By Udeme Clement
The plan by Nigerian Electricity Regulatory Commission (NERC) to raise electricity tariff by 11 per cent is unsettling for Nigerians especially the low income earners and operators of Small and Medium Enterprises (SMEs).

While some Nigerians are displeased about the development, stressing that power supply is not constant, others say increasing tariff when electricity generation capacity initially 4,400 megawatts (mw) had dropped recently by 625mw due to the disruption of supply of over 200 million standard cubic feet of gas per day to power plants will not help the economy.

Also, the decrease in power supply is coming just few days after Nigeria lost 450mw due to the shutdown of Shiroro Hydro-electric Power Station in Niger State , which occurred as a result of low water level from Kaduna River Sunday Business gathered that the current power generating capacity in the country stands at and 4,800mw daily and 200mw out of the total capacity is reserved for system collapse, notwithstanding the fact that the current capacity is quite insufficient for a population of over 168million people as well as industries requiring electricity on daily basis for production.

Accordingly, NERC has declared that the planned increase in electricity tariff takes effect between May and June when all the variables will be adequately examined. The chairman of NERC, Dr. Sam Amadi, explained that electricity tariff will be increased by 11percent and not 88 percent as was being speculated in some quarters.

To him, the proposed increase will improve the level of supply to make the sector investment driven, even as he said that Nigeria needs electricity generating capacity of between 22, 000 to 25,000 megawatts daily for commercial and domestic consumption.

The new electricity tariff taking effect in June will be the second time NERC is increasing tariff this year. The commission approved an increase in electricity tariff by over 50 per cent from January 2012, saying it was in line with the on-going reforms in the power sector.

The consumer with single phase meters were made to pay N10.85 and N14.60 per kwh as against the current rate of N7.30 per kwh, while customers currently paying N11 per kwh paid between N16.50 and N22 .

The residential category of the lowest paying customers at the rate of N2.20 per kwh increased to between N3.30 and N4.40 while the highest paying consumers at the rate of N15.60 per kwh increased to between N23.40 and N31.20 under the new tariff in January this year.

It could be recalled that NERC, which is charged with the statutory function of effecting major reviews of electricity tariff every five years in line with the provision of the multi-year tariff of MYTO, effected 10 per cent increase in electricity tariff in 2009. In 2009, the cost of electricity per unit was N7.00/kw,in 2010 it went up to N8.50/kw and moved to N10/kw by July 2011.

MYTO was introduced in 2008 to ensure a paradigm shift from the traditional price fixing to a cost reflective tariff driven by private investment in the power sector. The initiative was to move the sector from the previous monopoly structure to the current competitive market environment, where investments could maximise required outputs, even as NERC says low tariff would not attract investors who are ready to put their money into the sector, which requires massive investments to thrive.

Under MYTO, costs incurred by the electricity operators like gas, inflation and exchange rates are borne by the consumers and changes in the costs are reflected in the annual tariff reviews.