Tariff Hike: FG Gives Hint of Plan to Move All Electricity Consumers to Band ‘A’ in Three Years

·        Says govt to gradually withdraw subsidies, set to save $1.4tn in 2024

·        NERC fines Abuja Disco N200m for violation of order on billing

·        Instructs power distributor to refund affected customers

·        Eko Disco moves to reimburse customers wrongly billed

·        Northern elders, Atiku, Ajaero fault tariff hike

Olawale Ajimotokan, Chuks Okocha, Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

Despite the public outcry trailing the recent 230.8 per cent rise in electricity tariff for premium power consumers nationwide, the federal government yesterday, hinted that it plans to extend a similar measure to every Nigerian who has access to on-grid electricity.
The government said it would convert the entire power sector into a single band from the current six, with cost-reflective prices being fully implemented in the next three years.

Speaking during a weekly briefing organised by the Ministry of Information in Abuja, the Minister of Power, Chief Adebayo Adelabu, said the recent development was the first step in government’s plan to completely remove subsidy payment.
Also, yesterday, the Nigerian Electricity Regulatory Commission (NERC) sanctioned the Abuja Electricity Distribution Company (AEDC) for violating its order on customer classifications.

However, the Northern Elders Forum (NEF); former Vice President and the presidential candidate of the Peoples Democratic Party (PDP) in the 2023 election, Atiku Abubakar, and President of the Nigeria Labour Congress (NLC), Joe Ajaero, have faulted the recent increase in electricity tariff by the present government led by President Bola Tinubu.

In a separate document seen by THISDAY, the Nigerian Electricity Regulatory Commission (NERC), stressed that with the increase in tariffs for Band A customers from N68 to N225, it has succeeded in saving about N1.4 trillion from what it stated was the projected N3.2 trillion subsidy for 2024.
At the current price of N225, it argued that premium customers would be paying less than half of what they would otherwise spend if they deployed other alternatives like diesel-powered generators.

But Adelabu maintained that it no longer makes sense for the government to continue paying close to 70 per cent of electricity subsidy for Nigerians, explaining that to ensure the current economic downturn does not harshly impact the lower wrung of the society, government would embark on the gradual phase-out of underpayments for bands B-E and then lifeline.

Adelabu, said the federal government had spent about N2.9 trillion on electricity subsidy.
He said the government was still subsidising 85 per cent of electricity supply in the country despite increase in tariff for Band A customers.
He said the government remains pro-poor in its power policy because it is subsidising nothing less than 67 per cent of the cost of producing, transmitting, and distributing electricity in Nigeria.

He said the government is not ready to aggravate the sufferings by refusing to adopt 100 per cent withdrawal of subsidy on electricity
“This tariff review is in conformity with our policy thrust of maintaining a subsidised pricing regime in the short-run or the short-term with a transition plan to achieve a full cost reflective tariff for over a period of, let us say three years.

“It is because of government sensitivity to the pains of our people that will not make us migrate fully into a cost-reflective tariff or to remove subsidy 100 per cent in the power sector like it was done in oil and gas sector.
“We are not ready to aggravate the sufferings any longer which is why we said it must be a journey rather than a destination and the journey starts from now on, that we should do a gradual migration from the subsidy regime to a full cost-reflective regime and we must start with some customers.

“This is more like a pilot (scheme) for us at the Ministry of Power and our agencies. It is like a proof of concept that those that have the infrastructure sufficient enough to deliver stable power, those enjoying 20 hours of light should be the ones to get tariff added,” he pointed out.
Adelabu, argued that anybody that goes into any business intends to first recover cost, then if possible, make some profit, explaining that the moment a business cannot cover costs, the sustainability of such business is doubtful and will be run aground.

He observed that if the federal government was to pay the about N3 trillion subsidy for this year, it would be more than 10 per cent of the national budget for 2024.
“The power sector is just a single sector out of so many sectors that government has to attend to. We have works, we have housing, we have education, we have health, we have defence and so on that are all competing for this meagre revenue from the government.

“So it will be very insensitive on our part to force or compel government to continue to subsidise at that rate of almost N3 trillion for the power sector alone. We just have to be realistic and considerate. We also must ensure that the regulators are independent and there is consequence management,” he stressed.
With a little above 12 million registered electricity customers nationwide, Adelabu said the recent increase would only affect about 1.5 million customers.
The remaining 10.5 million customers, he said, would continue to enjoy government subsidy at about almost 70 per cent, until it is gradually phased out.
He emphasised that if the Discos are able to comply with the service level agreement, which is 20 hours for Band ‘A’ at the minimum, it is still far cheaper than the alternative source of diesel and petrol generators.

