Senate, NERC Differ on Electricity Tariff Hike, Bailout for Operators

Chineme Okafor in Abuja
The Senate Committee on Privatisation and the Nigerian Electricity Regulatory Commission (NERC) yesterday disagreed on the appropriateness of increasing electricity tariff now, and providing some kind of financial stimulus to operators in the country’s electricity sector to minimise their operational challenges.

While NERC said it would prefer that some sorts of incentives be provided for operators in the sector to protect electricity consumers in Nigeria from shocks that would come with a cost-reflective tariff in the sector, the committee said it was totally against tariff increase in quantum leaps, as well as provision of subsidy for operators.

The agency paid a courtesy call on the NERC in Abuja where it made its position known.
But the NERC explained to it that in the absence of a subsidy or other forms of incentives, it was mandated by the Electric Power Sector Reform Act (EPSRA) which the National Assembly signed into law in 2005 to periodically review and provide cost reflective tariff for the power sector.

NERC’s acting Chairman, Dr. Anthony Akah, said on the back of the EPSRA, NERC was mandated to act in the interest of stakeholders in the sector. He also noted that the federal government was planning on a mechanism that would protect consumers from a possible rate shock.

Statutorily, NERC’s periodic tariff reviews are usually done every five years for the major reviews and bi-annually for the minor reviews. The commission is also expected to roll out new sets of tariff this January, and it would come with the government’s insistence that there will be no financial subsidy from it.

Akah however said: “I want to say distinguished members that private players are there to provide services and make a far return on investment.

“The National Assembly gave us the right to bring in cost reflective tariff. The challenge we have as a regulator is that we don’t know which other miracle to do, because in the absence of subsidy and other mechanism coming in, we are bound under the law to provide a tariff that will cover the cost of investment and in the absence of that, there is no incentives for the players in the sector to come up and bring power.”

He stated that if there are no fair return on investments either through cost reflective tariff or highly subsidised tariff by the government, incentives to reduce cost of operation, as well as tax holidays, and financial bonds with low interest rates, the sector would pack up.

According to him: “I know the federal government at this time is considering various options to mitigate possible tariff hike. The petroleum sector as it is today has incentives. Compare petroleum and electricity, electricity in my opinion holds more importance as a trigger to the economic development and wellbeing of Nigerians.

“If we can have subsidy in the petroleum sector even up to today, why can’t we figure out something or a mechanism to be able to support (the power sector). I must say that there is an inter-ministerial committee with the regulator and I am fully aware that the federal government is committed to look at various options to mitigate rate shock and that Nigerians have the kind of power they deserve at a reasonable cost.”

The committee Chairman, Senator Ben Murray Bruce however said on its behalf that it would not vote for such increase and bailout as proposed by NERC.
He stated: “We have been round the entire country, and we hear the same thing everywhere – there is no money, some people are collecting the money and not remitting, there is corruption, there is no gas, the government needs to pump in N1 trillion, they need to quadruple rates, and it is a monument of problem.

“They want to increase rates and everybody here have not received salary increases in that rates, now what I don’t want is for us to leave NEPA as a monopoly and then create other monopolies as Gencos or Discos which is what we have now.”

“We now have monopolies in your networks and there is no competition. If there is going to be an increase, I am not in favour of a 200 per cent increase because Nigerians are suffering and that is the argument they make.

“If they (operators) chose to be in this market, then they are here to make profit and should find a way to cut cost. I won’t vote for a subsidy for them. All we have done is creating state monopolies and they do not help our problems because it is not working here, it is a disaster.
“No subsidy and no tariff increase, there must be a way out of this, if they must get subsidy, then the entire sectors of this economy should get subsidy, and the senate committee is totally against this,” he added.