Hope, Fears As New Electricity Tariff Begins

If the proposal made by the National Electricity Regulatory Commission (NERC) to the Federal Government is anything to go by, electricity consumers in Nigeria will be governed by a new tariff regime, beginning from today, June 1.

Already, President Goodluck Jonathan had given his tacit support to the new regime, which according to the Rivers State Director of National Orientation Agency (NOA), Chief Andy Nweye, is intended to attract foreign investors with the much needed funds to bring the desired funding into the electricity sector. In this way, President Jonathan’s power transformation agenda will be achieved in due course.

At a meeting in Abuja with electricity generation companies on May 12, the Minister of Power, Professor Barth Nnaji had told the nation that the new electricity tariff would commence on June 1. He, however, assured that the new tariff tagged “Multi-Year Tariff Order” (MYTO) would not affect the low income earners and would attract more investment into the power sector.

MYTO, according to NOA, is the method of calculating electricity tariffs for producers, transporters and consumers in Nigeria, and an adjustment in tariff that has been in practice since July 1, 2008. The new tariff regime, according to a document prepared by NOA and NERC, is predicated on the need to ensure adequate and stable power supply, and guarantee efficient customer service delivery in Nigeria, encourage private sector participation in electricity generation and distribution, create job opportunities for Nigerians, reduce unnecessary power consumption and wastage and provide more pre-payment metres and discourage estimated billing.

Under the new tariff regime, different classes of consumers would pay different rates applicable to their classes for their electricity supply. Consumers are classified into 14 groups namely Residential (R1, R2, R3, R4), Commercial (C1, C2, C3), Industrial (D1, D2, D3), Special  (A1, A2, A3) and Street Lighting (S1).

Consumers who use their premises exclusively as a residence, houses, flat or multi-storeyed house fall under residential class, while consumers who use their premises for any purpose other than exclusively as a residence or as a factory for manufacturing goods are classified under commercial.

Industrial customers are people who use their premises for manufacturing goods including welding and iron-mongery, while customers such as agriculture and agro-allied industries, water boards, religious houses, government and teaching hospitals, government research institutes and educational establishment are grouped under special class.

But feelers from a  one-day  roundtable organized by the NOA in Port Harcourt on Monday indicate that many stakeholders, especially electricity consumers and civil society groups are still skeptical about the government’s sincerity of purpose in the implementation of the new tariff regime. They do not share the optimism of NOA that if implemented, the country would be on the part to a stable power supply, thereby bidding farewell to the era of generator dependence.

Speaking on behalf of the Centre for Advocacy Initiative, a non-governmental organisation based in Port Harcourt, Barrister (Mrs) Gladys Chibuzor dismissed the new tariff regime as  unworkable since there was no baseline survey to determine its workability and possible impact on the power situation in Nigeria before it was introduced.

Sharing similar sentiments, a lecturer in the Department of Political Science, Ignatius Ajuru University of Education, Chief Christian Akani said the new tariff regime was another form of neocolonialism from the capitalist nations. He called on the federal government to tread cautiously  so as not to plunge the ordinary Nigerian into a deeper economic agony in order to satisfy the exploitative desires of the powerful capitalist countries.

“This is another Karawusa which means talkshore that may be of no effect since government appears determined to implement the programme.

Other speakers who expressed reservations about the new power policy direction include, the Director of Community Rights Initiative, Dr Lucky Eleminya Anyakwe. Dr Anyakwe picked holes with the timing of the programme, saying “It is only few days to the June 1, 2012 take –off time . How much time is there to collate feedback and channel it to the authorities?”.

On Tuesday, last week, the House of Representatives had summoned the Minister of Power, Professor Barth Nnaji and chairman of NERC, Dr Sam Amadi over the new electricity tariff. The summon was sequel to a motion moved by Hon Yakubu Balogun (ACN. Lagos) which was unanimously adopted by the House. Hon Balogun had argued that the increase in electricity tariff would bring untold hardship on consumers in the country in spite of irregular power supply.

