Amid electricity subsidy, stakeholders push for tariff increase

About four months after the Nigerian Electricity Regulatory Commission (NERC) deferred an increase in electricity tariff, stakeholders are beginning to demand for a cost-reflective tariff as the Federal Government continues to pump more money to defend the electricity sector.

Stakeholders at the ongoing Nigerian Electricity Supply Industry (NESI) conference in Abuja had insisted that a cost-reflective is critical in the power sector if the sector would progress.

The Country Director, Energy Market and Rates Consultant Limited, EMRC, Rahila Thomas, stated that while the regulatory body was expected to review the tariff every six months, the reverse has been reality.

With rising inflation, forex and other critical variables like generation capacity, regular review of the tariff according to her is sacrosanct.

“A review ought to have happened in July and the realities in inflation and forex mean tariff ought to have gone up but for political reasons, this hasn’t been done. Government is now paying subsidies that have amounted to N3.34 trillion. Out of that the government has paid N2.8 trillion to support the tariff,” they stated.

The Guardian had reported that despite dismal electricity supply averaging a daily load offtake of 3,200 megawatts, the Federal Government and end users, in the first six months of 2023, spent about N686.18 billion on subsidy or bill payment.

Given indications that electricity subsidy, which is increasing by N135 billion, quarterly, could push the 2023 total to N441 billion, the government has paid, at least, N171 billion as subsidies in the last six months.

This came as end users paid N515.18 billion under a Service Based Tariff (SBT), where market players woefully failed to improve supply to 5,000 megawatts, in accordance with a contract signed with NERC.

President Bola Tinubu had on Monday, said there was a need for a cost reflective tariff in the sector even as he admitted to the woeful performance of the sector.

Tinubu, who was represented at the event by the Adviser on energy and infrastructure, Office of the Vice President, Sodiq Wanka, had revealed that as of Q2 2023, for every kWh of electricity sent to the grid, only 60 percent of it was paid for.

“But as we know, even the tariff paid for that unit of electricity is far from being cost-reflective, especially in light of the recent devaluation of the naira.

“The sector has suffered from chronic underinvestment, especially in transmission and distribution. Many of the successor utilities of the PHCN have failed to meet their performance improvement targets due to technical and financial capacity issues,” he said.

Chairman and board of directors of Mainstream Energy Solutions Limited, Sani Bello at the event insisted that the lack of a cost-reflective tariff in the sector created a liquidity crisis across the entire value chain.

“While we acknowledge the effort of the current administration in trying to resolve and improve the foreign exchange environment, we look forward to a way out that will midwife an enabling environment for existing and prospective investors to thrive within the NESI.

“What we continue to tackle today is the lack of cost-reflective tariff that will provide sustainable liquidity for the entire value chain, strengthened laws and enforcement of these laws that will criminalize and deter energy theft as well as non-payment of electricity bills,” Bello said.

The stakeholders have also expressed concern over the numbers of unmetered customers in the country.

According to NERC, over seven million people are yet to be metered by the distribution companies. The development gives room to arbitrary billings.

Chairman/CEO, Mojec Meters Limited, Chantelle Abdul said Nigeria would need about N1.5 billion to bridge the existing metering gap.

“There are seven million customers without meters and three million with old meters that need to be replaced. The cost to finance that is about $1.5 billion,” she said.

She decried that most of the consumers may not be able to finance the meter, adding: “We need to develop a bankable proposition, and that requires a cost reflective tariff and right pricing of meters.”

Meanwhile, Ikeja Electric has announced an extension of the deadline for its customers National Identity Number (NIN) and Standard Transfer Specification (STS) meter linkage.

The deadline, which was initially set for November 1, 2023 has been extended to November 15, 2023, in order to give customers more time to link their STS meter.

The DisCo had asked consumers in its coverage area to upgrade their STS meter on or before November 1, 2023.

It had said any customer who fails to upgrade his/her prepaid meter by linking it with a National Identification Number (NIN) would be unable to vend energy units from November 1, 2023.

Ikeja Electric on its X social media handle, said: “Ikeja Electric extends STS Meter-NIN link till November 15, 2023, Our customers first and always."