“You will agree with me that the average cost of generating a kilowatt hour of power today, using diesel and petrol generator is not less than N450 to N500 because of the capital investment of purchasing the generator, the daily operational fuelling of the generator and the intermittent servicing of these generators.
“The cost is not less than N500. So, if we are putting the tariff at N225, I believe it is more than 50 per cent cheaper than running alternative power sources,” Adelabu maintained.

He stressed that for the first time in many years, government was taking a bold step to address the fundamental issues confronting the power sector, including liquidity and pricing challenges.
The minister emphasised that the sector had been deprived of the required liquidity to keep it running on a sustainable level and is therefore no longer attractive to investors.

“Even the operators don’t have enough liquidity to invest in enhancement of their infrastructure. The generator companies  cannot pay the gas companies, which is the raw material that they use to generate power. The generator companies cannot service their equipment.
“It got to a level that they cannot even pay the salaries of their workers because of the accumulated debt in the sector due to lack of liquidity and commercial pricing.

“And I believe that previous administrations have shied away from addressing this. It is a tough conversation, but we must have it at a point if we are serious about stable power sector in this country,” he added.
He assured that it might be painful in the short run, but the gains will come very soon and will be permanent.
At the moment, he stated that all Nigeria’s gas pipelines are bad as a result of vandalism, leading to a lack of adequate pressure in the gas pipes.

NERC Fines Abuja Disco N200m for Failing to Comply with Prescribed Customer Band Classifications
The NERC yesterday sanctioned the AEDC for violating its order on customer classifications.
This is coming on the back of the recent announcement by the power sector regulator of an increase of over 230 per cent for customers in Band ‘A’, that supposedly enjoy 20 hours and above electricity supply daily.
In a statement released in Abuja, NERC also directed AEDC to immediately begin the refund of customers that were unjustifiably moved to Band ‘A’, stressing that the process of reimbursement must be completed by April 11.
“NERC has taken enforcement action against the Abuja Electricity Distribution Plc for noncompliance with the Supplementary Order to the April 2024 Multi-Year Tariff Order (MYTO) 2024 for AEDC.

“AEDC has been fined N200,000,000 for failure to comply with the prescribed customer band classifications for the tariff billing,” the commission said.
It added that the decision followed a detailed review and customer feedback, which revealed that AEDC had applied the new tariff to all customer bands, contrary to the order, which was designed to ensure fair billing practices.
Many customers of the Disco had since the increase of premium power consumers’ tariffs from N68 to N225, complained of many infractions, including that those previously in Band ‘B’ were moved to the higher Band ‘A’ without any form of explanation.

Also, some complained that even in the same compound, different flats were having different classifications, an anomaly, while others said that they were being made to vend for N225 (Band ‘A’) when they rarely have power for half of the approved hours of supply.
But the AEDC on Thursday had acknowledged the discrepancies and distortions in billing, blaming ‘system glitches’.
“This was due to a system glitch caused by the reclassification of some Band ‘A’ customers who have now been downgraded to Band ‘B’ due to the number of hours of electricity supply enjoyed over the past few weeks. These erstwhile Band A customers who vended were charged the new tariff of N225 per kilowatt hour.

“Our team is working to identify the customers affected and all excess charges will be refunded.  The situation also saw some Band A customers who are now charged N225 vend at the old rate. Once the glitch is resolved, this category of customers will now recharge their meters at the new rate of N225, which will ensure they enjoy a minimum supply of 20 hours daily,” the power distribution firm stated.
But not convinced, the industry regulator in the statement, came down hard on AEDC, ordering it to show evidence of compliance to the new directives latest April 12.
“AEDC is therefore mandated to: Reimburse all customers in Bands B, C, D and E respectively that were billed above the allowed customer categories/tariff bands provided in the order.

“Reimburse through the provision of the balance of customer tokens that the affected customers would be entitled to receive at the applicable rates and all token reimbursements shall be issued to the affected customers by April 11, 2024.

“Pay the sum of N200,000,000.00 as a fine for the flagrant breach of the commission’s order and file evidence of compliance with the directives  with the commission by April 12, 2024,” NERC stated.

 

In a related development, in apparent smart move to avert NERC’s wrath, for billing customers outside the Band A category with the new N225 rate,  Eko Electricity Distribution Company (EKEDC) has apologised to the affected customers for the wrong doing.

 

The utility firm offered the apology in a message to the affected subscribers, yesterday.

