A new electricity tariff regime with potentially grave cost implications for urban dwellers, the rich and commercial concerns commences today.
The new tariff regime reduces the cost of electricity for rural consumers who do not use electronics or other heavy equipment. However, more affluent consumers, commercial and industrial consumers would pay significantly higher rates above the N4 per kilowatt hour that would be paid by the very poor.
Ahead of the commencement of the scheme, yesterday, the Federal Government said it was disbursing a N100 billion stabilization fund to subsidise the cost to be borne by consumers rated below the N24/Kwh cost of production over the next two years, at the rate of N50billion for 2012 and 2013 respectively.
Middle income consumers would be expected to pay between N11 and N12/Kwh. The highest rate would be paid by consumers living in high brow areas of the country such as Maitama, Asokoro in Abuja, Ikoyi and Banana Island in Lagos. Consumers in these areas grouped as R3 and R4 would pay as much as N23.71/kwh with fixed meter charges of N21,256.30 and N118,830.56 respectively.
Appearing before the House of Representatives, yesterday, the Minister of Power, Prof. Barth Nnaji, said the new tariff regime was formulated to stabilise the sector as well as attract private investments that is required to drive the sector in the medium to long term. Ministry sources also said the new pricing regime will enthrone efficiency and good governance in the Nigerian Electricity Supply Industry (NESI), eliminate waste and guarantee cost-reflective pricing.
Besides, Vanguard learnt, yesterday, that the Ministry of Power is to distribute free energy saving bulbs that allow lower power consumption and consequently lower electricity bills to be paid by the customers. Four-watt energy saving bulbs, which are said to be safer and reduce health hazards, will be deployed in place of present heavy energy consuming 40 and 60 watt bulbs.
NLC opposes incnrease
Meanwhile, the Nigeria Labour Congress, NLC, last night said it was insisting on its opposition to the new tariff. Congress had last Sunday declared its strong opposition to the June 1, 2012 planned declaring that the proposed energy tariff without improved power supply is not only uncalled for, but insensitive to the prevailing plight of workers and the Nigerian people. NLC in a statement by its President, Comrade Abdulwaheed Omar, called on the Federal Government to put on hold any future increase in electricity tariff until all the issues raised against such move have been dealt with to avoid the wrath of Nigerian masses.
At a briefing in Abuja to kick start the new regime, Chairman of the National Electricity Regulatory Commission, NERC, Dr. Sam Amadi, noted that the new tariff is established to ensure steady power supply and guarantee efficient customer delivery in Nigeria.
He said: “The tariff is structured to attain cost-reflective pricing that will ensure private sector investment in the generation, distribution and transmission of power in the country. Securing private sector investment will guarantee the desired availability, reliability and stability in electricity supply and efficiency in customer service delivery.”
Stressing that with stable power supply, businesses will thrive and the economy will flourish, Amadi added: “Small and medium scale enterprises will once again have the electricity they need to keep their businesses running. Hairdressers, vulcanizers, barbers and other small-scale enterprises will no longer have to depend on generators while bigger commercial and industrial ventures will considerably reduce their cost of doing business leading to a general reduction in the cost of goods and services.”
Amadi said that private sector participation was central to the Power Sector Reform aimed at transforming the sector in line with the NERC’s mandate to ensure adequate and affordable electricity to every Nigerian. He said under the new tariff regime, different classes of consumers will pay different rates applicable to their classes for their electricity supply, adding: “Low income earners who use less electricity will pay less than high income earners who consume more electricity. Lifeline consumers (R1) will enjoy the special benefit of not paying a fixed charge for their electricity.”
The NERC boss further stated that all electricity consumers will be metered within a maximum of 18 months, adding that all distribution companies (DISCOs) have been asked to submit their meter installation plan to the Commission in order to receive the meter component of the tariff.
Amadi stated: “This will address the perennial billing fraud suffered by many electricity consumers through estimated billing. A methodology to ensure accuracy of estimated billing is being designed by NERC to further protect the rights of customers and prevent over-billing while estimated billing is being phased out.” He added that Customer Complaints Units (CCUs) will now be fully operational in all distribution companies to address all customer complaints, and “where the CCUs fail, customers can now seek redress at the NERC Forum Offices also to be operational in all electricity distribution offices nationwide. These structures have been put in place to ensure effective and efficient service delivery under the new tariff order.”
Tariff hike is not political
Appearing before the House of Representatives, Nnaji said: “To solve the problem of power we cannot be talking of marginal increase. Certain measures have to be taken. Electricity is not a product of parties or issue to be played with politics or party ideology but is what concern everybody. We buy the product and it has to be priced very well.”
He stressed further that the increment was to create a good platform which would be attractive to investors that would come into the country with the sole aim of improving on the present situation so that Nigerians could enjoy uninterrupted supply of electricity.
The minister told the lawmakers that tariff can only work with sector reform, adding that the absence of a cost-recovery was a key reason for the failure of the power sector to serve Nigerians for the past three decades.
He said: “The tariff framework provides incentives for improving performance cost reductions and quality of service. However, tariff rebalancing is only a part of the equation and can only work in tandem with the current reform/privatisation programme”.
While explaining the benefits, the minister told the lawmakers that existing customers that have not paid for meters do not need to pay further as the cost of the meters have been included in their tariffs. He said new customers will only pay standard connection fee with no additional charges for the meter and that the meter maintenance fees have been abolished since Nov 2011.
Lagos Chamber of Commerce lauds tariff
Meanwhile, the Director General of Lagos Chamber of Commerce and Industry, Muda Yusuf, yesterday, said it was difficult to fault the position of NERC and the power minister, especially in the light of the nation’s clamour for a private sector driven power sector.
Yusuf said: “I believe it is a sacrifice that is worth making. In any event, it will still be much cheaper than providing electricity through generators powered by diesel or petrol generators, even with the tariff review. We also expect that this process would lead to the ultimate exit of the public sector in the direct management of the sector. I should stress that the citizens should not be made to pay for inefficiency or corruption costs. It is important to evaluate the elements of the current costs operations.
“The good thing is that the tariff would be discriminatory in favour of the poor. I would urge that it should also be discriminatory in favour of business. The government should be given a chance to follow through the process.”