- Fed Govt still subsidising 85% of customers – Idris
- NERC fines AEDC N200m over violation of new tariff
Power Minister Adebayo Adelabu said yesterday that this week’s hike in electricity tariff for Band A customers was informed by the realization that spending almost 10 per cent of the nation’s national budget on subsiding electricity alone was unsustainable.
The subsidy has already cost government N2.9 trillion this year alone, he said in Abuja.
Adelabu, with whom was Information and National Orientation Minister, Mohammed Idris, spoke at the Fourth Ministerial Briefing amidst criticism from various quarters on the tariff hike.
The latest of such criticisms came yesterday from the Northern Elders Forum (NEF) and the House of Representatives Minority Caucus with the NEF describing the hike as reckless while the Minority Caucus called it inhuman.
But Adelabu said that contrary to the views of some people, government was considerate and pro-poor in its handling of the subsidy on electricity supply as the tariff increase affected only 15 per cent of electricity supply.
Government, according to him, is subsidising at least 67% of the cost of producing, transmitting, and distributing electricity.
He said government refused to adopt 100% withdrawal of subsidy on electricity to avoid aggravation of the suffering of the generality of Nigerians.
He explained that the new tariff regime was based on the capacity of the operators to supply the minimum of 20 hours of electricity in a day.
He added that where the distribution companies (DisCos) cannot cope with the 20 hours supply, the customers will be downgraded to a lower band.
Adelabu said that under the new rate, the Nigerian Electricity Regulatory Commission (NERC) must ensure punishment for defaulting operators.
Throwing more light on the hike in electricity tariff, the minister said: “Two things and lessons we must achieve. Number one is achieving operational sustainability of operators on cost recovery. Anybody that goes into any business, the first intention is to recover cost, then if possible make some profit.
“The moment you cannot cover your cost, the sustainability of such business is doubtful. It will be run aground.
“But this cost recovery can either be through commercial pricing or a subsidized pricing. Commercial pricing is when the entire cost of producing power is transferred 100% plus the profit to the consumers of power.
“Subsidized pricing regime is when the consumers are not allowed to pay the full cost of production and government has pledged to pay a portion of this on their behalf. That is the regime that we are in Nigeria.
“We are in a subsidy pricing regime, whereby government provides a large portion of the cost of producing, of transmitting, and of distributing power.
“And I must tell you that as at today, before the introduction of the tariff increase, government is subsidizing nothing less than 67% of the cost of producing, transmitting, and distributing electricity in Nigeria.
“At the current exchange rate this is going to translate into N2.9 trillion for 2024. This is more than 10% of the national budget.
“Power sector is just a single sector out of so many sectors that government has to attend to. We have works, we have housing, we have education, we have health, we have defence and so on and so forth that are all competing for this meager revenue from the government.
“So, it will be very insensitive on our part to compel government to continue to subsidise at that rate of almost N3 trillion for the power sector alone. We just have to be realistic and considerate.”
Continuing, he said: “Electricity is no longer cheap for Band A. But this policy is pro-poor. It is pro-poor. The high- end people, they are the ones that are enjoying the subsidy more than others because they consume more.
“This is because what they are enjoying is more than what the poor are enjoying. We are saying no, let them pay the right price, and let the poor breathe too.”
Adelabu said although the subsidised pricing regime was in transition to a full cost reflective tariff, the government would continue to protect the poor.
“This tariff review is in conformity with our policy thrust of maintaining a subsidized pricing regime in the short run or the short term with a transition plan to achieve a full cost reflective tariff for over a period of, let us say three years,” he said.
“I have mentioned it in a couple of media briefings that it is because of government sensitivity to the pains of our people that we will not make us migrate fully into a cost reflective tariff or to remove subsidy 100 per cent in the power sector like it was done in oil and gas sector.
“We are not ready to aggravate the suffering of Nigerians any longer which is why we said it must be a journey rather than a destination and the journey starts from now on; that we should do a gradual migration from the subsidy regime to a full cost reflective regime and we must start with some customers.”
On power generation, Adelabu said the Zungeru hydroelectric power plant had been completed and installed.
Also completed is the concessioning process.
“The official handing over of this plant has been done to the conscessionaire which is Mainstream Energy who are the current operators of Kainji and Jebba hydro power plants,” he said.
He revealed that the present stage is the technical handover by the Chinese consultant that built Zungeru hydroelectric power to the concessionaire.
He explained that there is a one year defect liability period when the contractors need to be on the project site to ensure the fixing of all emanating faults.
He said “testing of generation of power started yesterday (Thursday) and it will last for about one or two weeks.”
He insisted that the plant has the capacity of evacuating power to the national grid.
Adelabu recalled that the COVID-19 pandemic delayed the Siemens project.
He said the pilot stage of the project is almost completed.
The minister said “we have installed three out of 10 mobile substations.”
According to him, the ministry has strengthened 14 power substations and installed 14 kilometre power line.
He revealed that the Federal Government will upgrade 6,000 transformers.
Also speaking, Idris said the tariff review would lead to a better electricity sector.
He said: “Misconceptions and concerns around the tariff review are understandable. However, let me reassure every Nigerian that this review is a strategic step toward a more sustainable, efficient, and equitable electricity sector.
“It lays the groundwork for significant improvements in service delivery, infrastructure development, and economic prosperity. Our focus must therefore remain steadfast on ensuring that the electricity sector’s transformation benefits all Nigerians, supports our industries, and propels our nation towards its bright future.”
Tariff hike is reckless, says NEF
NEF, in its reaction to the tariff hike, said it was not in the best interest of the generality of Nigerians.
The forum, in a statement by its spokesman Abdul- Azeez Suleiman, said the action would only worsen the standard of living of the people.
