Should Electricity Tariff Increase Precede Prepaid Meters?

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While the argument for cost-reflective tariffs by power firms rages on, the demand for prepaid meters is growing stronger with many electricity consumers groaning overestimated billing, Femi Asu reports

The issue of electricity tariff has, over the past few months, been a subject of debate among stakeholders in the nation’s power sector, whose privatization recently entered its fifth year.

Power generation and distribution companies are calling for tariff hike but many consumers are unwilling to stomach any further increase in tariff without the provision of prepaid meters and improvement in power supply.

Upon the commencement of the implementation of the tariff hike of over 45 percent in February last year, the Nigerian Electricity Regulatory Commission had mandated the distribution companies to complete metering of unmetered customers within one year, after which there would be no more estimated billing.

“The new tariff, besides eliminating fixed charge, has a robust mechanism to ensure that the distribution companies fully meter their consumers and eliminate ‘crazy’ billing within one year,” the then Acting Head and Chief Executive Officer, NERC, Dr. Anthony Akah, had said.

But more than one year after the last tariff increase, many consumers are still without prepaid meters.

The Managing Director/Chief Executive Officer, Benin Electricity Distribution Company, Mrs. Funke Osibodu, said, “There is supposed to be a minor tariff review every six months. In fairness, NERC prepares those things. I told quite a number of my political friends that this is the best time, when you and I know the exchange rate issue, to introduce cost-reflective tariff.”

On the provision of meters to consumers, Osibodu said at the PwC Annual Power and Utilities Roundtable in Lagos on Thursday, “Metering will not stop in the next three years. It is a process. We will not meter everybody overnight.”

The Deputy Director and Project Manager of Nigerian Power Sector Reform, Bureau of Public Enterprises, Mr. Amaechi Aloka, expressed the support of the BPE for tariff increase to enable the DisCo to recover the costs of supplying electricity.

“For us, there is no running away from having a cost-reflective tariff. The whole power sector reform was designed such that we will have an electricity industry with cost-reflective tariff at its core. The Multi-Year Tariff Order that was used to usher in the private sector was designed in such a way that it was supposed to be cost-reflective.”

He described as a misstep the removal of collection losses from the tariff in 2015, saying, “With a loss level of about 50 percent, it is difficult to design a MYTO that will ask the consumers to pay the actual cost of supplying electricity.”

The Commissioner, Legal and Compliance, Nigerian Electricity Regulatory Commission, Mr. Dafe Akpeneye, described estimated billing as one of the biggest issues in the industry.

Noting that some Nigerians continued to use electricity without paying, he said, “There are fundamental issues in the industry that have to be addressed, and firstly is customer enumeration. Everybody who is on the system should be captured. That is the first thing to do.

“Two, we need to have a metering solution.  Everybody must be metered. Three, there is a need for a revenue assurance framework that ensures that the customer is not just bearing the losses if I am not operating efficiently in line with my revenue requirements.

“Everything ties together, and if you go ahead and just do it now when you haven’t addressed the fundamental issues, you are going to create serious unfairness and inequity in the system.”

The Managing Director, Transmission Company of Nigeria, Mohammed Usman, described the TCN as the worst hit in terms of tariff.

He said, “When we went to NERC and did presentations, I think NERC accepted that TCN is the one subsidizing the sector. If we continue to increase the tariff without guaranteed investment into the sector, the losses will continue to increase, which means tariff will continue to increase. So, how do we solve this problem? We have to find a way of getting investment into the sector. Do we talk about tariff increase only or do we talk about tariff and investment?”

The DisCos had complained several times about the inappropriateness of the N31.58 being paid for a kilowatt-hour and alleged that they (DisCos) bought the commodity at N68/kWh but were mandated by NERC to sell at a far lesser rate.

“There is no way you can pay or remit the required amount that is needed from you as a Disco when you sell a product that is worth N68 for N31.58. It won’t work,” the Executive Director, Research, and Advocacy, Association of Nigerian Electricity Distributors, Mr. Sunday Oduntan, said at a recent event in Abuja.

The Principal Manager, Tariff, and Rates, NERC, Aisha Mahmud, was reported in October to have said that the commission had actually done a review and figured out that the feasible rate for electricity tariff should be N51/kWh.

“We have done the review and it is the Federal Government that is to decide on whether to implement the N51 price for a kilowatt-hour or not, as against the N31/kWh that is being paid for the commodity presently. Once we get the approval from the government, we will announce its implementation,” Mahmud said.

Last month, the Federal Government directed NERC to reinstate the regulation that allows power consumers to purchase meters from approved vendors.

NERC had in September last year directed the 11 Discos operating in the country to formally wind down the Credited Advance Payment for Metering Implementation scheme on or before November 1, 2016. The scheme was initiated by NERC in 2013.

The commission had stated that the CAPMI, which allowed electricity consumers to self-finance meter acquisition and installation given that the DisCos were unable to promptly deploy meters to them, would cease to exist from November 1, 2016.

But on November 16, 2017, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, stated that both the federal and state governments recently resolved that NERC should reinstate the regulation that permits power consumers to purchase meters, especially where the Discos could not provide the facility.

The minister said the resolution was reached at the recent third edition of the National Council on Power.

The council directed NERC to enforce on the Discos the policy directive that any unmetered customer was obligated to pay only the last undisputed bill, adding that if the customer remained unmetered, the last undisputed bill should be discounted by 15 percent in each subsequent year that the customer remained unmetered provided that the failure to meter the customer was the fault of the DisCo.

Source: IWIN

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