President Bola Ahmed Tinubu kept mum as the recent 240 per cent electricity tariff hike worsens the suffering being faced by Nigerians.
DAILY POST reports that the recent electricity tariff increase for customers has birthed another page of hardship for Nigerians.
While the residues of pain caused by the removal of subsidy and the Naira floating policies implemented by Tinubu’s Government last year still lingers, the hike in electricity tariff for customers under Band A, getting at least 20 hours of power supply, has further unsettled Nigerians.
In defence of the hike, the Minister of Power, Adebayo Adelabu, noted last Friday that 85 per cent of electricity will not be affected.
He added that the Government would save N1.14 trillion in electricity subsidies.
Despite Adelabu’s position, the Nigeria Labour Congress, Trade Union Congress, Lagos Chambers of Commerce and Industry, and Abuja Chambers of Commerce and Industry have all openly condemned the new electricity tariff hike.
They all agreed there is a cloud of confusion around the tariff implementation amid economic hardship.
Upon the new tariff announcement by the Nigerian Electricity Regulatory Commission Tuesday last week, the eleven Discos began implementing the N255 kilowatt-hours rate for customers getting 20 hours.
However, the implementation has attracted widespread dissatisfaction among electricity consumers.
Abuja Electricity Distribution Company apologized to consumers for wrongly applying new tariff hikes on B, C, D, and E customers, who were categorized as getting 16 hours of power supply.
Consequently, Abuja Disco was slammed with a fine of N200 million by NERC over the wrong billing of customers. The Commission also ordered the Disco to refund affected customers with energy tokens before 11 April, 2024.
Fear of Arbitrary Billing
Despite the sanction imposed on Discos, Nigerians are still apprehensive that all 12 million electricity consumers may bear the new tariff burden.
The Federal Competition and Consumer Protection Commission, FCCPC, confirmed this when it asked the Government to order Discos to meter all Band A customers within 60 days.
FCCPC also stated that consumers in Bands B, C, D, and E should not be migrated to Band A without being metered.
According to NERC data, only 5.7 million electricity consumers are metered, while around 6.3 million are unmetered.
The development further heightened the fears of arbitrary billing by Discos.
Nigerians Paying for Darkness
While the electricity hike subsisted, the power supply remained epileptic nationwide.
National grid collapse, repairs by the Transmission Company of Nigeria and fire incidents have resulted in downtime.
This year alone, the grid has collapsed three times.
Electricity supply has dropped significantly since January due to gas constraints.
Meanwhile, the latest gas price increase of 11 per cent has further worsened Nigeria‘s power sector challenges.
This is why Kunle Olubiyo, the Nigerian Consumer Protection Network President, said Nigerians have continued to pay tariffs for darkness.
The Senior Staff Association of Electricity and Allied Companies, in a statement by its National Secretary, Nnamdi Ajibo, called for a reversal of the electricity tariff hike.
Band A electricity consumers
According to a list compiled by NERC, the eleven Discos have 481 Band A feeders, which supply consumers with at least 20 hours of electricity.
Meanwhile, electricity consumers under B, C, D, and E bands get 16 hours of power supply and below.
However, the Trade Union Congress has said no Nigerian receives 20 hours of power supply.
In contrast, the Association of Nigeria Electricity Distributors, ANED, insisted Nigerians receive 20 hours of power supply.
To address the confusion, NERC told Discos to publish a list of all Band A customers and set up a link to provide customers with information on their respective bands.
Experts React
In an exclusive interview with DAILY POST, Wumi Iledare, Professor Emeritus in Energy Economics and Executive Director of Emmanuel Egbogah Foundation, said the electricity tariff hike and gas price increase seem skewed to optimize producer surplus rather than consumer surplus.
He noted that there seems to be no penalty attached yet for Discos benefiting from the sudden rise in tariff but not delivering.
“New tariff is perhaps based on the increase in the wellhead price for natural gas for power generation.
“However, we must agree that N68 per KWhr is a price ceiling significantly below the market clearing price. So there are shortages due to high electricity demand at low prices.
“N68 is also not anywhere close to the fair return price of an economic good with decreasing marginal cost and average cost curve. It’s not even the socially optimal price of electricity either.
“So NERC had to do something apolitical, which ought to have been done long before now, but for institutional capture and political expediency that has seemed to be good judgement for too long. So it is better late than never. I guess the commissioners have come to understand these facts better than before.
“Of course, the accuracy of the tariff is speculative because of the many unknowns. It is perhaps arrived at based on assumptions and facts within the context of the pricing model applied.
“As more facts become available, the pricing model will be recalibrated in a self-adjusting manner. If what I am reading in the media is correct, there is a price discrimination application based on daily supply hours. Such a mechanism is not unusual in a segregated market structure in the power market.
