NERC: Electricity Tariff Increase Would Reduce Grid Collapses, Enhance Supply

*Senate vows to take action on power rates hike on resumption

Emmanuel Addeh, Chuks Okocha, Adedayo Akinwale, Kingsley Nwezeh, Sunday Aborisade in Abuja and Nume Ekeghe in Lagos

About 24 hours after raising the electricity tariff for premium customers by over 230 per cent, Vice Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Musiliu Oseni, yesterday, defended the decision, stressing that it will bolster electricity supply nationwide.

Oseni insisted that the move will help reduce incidence of national grid collapses as well as encourage increased investment in the power sector.
Speaking during an interview on Arise Television, Oseni, however, added that the commission was implementing measures to prevent any exploitative practices by distribution companies towards customers. He stressed that a situation room will be established to collect and address customer complaints from those impacted by the tariff adjustment.

Equally yesterday, NERC made available the key indices that led to a review of electricity prices for Band ‘A’ customers from N68 to N225 per kilowatt hour.
In its “Supplementary Order to the Multi-Year Tariff Order (MYTO) 2024”, seen by THISDAY, NERC listed a rise in Nigeria’s inflation by 12 per cent between January and April this year, US inflation upsurge by three per cent, and Nigeria’s exchange rate increase by 59 per cent within the four months of 2024 as some of the reasons.

NERC also stated that there had been a 63 per cent rise in generation cost, 34 per cent rise in transmission and administration cost, as well as 11 per cent hike in the price of gas-to-power, saying they are other justifications for the move.
But speaking on the poor electricity supply in recent times due to the national grid collapse, Oseni said it had to do with the reduction in gas supply to some power plants and lack of maintenance of facilities by the generation companies.
He stated, “One factor that was responsible for this last one had to do with the reduction in gas to one of the power plants and also you have the issues of a lack of maintenance by the generation companies.
“The question is what contributed to that were both dip in the supply of gas as well as generation companies’ inadequate maintenance, which boils down to money.

“Any investor will not invest when there is no path to recovery. For instance, the generation invoice for January stood at N240 billion. So, based on the current Distribution Companies (Discos) charges before yesterday, they can only be mandated to pay about 10 per cent of that.
“That means the market will only do about 10 per cent of the invoice and how do you operate such a market and you expect quality service? So, those are part of the issues that we need to address.

“The factors responsible for grid collapse, if there is no liquidity, has serious implication on the quality of supply. Generation Companies (Gencos) not being able to pay for gas supply, not being able to maintain their machines as expected or as required is a recipe for poor quality of supply and grid collapse.
“So, it is part of the issues, that we believe if the market is liquid enough, definitely will be addressed.”
Oseni acknowledged potential short-term inflationary effects of the decision, but expressed confidence that tariff adjustments would lead to long-term improvements in service quality and market stability.

He added that NERC remained committed to addressing industry challenges and promoting transparency in the electricity market.
Oseni added that the establishment of a complaints department underscored the commission’s dedication to consumer welfare and service excellence.
He said, “The commission has a number of mechanisms in place for monitoring the performance of the distribution companies. First and foremost, the distribution companies were directed some months back to install smart meters on their feeders, and on the basis of that, they get data being streamed into the data system.

“And initially, we developed an application protocol interface to extract the data from the system and stream the data from the system into the commission. However, we realised that there are some challenges with that because sometimes the technology also fails.
“So, we now mandated them to grant access directly to the commission into the meter data management system so that as they get information, we are also getting it directly. And as part of the system being put in place, NERC has a call centre that any customers that feel exploited can naturally call. So the call centre has been put in place to ensure that customer’s complaints are addressed.

“In the next few days, the commission would release contacts of the situation room for people who feel exploited or probably have poor service delivery, starting with the 15 per cent that would be affected by this review.”
In addition, in the supplementary order by NERC, it said, “The Discos shall set up a rapid response team to ensure effective service delivery on the committed minimum hours of supply to each service Band commencing with Band A feeders effective from April 3, 2024.
“The team shall ensure timely response to customers’ complaints, fault clearing and alignment with TCN regional teams for effective load management and optimised dispatch to respective feeders.

“Disco’s shall publish the contact numbers of the service rapid response team for each customer cluster/business unit on its website and circulate the same to the customers via bulk SMS, commencing with Band A clusters no later than 12 noon, Friday April 5, 2024.
“Discos are obligated to publish daily on its website a rolling seven-day average daily hours of supply on each Band A feeder no later than 09:00 am of the next day.”

The order stated that where the Disco failed to deliver on the committed level of service on a Band A feeder for two consecutive days, the Disco shall on the next day by 10am publish on its website an explanation of the reasons for the failure and update the affected customers on the timeline for restoration of service to the committed service level.

It stated, “Where the Disco fails to meet the committed service level to a Band A feeder for seven consecutive days, the feeder shall be automatically downgraded to the recorded level of supply in accordance with applicable framework.
“The Disco is mandated to continuously ensure upward migration of customers from the lower service bands to Band A service level in line with the target on improvement in quality of service.”
However, Socio-Economic Rights and Accountability Project (SERAP) said it was suing the government of President Bola Tinubu over the “arbitrary” increase in electricity tariff.

SERAP, in a post via its official X account, asked the Tinubu government to reverse the “unlawful” tariff increase.
The rights group urged the president to reverse the increase pending the hearing of the suit it instituted against the increase.
SERAP stated, “We’re suing the Tinubu administration over the arbitrary increase in electricity tariff from N66 to N225, despite the difficult economic realities in the country, and the pending lawsuit on the matter.
“The Tinubu administration must reverse the apparently unlawful increase in electricity tariff from N66 to N225 pending the hearing and determination of the suit we filed on the matter, to protect the integrity of the judicial process and the rule of law.”

The Senate also pledged to take action that will favour Nigerians regarding the increase in electricity tariff on its resumption plenary on April 16.
Chairman, Senate Committee on Media and Public Affairs, Yemi Adaramodu, gave the assurance while speaking with journalists in Abuja.
According to NERC, Band A customers are those who enjoy 20 hours of electricity supply daily. It was also revealed that customers under this classification represented 15 per cent of the 12 million electricity customers in Nigeria.
The NERC vice chairman clarified that the review would not affect customers on the other bands.
However, the senate spokesperson said relevant committees of the upper chamber were watching the situation and would take a position favourable to Nigerians on its resumption.

Adaramodu said, “The relevant senate committees on power are studying the situation. You know we are on recess now. When we resume, they will present their findings to Senate at plenary. We won’t abandon Nigerians.”
He maintained that the senate would not show indifference to any policy that would add to the economic burden of Nigerians.
The senate had earlier rejected pronouncement by the Federal Ministry of Power to approve the proposed hikes in electricity tariff by distribution companies.
The senate also rejected plans to remove electricity subsidy, given the present hardship in the country.

The red chamber consequently directed its Committee on Power to investigate the over N2 trillion required for electricity subsidy payment, other debts owed in the sector, and the state of metering in the country.
The senate’s resolutions were sequel to consideration and approval of a motion moved by Senator Aminu Abbas (PDP, Adamawa Central) during plenary on the need to retain subsidy on electricity in the country for the foreseeable future.