energy loss, adding that between 2015 and last year, average tariffs were not cost-effective.
The IBEDC boss further said if tariff was increased to reflect the reality in the industry, it would enable the DisCos to overhaul their facilities, adding: “The only way to solve the problems and save the electricity industry is to increase tariff.”
He continued: “If tariff is not improved, then steady supply of energy will not be possible. Infrastructure will keep deteriorating; tariff shortfalls will keep accumulating; the industry will collapse due to illiquidity and IBEDC debt profile will continue to balloon.
”Five out of every new meter installed are bypassed in their first week of installation, while 85 per cent of customers do not pay bills in full,” he said.
Ayodele observed that the industry had continued to battle with saboteurs from energy theft to staff who continued to shortchange the company in spite of the losses incurred.
According to him, there had also been an increase in access to electricity by the consumer, noting that through profiling, the number of those accessing electricity had moved from 1.3 million to 2.1 million.
He stated that part of the company’s plan was to deliver one million meters to its customers within three years, with the ongoing meter asset providers’ scheme.
He said that the money realised from the sale of energy did not end with IBEDC but that all the value chains in the energy industry took their share. “So if electricity tariff is reviewed upward, it will make the energy industry thrive and expand,” he added.
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