The National Electricity Regulatory Commission (NERC) announced new electricity tariffs last week. The NERC Chairman, Dr. Sam Amadi, disclosed the increase in the cost of electricity at the signing of a N213 billion Memorandum of Understanding (MOU) with the chief executives of deposit money banks and the Central Bank of Nigeria (CBN) in Abuja.
It is, however, gratifying that the regulatory agency said that the new tariff will not reflect on the electricity bills of residential consumers until after six months when there would be visible improvement in power supply. According to the regulator, “…we expect that with more gas coming to power plants because of these facilities and other interventions, in the next two, three months, there will be increase in capacity.”
The news of an impending improvement in power supply is good, but we would have wished that NERC had postponed the tariff increase until the expected higher capacity and power supply are achieved. While we appreciate the pressure on NERC and the private investors who have ploughed so much money into the electricity companies, a lot more still needs to be done to meet the people’s need for stable electricity supply at a reasonable cost before increasing tariffs.
The “paper” success of the “transformation” of the power sector through a transfer of its commanding heights from the public to the private sector is a good step but it is not enough. Although we are on the side of the optimists who argue that the sector, after decades in the wilderness, has returned to the right path, we think the time has come for the people to really feel the impact of this privatisation of the sector. It should not be a “paper” achievement only.
While recognising the efforts of the NERC in protecting both investors and consumers in the power sector, it is important for the industry regulator to note that Nigerians need much more electricity supply than they are getting now, and they are willing to pay for its regular supply. However, they are bound to complain when they feel that the electricity distribution companies are not doing well enough.
Even though we recognise that the Multi-Year Tariff Order (MYTO), the template guiding the adjustment of electricity tariffs in Nigeria, is an integral part of the roadmap to power reform, the NERC must be careful not to do anything that could jeopardize the interest of consumers. Tariff increase must be handled with utmost care and discretion. In the last year, two increases were recorded.
The proposed increase in tariff for residential consumers in six months is hard to support. What if the anticipated changes – improved power supply, increased gas supply to the generating companies and visible increased capacity – do not become reality?
We, therefore, urge the NERC to make haste slowly on the issue of tariff increases, knowing fully well that even when the increases are restricted to the corporate and industrial customers, the ultimate payer remains the average consumer of goods and services of those organisations.
We also wish to remind the NERC about the issue of pre-paid metres that has been a subject of discord between distribution companies and residential consumers. We urge that those consumers who have paid for their metres should get them within the stipulated deadline.
We commend the CBN, the deposit money banks and the NERC for setting up the Nigerian Electricity Market Stabilisation facility. There is no better security for Nigeria’s power supply than when a potential investor is reassured that his investment in the sector is secure, viable and profitable. After nearly 40 years of negative investment in the power sector, any effort to encourage investors to put their money in the Nigerian power sector should be encouraged by all.
But, investors must always bear in mind the peculiar and long-term nature of power investments. A power plant has a life span of at least 35 years and may last beyond 60 years when properly run and adequately maintained. High tariffs in pursuit of higher profitability may, therefore, not be the best bet for the power companies. It may, indeed, turn out the equivalent of killing the goose that lays the golden egg.
