Analysis shows only 25% of Nigerians are impacted by tariff review

Amid condemnation by labour groups and others over the review of electricity tariff, data available to BusinessDay indicate that only about 25 percent of Nigerians in service bands A to C will be impacted by the tariff review (or 50% of the on-grid population), while the Federal Government will continue to subsidise the electricity tariff for the remaining.

Analysis of the share of consumer band contribution to electricity distribution companies’ (DisCos) revenue indicates that service band A consumers will see the highest average increase of 48 percent across DisCos, but this is maximum demand for customers including industrial zones and highbrow estates and commercial areas.

Customers on band B and C will see their share of contribution to DisCos’ revenue increased by 25 percent and 27 percent, respectively, and the bulk of these customers fall in residential classes and are in major city centres in Lagos, Abuja, Port Harcourt.

Considering that about half of Nigeria’s 200 million people do not have access to the grid, and a huge chunk of electricity consumers fall under bands D and E who will see their tariff frozen, this means that in real time, barely 25 percent of Nigerians will pay a higher tariff for power under the new service reflective tariff (SRT) plan.

The new SRT took effect September 1. It is anchored on the principle of equity demanding that DisCos bill consumers based on the level of service delivered. The DisCos have always pushed for a tariff that is cost-reflective, now they must earn their pay.

DisCos were broadly consulted in developing the tariff plan and based on allowed recovery and its consumer split, each Disco designed its tariff system applying the service-based methodology to earn revenue not greater than its allowed recovery.

DisCos submitted their proposed tariff design for Nigerian Electricity Regulatory Commission (NERC) ratification and conducted a consultation with its consumers on new rates and service commitment. NERC approved the tariff request from DisCos and issued a tariff order to this effect.

Therefore, DisCos have been mandated to improve communication and service commitments to consumers or face sanction.

In recent times, DisCos have published rates and figures by location for all consumers, so citizens can clearly understand where they stand and who has been impacted.

Communication has mostly been around rates per tariff band. Band A has 20 to 24 hours, Band B has 16 to 20 hours, Band C has 12 to 16 hours, with Band D and E being lower than 12 hours. Band D and E, which are said to be less wealthy areas of the country are frozen for tariff increase.

Therefore, many consumers say they are not clear about where they stand on Service Guarantees by the DIsCos. Many are unaware that if a DisCo consistently fails to meet service guarantees an area will be moved to a lower tariff band.

Though labour groups and many Nigerians have condemned the tariff increase, in reality not everyone will be affected.

“Regarding the electricity tariff, the majority of Nigerians will not be paying more and that is essentially because if you are currently receiving anything below 12 hours of electricity a day, your tariff will not go up,” said Laolu Akande, spokesman for Vice President Yemi Osinbajo on Channels TV’s ‘Sunrise Daily’ programme on Wednesday.

Yet, the current tariff review still pales into insignificance when compared with what some very poor Nigerians living off-grid are paying for energy generated from solar or other renewable energy sources.

For example, beneficiaries of the 85kw solar hybrid mini-grid at Gbamu-Gbamu village, in Ijebu-East Central Local Council of Ogun State, have been paying between N60 and N100/per kWh for electricity since the past two years and those in more remote parts of Nigeria, without grid connection, pay even more.

Analysts agree that the tariff review will help the sector challenged by limited cash flow. “The new tariff plan to the extent that it is clear that customers may pay higher tariffs where service delivery is assured would be welcomed by investors,” said Dolapo Kukoyi, energy lawyer and partner at Detail Commercial Solicitors, a law firm based in Lagos.