Private Sector Operators Kick As NERC Clarifies Hike In Electricity Tariff

The Lagos Chamber of Commerce and Industry has said the new increase in electricity tariff approved by the Nigerian Electricity Regulatory Commission is too high and poorly timed considering the country’s poor economic state.

The regulator on December 30 approved a 50 per cent tariff hike for Distribution Companies.

The revised Multi-Year Tariff Order which took effect on January 1, was the second review by the regulator since September 2020.

The NERC cited Nigeria’s high inflation, foreign exchange scarcity, available generation capacity, Ministries Department and Agencies losses, gas price and capex adjustment.

NERC said in the directive that, “The actual average monthly inflation rate of 13.1 per cent for the period January to November 2020 was used for review of the year 2020 tariffs, while, the November 2020 inflation rate of 14.9 per cent as obtained from the NBS was adopted to project Nigerian inflation rates for the year 2021 and beyond.”

But the Director-General of the Lagos based chamber, Muda Yusuf, told THE WHISTLER in an exclusive interview on Tuesday that the country was not ready for the hike considering the country’s economic hardship.

The LCCI DG said, “That will not be very fair to consumers given the current economic situation. The economy is in a recession and it wasn’t long they reviewed the tariff, so it is coming too soon after the review.

“In any case, whatever steps we are taking, we have to also put it in the context of the social environment. They should not be pure commercial principles. You should also look at the environment, the situation of the country and the economic recession.

“I think there is a big issue with the timing and even a hike of 50 per cent is high. So there is an issue with the rate of increase and also there is an issue with the timing.

The Lagos based chamber boss argued that the new hike would increase cost significantly amidst the economy which is already facing a high inflation rate of 14.9 per cent as of November 2020.

Yusuf said, “It will increase cost significantly and we are faced with an economy that has weak purchasing power, recession and cost are increasing. That is a very big problem for many businesses or any investor.”

Meanwhile, NERC has clarified the issues around the increase in electricity tariff, stating that no approval was granted for a 50 percent tariff increase in the Tariff Order for electricity distribution companies.

The commission, via its Twitter handle on Tuesday explained that in compliance with the provisions of the EPSR Act and the nation’s tariff methodology for biannual minor review, it adjusted the rates for service bands A, B, C, D and E by N2 to N4 per kWh to reflect the partial impact of inflation and movement in forex.

It stated that tariff for customers on service bands D & E (customers being served less than an average of 12hrs of supply per day over a period of one month) remains frozen and subsidised in line with the policy direction of the FG.

It said, “The attention of the Commission has been drawn to publications in the print and electronic media misinforming electricity consumers that the Commission has approved a 50 per cent increase in electricity tariffs.

“The Commission hereby states unequivocally that no approval has been granted for a 50 per cent tariff increase in the Tariff Order for electricity distribution companies which took effect on January 1, 2021.

“The Commission remains committed to protecting electricity consumers from failure to deliver on committed service levels under the service-based tariff regime.