There was a mild drama yesterday at the Nigeria Electricity Regulatory Commission (NERC) when it said electricity tariff will be reduced, but customers will now have to pay more.
Rising from a consultation meeting with stakeholders in the Nigeria Electricity Supply Industry (NESI), comprising generation companies (Gencos), distribution companies (Discos) and Consumers’ Forum in Abuja , the commission’s chairman, Dr. Sam Amadi, said the average tariff has dipped from N26 to N23per kilowatt.
He said: “The good news is that the average tariff has come down from N26 to N23. That is the good news. For us, if it goes up, we say it goes up. If it goes down, we say it goes down.”
Amadi said although the Commission would bring down the tariff, what the customers will now pay will be higher.
Amadi explained that R2 Abuja customers who presently pay N14 but may pay N19 if the new tariff is approved.
The new tariff, he said, will take effect retroactively from July this year. Amadi however, recalled that the tariff, which should have taken effect from July was frozen in June because a new government had just assumed office. He added that owing to the stability in the market, it is now convenient to unlock the tariff.
According to him, the Discos will present their different proposed tariffs to the commission which will in turn be presented to the Presidency for approval.
Commenting on how the new tariff would look like, Amadi said: “By January last year R2 customers were supposed to pay N19 in Abuja. They are paying N14. Today with the analysis, instead of N18, it should be N19.
“There is a reduction but it doesn’t mean that at the end of the day, they will still be paying that N18.”
The four factors that the commission considered in tariff review are gas prices, exchange rate, inflationary rate and generation capacity.
In her presentation, NERC’s Principal Manager, Market Competition and Rates, Aisha Mahmud, noted that the commission obtained the data for the computation of the Bi-Annual Minor Review from the website of the Central Bank of Nigeria (CBN).
According to her, inflation rate from the apex bank as at April 30 this year was 8.3 percent. She added that the Multi-Year Tariff Order 2 had an assumption of 13 per cent 13 per cent inflation rate but after last year’s minor review, the inflation rate was reviewed down to 7.8 percent.
On exchange rate, the CBN website, she said, showed an exchange rate of N197 to $1 as at April 30, adding however that the proposal took an exchange rate premium of 197+1 per cent.
The commission in the proposal observed that gas price has increased to $2.50 from $1.50 at transportation cost of $.80.
Mahmud said there is now an average peak daily generation capacity of 3,832megawatts (Mw) while average energy sent out is 3,404Mw.
In all, the commission said following the increase in energy generation, there is now more revenue generation for the Discos, which has now reduced the cost of power.