FG/Labour truce on electricity tariff creates confusion as NERC meets operators

The deal reached by the Federal Government and the labour unions over a two-week suspension of the implementation of the revised electricity tariff has left confusion in its wake both for consumers and operators.

BusinessDay understands that the regulator, the Nigerian Electricity Regulatory Commission (NERC) met with operators last night and a decision on how to proceed could be had today.

However, the new tariff increase was communicated by an order from the regulator, so it is only logical that a suspension should be announced by it.

“The Commission, pursuant to sections 32 and 76 of the Electric Power Sector Reform Act (EPSRA), issued the MYTO – 2015 Tariff Order in December 2015 to address, amongst other objectives, the provision of cost-reflective tariffs thus ensuring that prices charged by licensees are fair to consumers and are sufficient to allow licensees that operate efficiently to recover the full cost of their activities, including reasonable returns on the capital invested in the business,” NERC said in a recent order reviewing tariffs.

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According to the rules guiding the sector, only Commission is empowered to issue tariff orders thus making an announcement of a tariff suspension by other parties untenable. In any case, it erodes the independence of the regulator for the announcement to be issued by the government.

NERC is yet to publish a revised tariff and this has created confusion. Some DisCos officials say they are yet to receive an order from the regulator and in any case, it will take up to four days to restructure their vending platforms to accommodate a revised tariff.

The current situation pits operators against consumers. DisCos will find themselves in a difficult position offering an explanation to disgruntled customers demanding for a revision of their tariffs based on the Federal Government’s agreement with labour unions. Angst will take the place of civil discourse.

Following the adoption of the Service Reflective Tariff, DisCos had initially opposed the plan. While they had clamoured for a cost-reflective tariff which takes into account changes in the macro-environment including fluctuation in foreign currency exchange, gas prices and inflation, the regulator imposed a Service Reflective tariff.

The SRT groups customers into different bands based on the number of hours of electricity they received with those enjoying more stable power paying a higher tariff. There was no tariff increase for those who get the least amount of power.

NERC had earlier this month berated the DisCos for their inability to properly communicate the tariff review to customers. Following this, DisCos put up advertisements in newspapers and other media and stepped up campaigns on social media to inform customers of the new tariff and what customer bands they belong. Now, they are unsure about what to communicate with customers.

One key challenge with the power sector according to analysts is with the market. Nigeria’s electricity market does not recover proceeds of investments mainly because the tariff does not guarantee commercial returns and operators do not fulfil their market obligations. So it depends on government bailouts, costing over N1.72 trillion within the past 5 years.

This is what the tariff review was meant to correct, a fact that gets lost in the midst of agitations for review. Labour groups too are concerned about the welfare of workers who have become more impoverished due to the economic situation but derailing current reforms will lead to a poorer supply and more dependence on expensive generators.