NERC Holds Public Hearing, as Manufacturers Challenge Hike in Electricity Tariff

*Gencos, Discos oppose move to reverse rate increase

Emmanuel Addeh in Abuja

The Nigerian Electricity Regulatory Commission (NERC) Thursday held a petition hearing at the instance of the Manufacturers Association of Nigeria (MAN), following the organisation’s petition demanding a reversal or indefinite suspension of the implementation of the recent electricity tariff rate.

 The power sector regulator had in its supplementary multi-year tariff order of  April 3, 2024, noted that after considering the macro-economic environment, it found it necessarily to approve an increase in tariff for Band ‘A’ to N225/kWh. It later reduced the rate to N206/kWh.

During the petition hearing which took place at the NERC headquarters in Abuja, the association through its Director General, Segun Ajayi-Kadir and MAN’s lawyer, Tola Oshodi, made their case for the reversal of the decision.

Other parties present at the event included: Representatives of power firms and power sector experts, who also presented their cases on the prevailing situation of the macro-economic indices against which the tariff adjustment was made.

Vice Chairman of NERC and chairman of the petition hearing team, Dr. Musiliu Oseni noted the submissions from MAN as well as from ‘intervenors’, explaining that after listening to the arguments, NERC will make a ruling on the petition during a 30-day window, which may include an extension window of 15 days.

But he questioned MAN on the decision to instruct their members not to pay the new tariff, adding that it amounted to resorting to self help.

Nonetheless, he commended them for later following due process by appealing against the order, promising that the panel will rule on the appeal within the stipulated period.

In their argument, the manufacturers challenged the powers of NERC to review electricity tariff monthly without adequate consultation with consumers and other stakeholders, noting that the continued implementation of the order would lead to complete closure of the manufacturing sector.

Ajayi-Kadiri told the four-man panel of the commission headed by Oseni to suspend the implementation of the new tariff, explaining that the cost was becoming almost impossible for his members to bear.

He said: “Power to a manufacturer is like blood to a human being. It represents anywhere between 28 per cent to 40 per cent of our cost structure depending on how power intensive your manufacturing process is. So you can imagine if there is a 250 per cent increase in that particular cost, it is going to inflict damage.

“We operate in an environment in which this increase is coming on the back of the exchange rate challenge, petrol subsidy removal, increase on import duties, multiple taxation and other challenges”.

The MAN boss submitted that the decision to raise tariff was making the manufacturing sector uncompetitive, stressing that many companies were being disconnected from the grid because of their inability to cope with current prices.

“If you add the cost of electricity to the burden that we already have, we are not going to make a profit. More than 36 companies have been disconnected at this moment.

“If it is possible for them to pay and pass on the cost, we would not bother. We are being bashed from all angles and we need to engage in such a way that we are able to survive.

“We know that Distribution Companies (Discos) are business men and we are also businessmen, nobody will go into a business and try to make a loss. But what we are seeing in the increase is that the Discos are going to survive and the manufacturers are going to die. It is not possible for manufacturers to take on this cost,” Ajayi-Kadiri argued.

In his submission, legal counsel to MAN, Oshodi, challenged NERC’s powers to review tariffs monthly, maintaining that the commission had not consulted widely and given consumers enough time to state their case before approving the increase.

He averred: “There is a process for the bi-annual review, which means three months to the time for the bi-annual review, notices ought to be issued, stakeholder representations are invited and comments are taken over a period and considered before the review. I do not think regulations and guidelines allow NERC to do this monthly.”

Oshodi argued that for the tariff order to be valid it must follow the process prescribed and the amount of time needed for stakeholders to make their presentations on the review.

However, the application by MAN to have the implementation of the tariff increase suspended was opposed by the power generation Companies (Gencos) and the electricity Distribution Companies (Discos) which argued that it would lead to losses for them.

 Chairman of Sahara Energy, Kola Adesina pointed out over the years Gencos had been at the receiving end of the liquidity challenges facing the electricity sector in the country. The company owns Ikeja Electric and Mainstream.

“As a producer of power, we are also directly affected by those variables we all talk about, including inflation rate, interest rate and exchange rate. But we do not have the room like the manufacturers have where their entire cost can be passed on to their pricing.

“For years, we were subsidising the power sector in Nigeria and till today we are still doing exactly the same thing,” Adesina lamented.

Also speaking the Discos stated that they also have remittances to make to other stakeholders every month, explaining that they have also been struggling.

Chief Executive of Ibadan Disco, Mr. Kingsley Achife, noted that although the company was willing to make concessions to those with a payment plan, it however disconnect customers who refuse to pay outright without explanation.

They threatened to disconnect any manufacturers which failed to pay the new rate, adding that DisCos also receive invoices from the markets which they need to settle.

“We have some MAN members telling us they will pay the old rate. For us in Ibadan, we are disconnecting those ones because we don’t want to build up the liabilities they owe.

“We also recognise that because there is a jump that some may not be able to pay immediately and for those who are coming forward with a payment plan, we are listening to them and we are ready to work with them,” he stressed.