Sam Amadi, NERC Chairman
The Nigerian Electricity Regulatory Commission (NERC) on Tuesday said the recent increase in electricity tariff, which came into effect on January 1, 2015, would not affect residential consumers, who fall under the Residential (R1) and R2 category until June this year, notwithstanding the seeming discontent of distribution companies with the order.
While clarifying its stance at a press briefing in Abuja, the Chairman of NERC, Dr. Sam Amadi, said the six-month embargo on tariff increase for residential consumers, which make up about 80 per cent of electricity customers across the country, was a ‘win-win’ regulatory measure for Nigeria’s emerging electricity market.
Amadi explained that the measure would prevent consumers from being exposed to tariff hike without commensurate improvement in service and that within the six-month moratorium period, distribution companies are expected to improve on their deployment of meters to consumers.
After a recently conducted special review of the Multi-Year Tariff Order (MYTO 2.1), NERC approved a revised tariff for consumers across the country, which came into effect on January 1, 2015.
“Let me state upfront, and for the sake of clarity, that NERC has not increased tariff for residential consumers. I need to emphasis this point because it seems lost in the swirl of things. While the scheduled increase will apply to other classes of consumers from January 1, it will not affect residential consumers until after June 2015.
“The decision to grant this moratorium is a carefully considered one, arrived at after adequate consultations with stakeholders and careful consideration of the imperative to balance the legitimate demand for adequate electricity supply with the need for fair tariff. The freeze was designed primarily to protect and to promote the interests of the consumers as well as stimulate operators to serve customers better,” Amadi said.
He further disclosed that the distribution companies are not happy with the phased approach adopted by NERC, adding that the decision would mean that they cannot recoup their growing and previously unanticipated costs.
He stated: “Expectedly, the distribution companies are not happy about the phased approach adopted by the commission. This may negatively impact their bottom-line in the short run. But while we have a responsibility to protect consumers, NERC is not anti-business.”
“Indeed, NERC is mandated by the Electric Sector Power Reform (ESPR) Act 2005 to set tariffs that reflect the cost of operators as a way of attracting and sustaining necessary investments in the sector.
“What NERC has done with the freeze for residential consumers is to creatively use rate-setting as a balancing tool for achieving desired outcome, to grant relief to one set of stakeholders, while providing incentives to the other as a means of ensuring adequate and regular power supply and optimal customer service.
The intention therefore is to give the consumers a break for six months and provide the operators incentives to improve supply and services. To us, this is not a zero sum. Rather, it is ultimate win-win not just for consumers and operators, but also for the electricity sector and for the country as a whole,” he added.
On the commission’s metering expectations, Amadi said: “This moratorium is a regulatory mechanism for incentivising operators to improve power supply and be more responsive to the needs and complaints of their customers, especially in the area of metering.
“Our expectation is that by the time the full MYTO 2.1 tariff begins to apply to residential consumers both supply and service delivery would have improved significantly,” he emphasised.
THISDAY
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