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Power tariff: Stakeholders disagree over suspension of hike until 2021

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Only NERC can suspend tariff hike — Iledare

Power tariff: Stakeholders disagree over suspension of hike until 2020

By Udeme Akpan and Ediri Ejor

Stakeholders in Nigeria’s power sector, on Wednesday, disagreed over the suspension of tariff hike until 2021.
In an interview with Vanguard, National Secretary, Nigeria Electricity Consumers Advocacy Network, (NECAN), Mr. Uket Obonga, who backed the National Assembly for suspending it, said the new tariff failed because the environment was not ready for it.

Obonga said: “The operators have not yet been able to generate, transmit and deliver adequate and steady electricity to consumers in all parts of the nation.
“Many consumers, who experience darkness more than light, do not have pre-paid meters to control their bills. Consequently; their exploitation could have worsened if the new tariff was not stopped.”
He added: “The time has come for all Nigerians who are docile to wake up and challenge a lot of anomalies in the sector.

READ ALSO: NERC, Reps differ on Feb 1 power tariff hike

National Assembly has no power

However, former president, Nigerian Association of Energy Economics (NAEE), Prof. Wumi Iledare, who noted that the National Assembly should not have gotten involved in the matter, said: “It is not part of the duty of the National Assembly to suspend the tariff. The Nigerian Electricity Regulatory Commission (NERC), controls tariff, as part of its regulatory function. It is only NERC that can suspend the hike in tariff.”

Continuing, he said: “I am not sure the National Assembly has the constitutional power to suspend an act of the Executive without an Act. A passed motion by the National Assembly is nothing but a preference expression that is not binding on the Executive, in my opinion. Now, if the tariff is already ordered by NERC,

the DISCOs may set a lower rate as a way to palate COVID-19 effect, but cannot charge a higher tariff than prescribed by NERC.”

Too early to expect profit

He added: “However, investors in the sector should know that the pay-out period cannot be now. It is some distant years away. I am not sure the core business investors have good understanding of the business model for power. Yes, low tariff is what you get in this business without proven capital investment in infrastructure such as metering all customers.”

Sector will suffer with tariff hike

Furthermore, Executive Secretary, Association of Power Generation Companies, (APCO), Dr. Joy Ogaji, said: “The suspension of the cost reflective tariff may be justifiable from a political point of view. However, we are worried about the economic implication of this suspension on the operations of the sector.

“Recall that a new tariff was supposed to take effect from April 1, 2020. However, this was extended by three months due to the Coronavirus pandemic. A further extension of this review, coming from the National Assembly, sends a negative signal to the operators and potential investors.

“The electricity market is trying to move into a sustainable structure governed by demand and supply such that there will not be government interventions. As such, operators in the market have to sell power at a price that is reflective of the cost of production and a reasonable margin for investors. Now, power is not rightly priced, especially at the DISCOs level. There is an imbalance in the market.

“As it stands, the DISCOs cannot pay 100 percent to the Nigerian Bulk Electricity Trading Plc, NBET, hence there is a shortfall in payment to GenCos and in turn to

gas suppliers. Since the market is not sustainable, no new investor will be willing to come into the power sector.

“In view of the foregoing, the electricity market growth will be stifled which will in turn slow down the industrial development in Nigeria as power as we all know is a key driver of industrialisation. Therefore, delayed tariff increase, will lengthen the electricity market to reach a self-sustaining point. The power sector will always need intervention this way; and such is not healthy for the sector.”

READ ALSO: Hike in power tariff only for upper class – Minister

Need for transparency 

Ogaji added: “To improve the poor electricity situation, it has become pertinent to institute transparency in the billing, collection and remittance of the DISCOs. In addition, a viable framework for metering must be put in place to improve collection efficiencies in the sector. The Nigerian electricity sector is plagued with historical infrastructural challenges, especially in the distribution and transmission subsectors of the sector value chain.

“Due to the weak networks, DISCOs are only able to off-take between 3,500 megawatts, MW and 4,000mw, while the transmission wheeling capacity is about 4500mw.

“This calls for critical and long overdue revamping of the networks and infrastructures. It is also advisable to explore alternative transmission medium as well as alternative distribution means.

“There is a paucity of data in the sector and this must be addressed. The need for a clean, credible and real –time data in the sector or any sector for that matter cannot be overemphasised.”

Vanguard

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