Electricity Tariff to be Increased again!!!

Electricity Tariff to Increase Again As NERC Seeks To Conclude Extraordinary Review

The Nigerian Electricity Regulatory Commission (NERC) has conclusively announced the plans concerning the Extraordinary Tariff Review process for the 11 electricity pattern distribution companies in the country.

Since the first three months of 2020 till date, the minor review has always turned out inconclusive.

This disclosure is contained in a short notice which was addressed by the Chairman of the Nigerian Electricity Regulatory Commission (NERC) on April 26, 2021, and also appeared on its website for added proofs.

The Commission expressed its readiness to commence the processes for a minor review of the tariff in July, based on changes in inflation, foreign exchange, gas prices, and available generation capacity, among other factors.

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NERC states that the reviews can also be carried out whenever industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry. The commission is, however, soliciting comments from the general public and industry stakeholders on the proposed reviews.

NERC is mandated, under the provisions of the Electric Power Sector Reform Act (EPSRA) to review electricity tariffs in Nigeria every six months (minor) and five years (major).

The Information from NERC reads;

“Pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA), the Nigerian Electricity Regulatory Commission (“NERC” or “the Commission”) adopted the Multi-Year Tariff Order (MYTO) Methodology in setting out the basis and procedures for reviewing electricity tariffs in Nigeria. The MYTO provides for Minor Reviews (every 6 Months), Major Reviews (every 5 years), and Extraordinary Tariff Reviews in instances where industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry.

Further to the above, the Commission held series of Public Hearings and stakeholder consultations in the first quarter of 2020 on the Extraordinary Tariff Review Applications of the eleven (11) electricity distribution companies (“Discos”) to consider their respective 5-year Performance Improvement Plans (“PIPs”). However, the evaluation of the Discos’ requests for review of the Capital Expenditure (“CAPEX”) proposed in their PIPs could not be concluded for the consideration of the Commission during the Minor Reviews undertaken in 2020. Specifically, Section 21 of the MYTO – 2020 Order provides for consideration of Discos’ CAPEX application upon further scrutiny and evaluation of the investment proposals. Accordingly, this notice is issued to inform the general public and industry stakeholders of the Commission’s intention to:

Conclude the Extraordinary Tariff Review process for the eleven Discos;

Commence the processes for the July 2021 Minor Review of MYTO – 2020 to consider changes in inflation, foreign exchange, gas prices, available generation capacity, and CAPEX required to evacuate and distribute the said available generation capacity in accordance with EPSRA and other extant industry rules.

This notice is hereby issued in compliance with the provisions of EPSRA, the Business Rules of the Commission and the Regulations on Procedures for Electricity Tariff Reviews in the Nigerian Electricity Supply Industry to solicit for comments from the general public on the proposed reviews.

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Stakeholders and the general public are invited to send their comments to the Commission within 21 days from the date of this publication.

The Federal Government may be caught between the proverbial devil and deep blue sea as the landing price of petrol is currently N171 per litre. Nigerian National Petroleum Corporation (NNPC) Group Managing Director (GMD) Mikanti Baru indirectly confirmed this when that the landing price for petrol had hit N171 per litre, N26 higher than the current price of N145 per litre. Baru also stated that the current pump price would be maintained, but was silent on who was paying for the differential.

The landing price is the cost at which petrol gets to the country, and excludes profit margins for the marketers. The entire nation has been caught up in a severe fuel scarcity that has seen commercial activities ground to a halt.

What this means?

The current landing prices about major oil marketers in the country will be unwilling to bring in petrol cargoes into the country. The NNPC is thus currently the sole importer of petrol in the country. A previous subsidy system whereby the government paid the cost differential to the marketers was scrapped by the current administration, due to widespread fraud.

Implications of this

The NNPC by selling below cost price is running at a loss. This negates the earlier expressed intentions of the government to run the corporation profitably.

Why the reluctance to increase fuel prices

The government may be unwilling to increase pump prices having carried out a massive increase in 2015 from N87 a litre to N145 per litre. Approaching elections mean a price increase could affect the ruling party’s performance at the polls.

Rather than implement what it then called a price modulation, this is known as ‘A MISSED OPPORTUNITY’

The NNPC opted to leave pump prices unchanged even when global crude oil prices were on the rise. Had the government scrapped the subsidy regime totally, or activated the pump price modulation, the nation would not have been caught in a fix.

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