May 23, 2024

Electricity: MAN questions powers of NERC to review tariff monthly


–Seeks suspension of tariff hike

–Orders members to pay old rate

–DisCos vow to disconnect indebted factories

–NERC to give ruling in 45 days

By Obas Esiedesa, Abuja

The Manufacturers Association of Nigeria, MAN, has questioned the powers of the Nigerian Electricity Regulatory Commission, NERC, to review electricity tariff monthly without adequate consultation with consumers and other stakeholders.

MAN defending its petition against the April 2024 Multi-Year Tariff Order, MYTO, that increased electricity tariff for Band A customers, argued that the continued implementation of the order would lead to complete closure of the manufacturing industry.

Speaking at a public hearing held by NERC in Abuja Wednesday, the Director General of MAN, Segun Kadiri told a four-man panel of the Commission headed by Vice Chairman, Musiliu Oseni that it was impossible for manufacturers to absorb the high cost of electricity.

Kadiri who urged NERC to suspend the implementation of the new tariff for Band A consumers said factories were shutting down due to high cost of operation.

According to him, “Power to a manufacturer is like blood to a human being. It represents anywhere between 28 to 40 percent of our cost structure depending on how power intensive your manufacturing process is. So you can imagine if there is a 250 percent increase in that particular cost, it is going to inflict damage.

“We operate in an environment in which this increase is coming on the back of the exchange rate challenge, petrol subsidy removal, increase on import duties, multiple taxation and other challenges”.

He pointed out that while the manufacturers were not challenging the powers of NERC, he noted that the tariff increase has made the sector uncompetitive.

“If add the cost of electricity to the burden that we already have, we are not going to make a profit. More than 36 companies have been disconnected at this moment. If it is possible for them to pay and pass on the cost, we would not bother after all inflation has been generally agreed to be cost induced yet the CBN in their wisdom still increased the MPR by 150 points.

“We are being bashed from all angles and we need to engage in such a way that we are able to survive. We know that DisCos are business men and we are also businessmen, nobody will go into a business and try to make a loss. But what we are seeing in the increase is that the DisCos are going to survive and the manufacturers are going to die. It is not possible for manufacturers to take on this cost”, he stated.

Speaking earlier, the lawyer to MAN, Tola Oshodi while acknowledging the powers of NERC to approve tariffs for the Nigerian Electricity Market, he noted that the law does not allow the Commission to do so monthly.

Oshodi said NERC had not consulted widely and given consumers enough time to state their case before NERC approved the tariff increase applications by DisCos.

“There is a process for the bi-annual review which means three months to the time for the bi-annual review notices ought to be issued, stakeholder representations are invited and comments are taken over a period of 21 and considered before the review. I do not think regulations and guidelines allow NERC to do this monthly”, he declared.

However, under questioning from NERC’s Commissioner, Legal, Licencing and Compliance, Mr. Dafe Akpeneye, MAN Counsel admitted that the law does not specify the timing or period for tariff review.

Oshodi insisted however that for the tariff order to be valid it must follow the process prescribed and the amount of time needed for stakeholders to make their presentations on the review.

NERC’s Vice Chairman, Musiliu Oseni questioned MAN on the decision to instruct their members not to pay the new tariff, adding that it amounted to resorting to self help.

He commended them for following due process by appealing against the order, saying ruling on the appeal would be disclosed within the next 30 days with an additional 15 days extension if needed.

The application by MAN to have the implantation of the tariff increase suspended was opposed by the power generation and distribution companies which argued that it would lead to losses in their operations.

The Chairman of Sahara Energy, the owners of Egbin Power and Ikeja Electric, Kola Adesina said over the years GenCos have been at the receiving end of the liquidity challenges facing the electricity sector in the country.

“As a producer of power, we are also directly affected by those variables we all talked about, inflation rate, interest rate and exchange rate. But we do not have the room like the manufacturers have where their entire cost can be passed on to their price.

“For years, we were subsidizing the power sector in Nigeria and till today we are still doing exactly the same thing”, he added.

On their part, the CEOs of Ibadan DisCo and Jos DisCo, Mr. Kingsley Achife and Abdu Mohammed said the utilities were also struggling and none was making any profit due to low tariff.

They threatened to disconnect any manufacturers which failed to pay the new rate, adding that DisCos also receive invoices from the markets which they need to settle.

Achife said: “We have some MAN members who are following what their letter said, telling us they will pay the old rate. For us in Ibadan, we are disconnecting those ones because we don’t want to build up the liabilities they owe. We also recognize that because there is a jump that some may not be able to pay immediately and for those who are coming forward with a payment plan, we are listening to them and we are ready to work with them”.