-No more subsidies for Band A

-Raises eligible consumer threshold to 6-20MWh

By Obas Esiedesa, Abuja

After months of failing to meet his subsidy payment obligations to the Nigeria Electricity Market, President Bola Tinubu yesterday hiked electricity tariff for 1,974,385 customers in Band A by 230 percent from N68 per kilowatt hour to N225/kWh.

The Federal Government who disclosed this through the Nigerian Electricity Regulatory Commission, NERC, said subsidy payments across the bands, estimated to cost about N2.9 trillion this year, has become unsustainable.

Band A customers are those that receive an average daily supply electricity supply 20 hours or more. With the   new order issued by NERC, Band A would no longer enjoy Federal Government subsidy on electricity.

The President had since July 1, 2023, frooze electricity tariff at December 2022 level with a promise to pay the difference as subsidies. But the government has so far failed to pay any amount to the market leading to the accumulation of N3.5 trillion debts to power generation companies and gas suppliers.

The Vice Chairman, NERC, Mr. Musliu Oseni told journalists in Abuja that in order to ensure that only customers who receive at least 20 hours of electricity daily are on Band A, the number of feeders that meet the threshold has been reduced from 875 to less than 500.

He explained that only 15 percent of the 13,162,572 electricity customers nationwide would be affected by the tariff increase while the remaining customers would continue to pay the old rate until supply improved and migrated to the new Band A.

NERC expressed the hope that the additional revenue would attract investments into the sector, adding that it would deploy several tools to ensure that customers in Band A would get the daily hours of supply from electricity distribution companies, DisCos.

He stated that the cost of electricity has gone up significantly since the Multi-Year Tariff Order 2024 effect on January 1, stressing that the decision by the government to increase the price gas to power from $2.18/MMBTU to $2.42/MMBTU and the rise in foreign exchange rate were major factor in the review.

He noted that because the tariff payable by customers remained the same despite these changes, the performance of the generation companies was affected because they could not pay for gas.

“You will recall that we classified customers on the basis of the hours of service where bands A-E, based on the service level. So the commission reviewed the performance of those feeders, leveraging technology to be able to monitor the performance of the feeders in near real time. And on that basis, the commission has decided that many of the feeders the DisCo’s currently brandish as Band A, are not meeting the Band A service and as such the feeders are being ordered to be downgraded immediately as a way of protecting consumers. We have over 3,000 feeders and initially we had over 875 feeders as Band A feeders based on the classification of the DisCos.

“But upon reviewing these feeders performance, the Commission has reduced it to fewer than 500 feeders which qualify as Band A feeders that are currently meeting the average 20 hours average service. When you look at that less than 500 feeders vis-à-vis  the over 3,000 feeders, the computation shows that just 17 percent of the total feeders of the distribution companies now qualify as Band A feeders. When you look at where those 17 percent feeders are critically, it is estimated that just under 15 percent of total customers are benefiting from those feeders that are currently connected to those feeders.

“On the basis of that, the Commission has decided that only the 17 percent feeders and 15 percent customers will be affected by any rate increase that the Commission will ever approve for the distribution companies.

“Further to that, the Commission has issued an order which is titled: April 2024 supplementary order, that is, it is supplementary to the order issued in December 2023, the April 2024 order takes effect from today April 3, 2024) and in that order, the Commission has approved a rate review of N225/kWh for 15 percent of the customer population in NESI. That means that less than 15 percent of the customers will be affected”, he added.

Mr. Oseni explained that customers who had been wrongly classified as Band A customers but were not receiving at least 20 hours of electricity supply will not be affected by the rate increase.

The Vice Chairman also disclosed that the Commission has reviewed its Eligible Customer regulation and increased the consumption threshold from 2MW/h to 6-20MW/h.