Nationwide protests loading as FG succumbs to ANED’s pressure to hike tariff
Majority of Nigerian electricity consumers are warming up to track down the Federal Government should it further with the plan to dance according to the tunes of electricity distributors under the aegis of Association of Electricity Distributors of Nigeria (ANED) to hike tariffs.
Towards the end of last week, indication emerged that against the persistent clamour for power sector reform, and constant claims by Discos that tariffs charged in Nigeria are not cost-reflective, government through the Nigeria Electricity Regulatory Commission (NERC) has proposed upward adjustments to electricity tariffs payable by consumers by an average of c.35.0%, taking effect from July 2020.
Findings from various documents obtained from the NERC on Wednesday in Abuja showed that beginning from next year, power consumers will have to pay an additional sum of between N8 and N14 for every kilowatt-hour of energy provided by their respective distribution companies. The NERC also revealed the actual cost reflective tariff for each of the 11 power distribution companies operating in Nigeria.
The government disclosed the cost reflective tariff of each of the Discos in separate documents for each particular distributor in a regulatory instrument cited as ‘The 2016-2018 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2019’.
The tariff increase for each Disco differs, going by figures in the documents from the commission. Our correspondent observed that for Abuja Disco’s minor review assumptions 2015 – 2021, the commission stated that the Disco’s end-user cost reflective tariff from 2017, 2018, 2019, 2020 and 2021 per KWh were N42.81, N46.44, N52.86, N46.02 and N44.29 respectively.
However, in its analysis of the planned tariff regime change, leading financial analyst group, Codros Capital said in a statement that “In terms of immediate impact, we believe the move will put upward pressure on inflation, especially on the Housing, Water, Energy, Gas & Other Fuels (HWEGF) and Energy baskets, which both constitute c.17.0% of Headline inflation. Historically, we highlight that the 2016 hike in electricity price corresponded to month-on-month expansions of HWEGF and Energy inflation of 607 bps and 697 bps, respectively.
According to Codros, “While the new tariff is positive, we highlight that it does not entirely address the myriad of challenges faced by the industry. In our view, raising electricity prices is just one element of a myriad that will allow the sector to thrive. For clarity, high technical & commercial losses exacerbated by energy theft, and consumers’ apprehension towards payments under the dominant practice of estimated billing will continue to hinder the Discos cash collection efficiency, and thus, remittances to NBET. In fact, NERC, in its latest report revealed that collection efficiency of Discos ranges from c.40.0% for Jos Disco to c.80% for Ikeja Disco. Until metering has been concluded to a high degree, we see expect the collection inefficiency to persist.
