Nigerian power firms quietly slap customers with tariff hike

Electricity distribution companies (DisCos) in Nigeria have quietly increased tariffs by as much as 18.5 percent, with effect from December 1, 2022, leaving customers confused.

BusinessDay findings showed that the two Discos in Lagos, Eko Electricity Distribution Company and Ikeja Electric, have hiked tariffs, with electricity bills being sent out to postpaid consumers.

The Magodo Residents Association (MRA) sent a message a few days ago to its members notifying them of an increase of over 17 percent in tariff.

“It has come to our attention that Ikeja Electric effected an increase to the cost of tariff under the year review by the Nigerian Electricity Regulatory Commission,” the association’s publicity secretary said in a message seen by BusinessDay.

MRA said NERC had revised the Multi-Year Tariff Order, adding that the bilateral tariff of N61.75 chargeable for Ikeja Electric’s bilateral power agreements has been reviewed upwards to N72.40 (excluding VAT) effective from December 15, 2022 in line with the regulator’s directive.

According to one of the bills seen by BusinessDay, for the particular consumer who used to pay N57.65 per kilowatt hours, the new rate effective December 1, 2022 was put at N68.30 for residential 3-phase MD (R4) service band A customers.

At the time of filing this report, NERC has not released an official statement on the tariff rate while efforts to get comments from spokespersons for Ikeja Electric and EKEDC proved abortive.

BusinessDay learnt that the regulator (NERC) and the service companies in the country are keeping silent on the tariff hike because of the view that it will incite Nigerians ahead of crucial elections next month.

Several consumers who had got wind of the increase asked for written confirmation by Eko DisCo but the company has so far kept mute.

“It would seem this increase has been applied surreptitiously because of the elections,” one official said.

Reacting to the new development, Abel Godson, executive director of Centre for Transparency & Accountability in the Energy Sector, said: “With the deteriorating nature of electricity supply in the country, coupled with a deteriorating and ageing infrastructure within the electricity network, government’s preoccupation should be about stabilising the market, and not tariff hike.”

He said “promoting cost-reflective tariffs at a time where the country is battling one its worst forex regimes and high inflation rates, which affect the cost of goods and services, will be counterproductive.”

The Federal Government and labour unions had gone into extensive discussions prior to the implementation of the service-based tariff in November 2020, with NERC promising improvement in service delivery to Nigerians.

The first hint that the DisCos were seeking a tariff increase came from Emeka Ezeh, head of corporate communications at Enugu Electricity Distribution Company (EEDC), who said on December 19, 2022, that his company had effected what he called a minor tariff review, which worked out to a jump of 13 percent.

He told the News Agency of Nigeria that the new rate for non-maximum demand customers under R2SB had increased from N58.47 per kilowatt-hour to N66.47.

Ezeh spoke against the backdrop of complaints by some customers over the surprise increase in tariff they noticed which cuts across all categories of customers within the company’s network franchise area in the South-East.

He said that the minor adjustment, which took effect from Dec. 1, 2022, was approved by NERC some months ago across all DisCos in the country.

According to him, there is a minor adjustment by some percentage across board in the whole DisCos nationwide currently and it is not peculiar to EEDC alone.

He said: “The minor increase in the rate of tariff approved by NERC is for electricity distribution companies to meet up with the current economic realities in the power/electricity sector.

“Currently, the sector is seriously affected by the high inflation rate in the country; as it affects our daily operational maintenance and services to our esteemed customers in our network.

“The issue of high foreign exchange rate is affecting our business too in terms of importing most of our spare parts needed for daily maintenance and repairs in the network.”

Read also: CAN to voters: Liberate yourself from shackles of misrule in 2023 general election

In Africa’s biggest economy, the country’s beleaguered power sector is seen to be moving at a snail’s pace despite over N1.6 trillion in interventions by Federal Government despite the privatisation of the sector in 2013.

Findings showed the power generated and made available on the national grid, which was around 2,946.15 megawatts in 2015, currently hovers around 4,000-4,800MW on average despite billions of dollars invested in the sector.

Total power generation in the country stood at 4,735MW as of 6am on Wednesday, according to data from the Nigeria Electricity System Operator.

Ahead of the general election in February, Nigeria’s frontline presidential candidates have issued manifestos outlining goals to double or triple current electricity output.

The reading of the manifestos does not seem to indicate that this approach will fundamentally change.

While there is something redeeming about these plans, the key challenge in Nigeria’s power sector is a dysfunctional electricity market. The inability to recoup investments into the power sector is a critical issue requiring attention and rather than more government, as the manifestos proposed, operators say less government is required.

Operators say one way to achieve this is a tariff that generates commercial returns. A liberalised power market that will buy gas used to generate power at market rate, removing subsidies and ordering the power sector to run as a fully functional market governed by contracts.