But Professor Nnaji and Dr Amadi had, at different occasions, dismissed the fear that the new electricity tariff regime would amount to increase in electricity tariff for consumers. They argue that the ordinary Nigerian would benefit more from the new tariff regime.

Elucidating further on the new tariff regime, the state Director of NOA, Chief Nweye explained that tariff review was not tariff increase “because in the tariff order, the urban poor and the rural dwellers called R1 would pay less in one or two areas”. He added that the R1 consumers tagged “lifeline class” would enjoy the special benefit of not paying fixed charge for their electricity.

“For instance, they will pay N4 per kilowatt per hour instead of N7, and will no longer pay  metre maintenance charge”, he said.

Meanwhile, the R2 customers who belong to the middle class and who constitute the overwhelming majority of consumers, according to Chief Nweye, would pay between N11 and N12 per kilowatt instead of the average cost of about N24, while the R3 consumers who are the rich would notice a substantial increase in tariff but not up to the 88 percent that was widely reported by the media.

Corroborating this view, the NERC boss, Dr Amadi had, in his defence of the new tariff regime, stated that “customers do not have to pay to purchase a meter because this cost has been included in their tariff. They only have to pay a minimal fee for the connection which is approved by NERC”.

The NOA boss, while defending the NERC’s position on the new tariff regime, said the objective of the new tariff was to attain cost reflective pricing that would ensure private sector investment in the generation, distribution and transmission of electricity in the country.

Stating that 50 private independent power projects have been licensed to produce 20,000 megawatts of power in the near future, Chief Nweye expressed fear that if these plants were not cost-effective, the ultimate investors might not invest as expected.

Nweye noted that for many years, Nigerians were not paying cost reflective tariff that could recover cost and bring incentives to re-invest in the network. This, according to him, was largely responsible for the poor state of power supply in the country.

He argued that government could no longer rely on the past mindset of every national good as free and that electricity is not a typical public good that is free, but a product that is produced at a cost and therefore needed to be properly priced in order to provide incentives for more investment.

The State NOA Director stated that “with stable power supply, businesses would thrive and our economy will flourish. Small and medium scale enterprises will once again have the electricity they need to keep their businesses running. Hairdressers, vulcanisers, barbers and other small scale entrepreneurs will no longer have to depend on generators, while bigger commercial and industrial ventures will considerably reduce their cost of doing business, leading to a general reduction in the cost of goods and services”.

Meanwhile, NERC is putting some measures in place to protect the rights of consumers and prevent over-billing. These measures, according to NOA boss, include establishment of Customer Complaint Units (CCU) in all distribution companies, as well as NERC Forum offices in all distribution offices nationwide.

The new tariff regime and the measures proposed to actualise it, are in no less mouth-watering; but given the failure of past governments to keep their promises to the people, especially in the area of power supply for more than two decades, many Nigerians still find it difficult to believe that Jonathan’s government would not be a chip of the old bloc.

But the Acting General Manager, Customer Service, Power Holding Company of Nigeria (PHCN), Mr Sebastian P. Koka allayed such fears. Giving a breakdown of the financial implications of meeting the expectations of Nigerians in the area of power supply at the roundtable on Monday, Mr Koka admitted though that previous governments had failed to satisfy the yearnings of Nigerians because they were not honest and humble enough to tell Nigerians the truth, he expressed confidence in the ability of Jonathan’s government.

“I must tell you that President Goodluck Jonathan has been honest enough to let everyone know that government is neither a good manager of businesses nor would it be able to afford the financial needs of the sector alone.

“Even if government invests in the construction of the power infrastructure, there has to be a programme to ensure regular maintenance of such infrastructure”, he said.

With the take-off of the new tariff, today, expectations are high that the era of generator dependence for power supply is gone. But how the new regime would not impose a deeper agony on the ordinary Nigerian remains the greatest fear the Jonathan administration will have to allay in the peoples’ minds.

Boye Salau and Desmond Osueke