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Home consumers to pay 60% more for electricity

The Nigerian Electricity Regulatory Commission (NERC) has directed that, with effect from 1 April 2020, Nigerians be billed 60 percent more than they currently pay for the electricity they consume in their homes.

The huge upward adjustment in tariffs will affect consumers in all 11 distribution companies (Discos) in Nigeria, although with different intensities.

Comparatively, the new adjusted tariff plan shows that over 80 percent of the population will be paying average 75 percent increases in electricity tariffs from April.

Although the increases have drawn widespread anger and disappointment in the land, they however reflect the poor state of the public electricity business in the country – and the near-desperate measures by the regulator (NERC) to ensure the survival of the market.

NERC authorizes price adjustments based on a number of environmental and operational factors.

The environmental factors include cost of external inputs such as gas, prevailing exchange rates, and rate of inflation.

Operational factors include amount of power, number and profile of consumers, as well as various operations and maintenance costs.

According to a former chairman of NERC, Dr. Sam Amadi, “inefficiency, otherwise called losses, also constitute a significant part of the costs.”

Dr. Amadi suggested that some Discos had in the past exploited the “collection losses” factor to enjoy high tariff approvals by NERC.

The April 2020 adjusted prices approved by NERC would seem to indicate that eight of the 11 Discos are in very bad shape, with home consumers in these zones to suffer an average of 74.4 percent higher adjustments in tariffs.

Home consumers who will suffer the most increase from 1 April include Benin Disco customers (82.8% increase), Kaduna (79.5%), Yola (78.4%), Enugu (77.5%), Port Harcourt (76%), Kano (74.5%), Abuja (73.1%), and Ibadan (53%)

On the surface of it, the new rates suggest that only three Discos are doing reasonably well, with their customers suffering less than 40 percent increase in tariff charges.

These include Eko (whose consumers will suffer a minor 4.77% adjustment in their tariff), Jos (21.5%) and Ikeja (37.7%).

The relative low tariff increases in Eko and Ikeja Discos can be understood because they represent relatively smaller areas with low cost of operations and relatively minimal collection losses of power.

Customers of Jos Electricity Distribution Company, on the other hand, are not in the league of consumers in the Lagos market; they have hitherto paid the highest rate before the latest adjustment.

Since the price adjustment was published on the NERC website, the regulator has tried hard to explain that it is a “price adjustment” based on existing multi-year tariff order (MYTO) price path and not an “increase” which can only be executed when a new MYTO regime comes into place.

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