His words: “Under the new tariff plan, 24 hours of electricity per day will cost a staggering N5,400, amounting to an unbearable monthly total of N162,000 and an astounding yearly total of N1,971,000.
“These exorbitant amounts are simply unaffordable for the majority of Nigerians, who are already grappling with economic hardship and trying to make ends meet.
“By implementing such exorbitant electricity tariffs, the government is effectively perpetuating a form of economic oppression that will only serve to widen the gap between the rich and the poor in Nigeria. It is imperative that this act of exploitation be firmly rejected and not be allowed to stand unchallenged.
“The decision to implement these tariffs without considering the impact on the average citizen is not only callous but also short-sighted. The resulting consequences could potentially lead to internal security threats as the disparity between the haves and the have-nots becomes more pronounced.
“The NEF strongly believes that this decision was made without carefully considering the economic realities faced by the majority of Nigerians and it highlights the government’s lack of empathy towards its citizens.
“Instead of implementing policies that would alleviate the suffering of the people, the government has chosen to further exploit them.
“This introduction of exorbitant electricity tariffs is not only unjust but also a clear indication of the disconnect between the government and the people they are meant to serve.
“The NEF calls on the government to immediately reconsider this ill-conceived decision and take into account the dire economic situation faced by the majority of Nigerians.”
Reps Minority Caucus: Tinubu must intervene
The Minority Caucus of the House of Representatives disputed claims that the hike affects only 15 per cent of consumers.
Its leader Kingsley Chinda said:”The hike, from data put out by the DISCOS, affects all electricity consumers. This habitual resort to deceits and outright lies clearly puts government in bad light and erodes the trust and confidence of the populace in the government.
“It further highlights the disconnect between policymakers and the realities faced by the masses of our people. Elsewhere in the global north, governments are doing all they can to protect citizens against the adverse effects of the pandemic on economies.
“In the United Kingdom, for example, where anti-subsidy proselytisers preach against subsidies, His Majesty’s Government has ‘paid almost 40 billion pounds ($50 billion) in energy subsidies since it began to help households and businesses cope with the surge in power bills after Russia’s invasion of Ukraine’.
“According to the global news agency, Reuters, ‘between the launch of the schemes in October 2022 and March 2023, nearly 21 billion pounds was spent on the Energy Price Guarantee (EPG) programme that supports households with their bills, the government said.
“A further 12 billion pounds was paid under the Energy Bills Support Scheme, which offered homes payments of 400 pounds towards their bills over the winter months. Businesses and other organisations received about 5.5 billion pounds under the Energy Bill Relief Scheme and almost 1 billion pounds was spent on other programmes’.”
“We urge Mr. President Ashiwaju Bola Ahmed Tinubu to prevail on the electricity regulator, NERC, to rescind this decision and prioritise the welfare of the people.
“Transparent dialogue and inclusive decision-making processes are imperative to address the root causes of the energy sector’s inefficiencies and ensure sustainable solutions that benefit all stakeholders and not consistent and persistent increase in tariff.”
Hold Gencos, Discos owners responsible for hike in tariff —Duru
The Deputy National Organising Secretary of the All Progressives Congress (APC), Nze Chidi Duru, has blamed influential people behind Gencos and Discos for the increase in electricity tariff.
He said the plot was another move by such people to capture the economy and the state.
Duru in a statement suggested that stakeholders who are affected by the increase should have been consulted on their expectations from the Discos in the face of the increase.
“Though the NERC explains that the tariff increase only affected customers in Band A, those who enjoy a minimum of 20 hours a day of electricity, most customers in this category had never stopped complaining about deficient electricity supply, definitely not anything near the 20 hours a day of power supply as bandied by NERC,” he said.
“In the first instance, what manner of guarantee is in place to ensure a possible 20 hours of power supply as announced? How will this be enforced on Discos that had, more or less, become laws unto themselves, and what are the available sanctions in place for non-compliance?
“At the minimum, I suggest that even if it is only to serve the purpose of equity, stakeholders who are affected by this increase should be consulted for their inputs on their expectations from the Discos in the face of the increase.”
NERC slams N200m fine on AEDC for violation of tariff
Following its failure to comply with the prescribed customer band classifications for the new electricity tariff billing, the industry regulatory, the Nigerian Electricity Regulatory Commission (NERC) yesterday imposed a N200 million penalty on the Abuja Electricity Distribution Plc (AEDC) for non-compliance with the Supplementary Order to the April 2024 Multi-Year Tariff Order 2024 for the utility.AEDC (the “Order”).
This decision followed a detailed review and customer feedback, which revealed that AEDC had applied the new tariff to all customer bands, contrary to the Order, which was designed to ensure fair billing practices.
The NERC mandated the AEDC to reimburse all customers in Bands B, C, D and E respectively that were billed above the allowed customer categories/tariff bands provided in the Order. It also ordered the utility firm to reimburse through the provision of the balance of customer tokens that the affected customers would be entitled to receive at the applicable rates and all token reimbursements shall be issued to the affected customers by 11 April 2024.
Similarly, AEDC is to pay the sum of ₦200 million as a fine for the flagrant breach of the Commission’s Order, and file evidence of compliance with the directives with the Commission by 12 April 2024.
A statement signed by the NERC management explained that the action by the Commission underscores its commitment to protecting consumer rights and ensuring equitable practices within the country’s electricity sector.
Soon after the hike in electricity tariff for consumers on Band A width, consumers outside this band cried out over the noticeable change in their tariff rate. Some of the consumers took to social media handles to express their displeasure at the development, lamented that the AEDC have not been truthful in placing consumers on the bands they claim they are on.
