FG will bear cost of 2-week electricity tariff suspension – NERC

The Federal Government will pay the cost for the suspension of the newly approved Service Reflective Tariff that doubled the cost of electricity for some customers after the sector regulator acceded to a deal government reached with labour unions suspending the review.

“For every decision that we make as a government for customers not to pay a cost reflective, it creates a liability and it has to be settled by someone. The practice for the past five years is that the government has written the check for the liability,” said Dafe Akpeneye, commissioner Legal, licensing and compliance at the Nigerian Electricity Regulatory Commission.

Akpeneye said this in response to questions by Dolapo Kukoyi, a partner at Detail Commercial Solicitors on the second day of the BusinessDay Energy conference which held over virtually.

On Tuesday night, NERC issued an order suspending the electricity tariff hike from September 28 to October 11, 2020. “Following a joint communique issued by the Federal Government of Nigeria and the labour unions, the FGN agreed that the recent review in electricity tariffs would be suspended by the Commission for a period of 14 days to further consultations of negotiations between the parties,” the Commission said.

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NERC directed all DisCos that “all tariffs for end-use and market obligations of the DisCos during the 14-day suspension shall be computed on the basis of rates applicable as of August 31, 2020.

Apeneye insisted that rolling back the regulation on the basis of government’s truce with labour does not interfere with the Commission’s independence.

“We need to bear in mind the far-reaching consequences on the economy, the law requires that we need stakeholder consultations before reaching decisions,” he said.

The Commissioner explained that based on a policy issue, labour had threatened to shut down the economy because they did not agree with the increase in the retail price of fuel and the hike in electricity tariff. NERC saw the need to engage the unions on the concept of service reflective tariff, which is a novel concept on the continent.

“It’s the first time it is being done in Africa, and rate increases for everybody is the norm in many parts of Africa, as a gesture of good faith, Labour said they want to understand but can you suspend for now,”

Citing sections 33 of the ESPRA, Akpeneye said that as an independent regulator, NERC receives policy directions form the minister and is bound to comply when they complied with the Act and the constitution of the land.

“Looking at the overarching issues, we saw it as a valid policy direction and we issued the order to suspend the review for 14 days to enable the Federal Government team and organized labour continue with negotiations over this,” Akpeneye said.

Earlier in his speech at the conference, the minister of power represented by his special adviser on policy Abba Aliyu said the federal government have spent N1.5 trillion subsidy power since 2015 resulting from monthly spending of N12 billion which is not sustainable as the performance of Disco keeps flaunting.