“Looking at everything done so far within the last month in 2024 to spur up gas to power value chain, the presidential executive order 40, the increase in wellhead natural gas price by the Nigeria Petroleum Regulatory Authority, and discriminatory electricity tariff, the benefits seem to be skewed to optimize producer surplus than consumer surplus.
“Finally, regarding my take or endorsement, the biggest challenge with the implementation is how to properly distinguish the targeted class with the ability to pay and ensure 20+ hours of power supply to them.
“There seems to be no penalty attached yet for Discos benefiting from the sudden rise in tariff but not delivering. The ability to implement price discrimination is doubtful”, he told DAILY POST.
Similarly, Chinedu Amah, the CEO of Spark Online, a power sector investment forum, said the hike will enable the Government to unlock more cash to invest in things that will yield collective growth.
He noted that Nigeria does not necessarily have standard development for all citizens, stressing that it is difficult to define who is rich or poor by their place of residence.
“First of all, it is important to note that subsidy removal is a good move if it will enable the government to unlock more cash to invest in things that will yield collective growth.
“However, it is important to point out that we do not necessarily have standard development in all our cities; thus you cannot clearly define who is rich or poor in all cases by how they reside,” he said.
Meanwhile, an energy expert, Mr Eleojo Joseph, said the last one week had been hellish for Nigerians due to the electricity tariff hike.
He queried that there was no proper demarcation of Bands A, B, C, and E before the new tariff hike.
According to him, the hike will affect the country’s economy in the long run.
“It has been a week of complete anarchy, fraud and scam by the DISCOs on Nigerians, and the people are in total disrepair.
“How did we arrive here? We arrived here because we do not have a competent regulatory authority, and the Government does not understand the importance of electricity generation and distribution.
“NERC has been sleeping for eight years or more, and the incompetence is showing all over the sector. But thank God they have woken up from their slumber and are making all sorts of mistakes.
“The genesis of the problem is the lack of proper mechanism being put in place before the hike in price.
“It seems there is no interface between the operators and the Regulator. Was there proper demarcation or ringing of Band A, B, C, etc., users, and was it tested before they hiked the price?
“Who are the technical experts of the DISCOs? Who are their software and billing teams? So many questions to ask, but there won’t be answers.
“Why on earth will DISCOs lie on actual verifiable events? 20 hours of electricity is measurable. The DISCOs should be ready for litigation because there will be plenty of such cases in our courts in the coming months.
“The new sets of staff of the DISCOs are a fraudulent bunch who are only there to make money, and I foresee anarchy as most angry persons will take the law into their own hands and attack the DISCO staff on the field. We are headed to a dangerous state in Nigeria’s power sector.
“The economy is the ultimate loser in all of these things happening. More industries will relocate or close shops, unemployment will increase by the day and a more gloomy outlook for the country.
“Government should dedicate special attention and rate to the industrial sector and increase the take-home salary of workers in the private and public sector”, he told DAILY POST.
Similarly, the national secretary of the Network for Electricity Consumers Advocacy of Nigeria, Uket Obonga, said most Nigerians believe that the new tariff will be implemented across the board in a matter of time.
“The citizenry’s reaction to the recently announced increase in Electricity Tariff is both baffling and bewildering.
“The Nigerians believe it is just a matter of time before the tariff increase percolates down through the other Bands.
“Proof of this was the enthusiasm with which AEDC, EKEDC and IBEDC applied the tariff increase to all their electricity customers irrespective of their Bands before the Regulator clamped down a N200 Million fine on AEDC.
“It is true that the Federal Government has failed to honour its financial obligations to participants in the NESI, especially concerning payment for gas, GenCOs, and DisCOs.
“These lapses on the part of the Federal Government have emboldened the DisCOs to root for higher tariffs to balance their books.
“Unfortunately, higher tariffs do not necessarily translate to better services because there are two other partners, TCN and the GenCOs, who do not receive commensurate receipts from the DisCOs as monthly energy remittances.
“To improve power supply in Nigeria, a holistic approach must be implemented to address the several teething problems of the NESI.
“Gas constraints: An overhaul of our Gas two Power Policy. Increased homegrown participation in producing, processing, and distributing gas for homes, industry, and power generation.
“Presently, we are importing gas to augment our local supplies, which depend on Forex availability and rate.
“TCN Bottlenecks: an overhaul of the transmission system entails more lines, reconductoring, upgrade of power transformers, and the building of new substations.
“DisCOs rickety networks: some DisCOs have not added a single SPAN of overhead lines to their network, not to mention building new injection substations. There is an acute need to refurbish, upgrade and expand the distribution networks.
“The unending metering saga: There must be new regulations with severe sanctions for failure, flouting or by-passing the metering regulations.
“All connections must be metered; presently unmetered consumers must be metered within three years,” he stated.
[DailyPost]