Indications from officials of the federal government point to an imminent increase in the price of electricity paid by consumers. The Special Adviser to President Tinubu on Energy, Olu Verheijen was quoted last month as saying that the current power tariff would rise by about two-thirds in order to reflect the cost of supplying it.
She reportedly told journalists during the Mission 300 Energy Summit in Tanzania that the higher energy tariff is required to fund the maintenance necessary to improve reliability and attract private investors into power generation and transmission.
She was later to clarify that she was misquoted. According to her, what she said was that following the increase on Band ‘A’ tariffs, the current tariffs now cover about 65 per cent of the actual cost of supplying electricity with the federal government subsidizing the difference.
But this arithmetic did not just add up. Under the Service-Based Tariff (SBT) scheme, consumers were classified into bands A to E with different tariff’regimes and hours of electricity supply. Those on Band A pay N209 per kilowatt-hour while their Band B counterparts pay N68 per kilowatt-hour for 20 hours and 16 hours of daily electricity supply respectively. Band E customers are supplied only four hours of electricity.
As at the time the SBT scheme was being sold to the public, the impression conveyed was that Band A tariff was the appropriate price for the commodity supplied to those in that band. Is Verheijen now saying that the current rate paid by Band A customers represent only 65 per cent cost of the power supplied to them? Or was she referring to consumers in other bands? She needs further clarification on this.
But that is really beside the point. The real issue is, increase in electricity tariff is imminent irrespective of how it is framed. The Minister of Power, Adebayo Adelabu toed the same equivocating line last week when he announced plans to ‘regularise’ the country’s electricity tariffs to address the significant disparity in tariff between different consumer bands.
The minister shied away from presenting it as tariff hike when he spoke at the public presentation of the National Integrated Electricity Policy (NIEP) in Abuja. “We’ll look at the tariff again. I’m not saying that we’re going to increase the tariff before I’m misquoted. We are going to look at the tariff and see how we can improve upon the modest achievements we made last year”, he said.
Adebayo pointed out what he saw as the incongruity in differentials in prices paid by Band A and their B counterparts and stressed the need to close such gaps. He finds no justification that Band B which enjoys about 16 hours of electricity daily pays only N68 per kilowatt-hour while those on Band A enjoying about 20 hours pay N209. He may have a point here. But how come the government is realising this about a year after the Band A billing system took effect? The answer may be located in the current inability of official of the government to come clear on what regularising the electricity billing process is all about.
In spite of the garb government functionaries have sought to dress the plan, the Nigerian Labour Congress (NLC) sees it for what it is – an attempt to hike the price of electricity supplied to consumers. It has therefore vowed to resist it.
In a statement issued in Yola, Adamawa State after its National Executive Council meeting, NLC rejected what it called “sham reclassification” of electricity consumers by the Nigerian Electricity Regulatory Commission NERC). It accused the minister of power and NERC of attempting to force consumers into higher tariff bands under the pretext of service improvement while in reality deepening economic hardship. Beyond electricity, the NLC also expressed concerns over the recent increase of over 35 per cent in telecommunications tariff.
Though it acknowledged having reached an agreement with the federal government on the 35 per cent increase instead of 50 per cent earlier floated, it is yet sceptical of the federal government’s commitment to keeping to its words. The concerns of the NLC are not unfounded especially given the manner government officials are packaging and presenting the plan. Their manner of presentation conveys the unmistakable impression that either there is something to hide or they are not comfortable with such plans.
Verheijen who initially spoke of two-thirds increase, later said she was misrepresented as what she meant was that the current price paid by consumers represented about 65 per cent of the actual cost of supplying electricity while the federal government bears the difference. That clarification came with flaws as pointed out earlier.
Adelabu would rather speak in very unclear terms. He talked about regularizing the country’s electricity tariff to close the significant disparity in tariff differences between different bands. Yet, he would not want to be quoted as saying there will be a hike in electricity tariff. What else was he talking about if not the imminence of tariff hike?
So, the scathing remarks and scepticism by the NLC on government’s commitment to keeping to the 35 per cent telecommunications’ tariff agreement are not out of place. But the reason the government does not want to call a spade its rightful name is not hidden to the discerning public. It has to do with the manner the STB scheme was sold to the public last year.
Then, the policy was presented as discriminatory pricing. It allowed Distribution Companies (DISCOS) to raise electricity price to N225 per kilowatt-hour from N68 in return for guaranteeing 20 hours of electricity supply per day. NERC said then that Band A customers represented 15 per cent of the population but constituted 40 per cent of electricity users.
The government also said the price paid by Band A customers represented the appropriate pricing for the commodity and would allow the DISCOS fully recover efficient cost of operation including a reasonable return on capital invested in the business. Now, it appears to be singing a different song.
Ironically, this brand of discriminatory monopoly was not necessarily based on the ability to pay or some other social or demographic indicators but on the capacity of the DISCOS to supply at least 20 hours of electricity to the earmarked areas. It is still unclear whether the price regularising scheme will guarantee other bands longer hours of steady electricity supply or how the price adjustments will affect the various bands.
The prospect of steady power supply to all the bands appears a tall order given the experiences of customers initially graded under the Band A scheme. The DISCOS were soon to find out that they lacked the capacity to maintain the agreed hours of steady electricity supply to their consumers. This saw to the down-grading of customers hitherto in Band A to Band B.
Band B could not also deliver on promise as epileptic power supplies coupled with national grid breakdowns made a mockery of the scheme. Even then, the total power generation in the country which is still about 5,000 megawatts is still a far cry from the national power supply demand.
It remains doubtful whether the government can possibly market the regularisation process on the grounds of improved and steady power supply. That will make no sense. Apparently conscious of that contradiction, the new argument is that cost reflective adjustments will improve funding for maintenance and reliable supplies and attract investors into power generation and transmission.
What this entails is that consumers across all bands will have to pay more before the investments in infrastructural maintenance that will guarantee steady supplies could be attracted. If this interpretation is correct, then electricity consumers must be charged more for services rendered irrespective of their level of efficiency. That seems where we find ourselves now.
That would appear a negation of the foundation on which the STB scheme was erected. Then, all the rigmarole on nomenclature- STB tariffs, cost-reflective pricing and regularisation of tariff are just subsidy removal from electricity dressed in other garbs. Such policies have been coming in torrents and the government appears scared calling it by its real name for fear of backlash.
