•Tariff obsession by NERC is wrong; Nigerians shouldn’t pay more for electricity now
THE latest review of the Multi-Year Tariff Order (MYTO) by the Nigerian Electricity Regulatory Commission (NERC) must have come as a disappointment to the electricity consumer. There is, clearly, a lot to say against retaining a tariff structure which appears to reward the inefficiency of the operator, while doing nothing about the lingering frustrations of the electricity consumer.
It isn’t that we do not understand the rules of the MYTO which provide that where the aggregate of the variables of rate of inflation, the exchange rate, gas price and available generation capacity change by plus or minus 5 percent of the MYTO figures, the changes would necessitate a tariff review. Our bone of contention is not just the perverse incentive it seems to confer on the inept operator, but the armour it has since provided for doing nothing.
We recognise two legs to the review expected to have taken off yesterday, June 1 – one barely good; the other hopelessly bad.
The first or rather the good part is the retention of the fixed charge component of the electricity tariff at N750 rather than N1,500 per month as projected under the MYTO. Although the electricity consumer would rather that the fixed charge be abolished completely, it is nonetheless a smart move. Clearly, the elements would seem in favour of the reduction. The MYTO had projected an inflation rate of 13 percent; the rate as at March 30, cut-off date for the review, was 7.8 percent, that is, 5.2 percent less than projected. Exchange rate was also projected at N178 to the dollar; whereas the March 30, data from the Central Bank of Nigeria was N157.30 to $1, which is 11.6 percent less than projected. The review, under those prevailing macro-economic variables obviously makes sense.
However, in the reasoning of NERC, this should not suffice to earn the electricity consumer significant respite since, according to it, the other two components of transmission and distribution leave the gross available capacity short by a whopping 52 percent. Whereas the total electricity generation output as of March 31 review date was 4,306 MW, this was far les than the 9,061 MW projected by NERC. The effect of the loss, according to NERC, “completely outweighs the benefits that were gained from the positive macroeconomic indices”. In effect, residential consumers will have to pay one naira more per unit.
We understand the need for NERC to follow its own rules scrupulously; unfortunately, in this instance, the rules are not only skewed against the electricity consumer; they have somewhat amplified the unfair practices which typified the old order.
This has again brought to the fore an issue that was a subject of an earlier editorial, which is the obsession with tariff hikes at the expense of delivery of quality service. Obviously, both NERC and the Distribution Companies (DISCOs) have chosen to remain unfazed by the growing frustration of the electricity consumer with the epileptic power supply situation, hence their elevation of tariff issues over and above the responsibility to deliver quality service. The point is that their prerogative to align their tariffs with the dictates of the market should not detract from their responsibility to ensure that the consumer is availed full value for his money.
Much as we do not deny that the transition in the power sector has been something of a learning curve for the operators and the regulator alike, the current one-sided obsession with tariff issues at the expense of qualitative service can only breed consumer resistance in the long run. In short, we understand that the operators will need all the revenue they can get to deliver quality service; this however cannot be at the expense of the goodwill of the electricity consumer.
