The Senate on Tuesday urged the Federal Government to immediately suspend the planned tarrif increase scheduled to take effect from 1st July, 2020.
Specifically, the Red Chamber said there is increased hardship resulting from the COVID-19 pandemic and it would not be appropriate if the planned electricity tariff increase is implemented.
Consequently, the Senate has urged the federal government through the ministry of finance to include the Nigerian electric power sector in the disbursement of the proposed N1.7trillion COVID-19 Crises Intervention Fund to solve the operational challenges in the sector.
The resolution of the Senate followed a motion by Senator Gabriel Suswam (Benue North East) on power Sector recovery plan and the impact of COVID-19 pandemic. Suswam is chairman Senate committee on Power.
Leading the debate, Suswam said prior to the outbreak of coronavirus, the Nigerian Electricity Supply Industry (NESI) was already facing teething operational constraints including the absence of cost-reflective tarrifs, inadequate enumeration and metering of consumers.
He said also that there was limited access to funds for investment, poor revenue generation and high levels of aggregate technical commercial and collection (ATC&C) loses.
Suswam further noted that Generation Companies (Gencos) were owed 72 per cent of their revenue in 2019 while Electricity Distribution Companies (Discos) reported average ATC &C losses of about 41 percent which prevented NESI from performing optimally.
“If the negative impact of COVID-19 is on the NESI continuous without any emergency financial intervention from the federal government, DisCos already facing dwindling revenues in the wake of the pandemic may not be able to meet their remittance obligations to the market as set by NERC in 2019 tarrif order.
“This will also affect the financial obligations of the Transmission Company of Nigeria (TCN) which is expected to have a cost reflective tarrif change of N3.7/kWh to N8.3/kWh by 1st July 2020.
“The financial obligations of GenCos and Gas-to-Power suppliers will also be negatively impacted while banks that lend to oil and gas producers may face deteriorating credit quality making it harder for operators to access the much needed funds for investment,”Suswam stated.
Consequently, the Senate has mandated it committee on power to investigate all federal government interventions in the power sector since the privatization of the sector to ascertain the adequacy of such interventions and their desired impact, and report back in four weeks.
Also, the Senate has tasked the committee to investigate all market participants in the power sector value chain and ascertain the level of corporate governance compliance in NESI.
While urging the CBN to allow operators in the power sector access to foreign exchange for procurement of equipment and materials like what is done in the aviation and oil sectors, the Senate further directs the federal government to consider additional tarrif support to cushion the effect of rate shock over a fixed period to allow TCN and DisCos access funds and implement performance improvement investments that will support increased tarriff to customers during the pandemic.
Meanwhile, Senate President Ahmad Lawan has called review of the privatization of the power sector.
Lawan said the GenCos and DisCos are not capable of providing steady power supply in the country.
“The current system can never bring regular power supply if we stay like this in the next ten years.
“The privatization of the power sector is success , we expect a steady power supply
But the DisCos are not capable to supply power at the moment.
There is need to review this privatization because I think something is wrong somewhere and so if we dont review this, in the next ten years, the situation will be same. The federal government should look into the privatization,”Lawan stated.
