The new tariffs which take effect from January 2024, come exactly one year after the companies increased tariffs and barely four months after the regulator increased the price for meters.
Despite that the Electricity Distribution Companies (DisCos) have little or no investment in the electricity sector, the Nigerian Electricity Regulatory Commission (NERC) has approved new electricity tariffs for the 11 distribution companies in the country.
The new tariffs which take effect from January 2024, come exactly one year after the companies increased tariffs and barely four months after the regulator increased the price for meters.
SaharaReporters reported on September 6, 2023, that NERC in a circular marked NERC/2023/020, and jointly signed by Sanusi Garba, the commission's chairman and Dafe Akpeneye, its commissioner, legal, licencing, and compliance announced the increase.
The commission said a single-phase meter will now cost N81,975.16k, instead of the previous price of N58,661.69k.
Announcing the new tariff increment on Wednesday, during a media interaction, NERC chairman, Sanusi Garba, assured that customers will continue to pay the current tariffs as the federal government is to subsidise the increased tariffs to the tune of N1.6 trillion this year.
Garba said the federal government will continue to subsidise electricity to ease the financial burden on Nigerians due to economic challenges in the country.
NERC also approved a monthly tariff review of the DisCos going forward arising from changes in exogenous indices, which include changes in the inflation rates, Naira/USS exchange rates, and gas-to-power prices.
“Government has decided for now, arising from the cost of living crisis and so many others, to in the meantime continue to subsidise electricity.
“In the new tariff order just published by the commission, you will discover that tariff is not going up but you will see what the Electricity Distribution Companies (DisCos) should be charging.
“You will also see in the tariff order the amount of subsidy the government will be providing to cover the gap between what they will charge and what they are allowed to charge,” he said.
According to him, the new tariff contains what the DisCos are allowed to charge based on government policy if they are to remain in service.
On December 31, 2023, NERC officially debunked reports of an increase in electricity tariffs starting from January 1, 2024.
Reacting to a media report that all had been perfected for the new tariff to take effect from January 1, 2024, the spokesperson for NERC, Usman Abba, told journalists that rumours of tariff hike were fake.
“NERC has not issued any order to DisCos concerning tariff hike; we usually have meetings with all stakeholders before any proposed increase, but we’ve not had any meeting with any DisCos concerning price increase,” Abba said.
NERC’s quarterly reports indicated that electricity subsidies gulped N204.59 billion in the third quarter of 2023 and N135.23 billion in Q2, which is substantially higher than the N36.02 billion in Q1 2023.
“The Multi-Year Tariff Order (MYTO) in 2022 to gradually eliminate the subsidy. However, challenges arose with the freeze on tariff reviews in July 2023, disrupting the progress made in phasing out the subsidy,” Adetayo Adegbemle, the executive director of PowerUp Nigeria, a power consumer advocacy group said.
Abuja DisCos in June 2023 in a note to their customers, informed of an increase in electricity tariff effective 1 July.
The DisCos statement suggested that the tariff increase is a response to the floating of the naira and aims to ensure that the electricity industry remains financially viable and sustainable in the face of currency challenges.
The DisCos statement suggested that the tariff increase is a response to the floating of the naira and aims to ensure that the electricity industry remains financially viable and sustainable in the face of currency challenges.
“Under the MYTO 2022 guidelines, the previously set exchange rate of N441/1 dollar may now be revised to approximately N750/1 dollar, impacting the tariffs associated with your electricity consumption,” Abuja DisCos said.
But on June 29 2023, Abuja DisCos informed its customers to disregard the publication saying it was yet to get approval to commence the tariff hike.
“Dear Esteemed Customers, please disregard the communication circulating in the media regarding the review of electricity tariffs. Be informed that no approval for such increments has been received,” the company had stated.
The MYTO is a framework NERC uses to determine electricity tariffs in Nigeria. It provides guidelines for a structured approach to calculating and reviewing tariffs to ensure transparency, cost recovery, and sustainability in the power sector.
It provides a 15-year tariff path for the Nigerian electricity industry and undergoes regular reviews to account for changes in factors such as inflation, exchange rate, gas price and generation capacity.
Major reviews are conducted every five years, during which all inputs are reviewed in consultation with stakeholders, while the minor reviews are done bi-annually, which involve collecting actual data from the National Bureau of Statistics, Central Bank of Nigeria and System Operations Unit of Transmission Company of Nigeria.
In 2015, the average tariff across Discos and classes of end-users was N25 kilowatt. And on September 1, 2020, the average tariff was reviewed upward to N60 per kilowatt and later went up to N64 in 2022.
The foreign exchange rate used in determining the 2015 tariff was N198.97/$. The local currency devalued to N383.80/$ in 2020 and further weakened to N441.78/$ in 2022. A dollar currently sells for over N750 at the official forex market.
The inflation rate used in the 2015 MYTO was 8.3 per cent, accelerated to 12 per cent in 2020 and worsened to 16.97 per cent in 2022.
SaharaReporters reported on Tuesday that the Federal Government had warned the electricity distribution companies not to force communities to purchase electricity transformers, cables, and poles, as it is the sole responsibility of the DisCos to provide such items.
Minister of Power, Chief Adebayo Adelabu who gave the warning on Monday during a working visit to Ibadan Electricity Distribution Company, (IBEDC) in Ibadan, Oyo State, said, “There must be improvement in power supply."
“We don’t want to hear the news of communities buying transformers, cables, and poles for themselves again. The federal government frowns at it. You see what we have done in Kaduna. Service to our people is paramount. It is the responsibility that Mr. President has placed on us. You are not number one, two, or three, you are struggling to be number four on the rating," he stated
NERC’s Commissioner-in-charge of Consumers Affairs, Aisha Mahmud, while speaking during a three-day NERC/Abuja Electricity Distribution Company (AEDC) Customer Complaint Resolution Meeting, had said that a lot of consumers in Nigeria were not aware of their rights.
She said, “It is not the responsibility of the consumers to buy meters, poles, or any assets for the DisCos (distribution companies) because we have already provided for that in the tariff of the utilities.”
“But under any circumstances that you have to purchase these items and you cannot wait for the DisCos to make that investment, we have made provision for that under our ‘investment regulation’,” Mahmud added.