 

EKEDC said it identified that some customers were inadvertently classified in service category Band A, resulting in incorrect charges at the newly announced rate of N225.

 

It added that the error occured due to a temporary glitch in their  back-end system, noting that it was currently working diligently with their IT partners to resolve the issue as quickly as possible.

Eko Disco also promised to reimburse all affected customers appropriately.

 

The message read, “We are writing to inform you about a recent issue that may have affected your meter vending charges.

 

“We identified that some customers were inadvertently classified in service category Band A, resulting in incorrect charges at the newly announced rate of N225.

 

“This error occured due to a temporary glitch in our back-end system. We sincerely apologise for any inconvenience this may have caused. We are currently working diligently with our IT partners to resolve this issue as quickly as possible. All affected customers will be reimbursed appropriately.

 

 

Northern Elders, Atiku, NLC Fault Tariff Hike

Meanwhile, the Northern Elders Forum (NEF) has described the recent increase in electricity tariff as a betrayal of trust given to the government by Nigerians.

In a statement issued by the forum and signed by the Director Publicity and Advocacy, Abdulazeez Suleiman, it expressed concern over the government’s “reckless” move, insisting that it displays a complete disregard for the wellbeing and welfare of the Nigerian people.

“The NEF recognises that this drastic increase in electricity tariffs will have a significant negative impact on the already struggling population, further exacerbating the gap between the rich and the poor.

“The breakdown of the new tariffs reveals an alarming burden that the average Nigerian will face in affording electricity on a daily basis. Under the new tariff plan, 24 hours of electricity per day will cost a staggering N5,400, amounting to an unbearable monthly total of N162,000 and an astounding yearly total of N1,971,000.

“These exorbitant amounts are simply unaffordable for the majority of Nigerians, who are already grappling with economic hardship and trying to make ends meet,” NEF said.

It posited that by implementing such exorbitant electricity tariffs, the government was effectively perpetuating a form of economic oppression that would only serve to widen the gap between the rich and the poor in Nigeria.

“The resulting consequences could potentially lead to internal security threats as the disparity between the haves and the have-nots becomes more pronounced,” it added.

NEF argued that the decision was made without carefully considering the economic realities faced by the majority of Nigerians and highlights the government’s lack of empathy towards its citizens.

It maintained that instead of implementing policies that would alleviate the suffering of the people, the government has chosen to further exploit them.

“This introduction of exorbitant electricity tariffs is not only unjust but also a clear indication of the disconnect between the government and the people they are meant to serve.

“It is a blatant display of the government’s blatant disregard for the wellbeing of its citizens and a betrayal of the trust placed in them. The NEF calls on the government to immediately reconsider this ill-conceived decision and take into account the dire economic situation faced by the majority of Nigerians.

“Nigerians must now rise and demand accountability from their leaders, reminding them that their primary duty is to serve the people, not exploit them for personal gain,” it stated.

For its part, Atiku Abubakar, said the hike in electricity tariff would create more difficulties for the citizens and elevate inflationary pressure.

Atiku also said the manufacturing sector would similarly be impacted negatively, adding that not only were they paying higher interest rates on their bank loans, but would also pay more for diesel, pay higher wages as a result of upcoming new minimum wage.

He argued that Tinubu’s men were pushing the economy into a deeper crisis, stressing that his reforms were without human face.

In a statement he personally signed, Atiku said as usual, the government was unleashing another dose of reforms without adequate notice and without an adequate post-reform plan to mitigate the pain.

“The increase in electricity tariff comes at a time when Nigerian citizens are going through excruciating difficulties occasioned by the withdrawal of subsidy on PMS and floating of the domestic currency.

 

“The government has not successfully dealt with the pains associated with the implementation of those measures, and now this.

“It is important that we understand the root cause of the inefficiencies in the power sector before unleashing another dose of reforms. It is time to revisit the privatisation exercise that produced the Discos.

“Tinubu must ensure that these reforms are sequenced; implement measures to mitigate the pain, and hold the NERC responsible for ensuring improved service delivery,” he said.

Also, speaking on ARISE News Channel, NLC President, Joe Ajaero said: “In a country where you don’t have energy availability, you can’t talk about affordability when there is no availability and accessibility.

“From 2012 till date, there have been up to seven tariff increases. Ask this present government what is their energy policy. The Goodluck Jonathan government led us into privatisation. Where are we now? Are we still pursuing that privatisation agenda?

“From the 4,000MW it was when they privatised several years ago, where are we many years after?”