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The New Electricity Tariffs

Started by bamalli, May 25, 2010, 11:38:20 AM

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bamalli

The New Electricity Tariffs
05.23.2010

In spite of the poor domestic and industrial electricity supply in the country, the National Electricity Regulatory Commission has gone ahead to announce increase tariffs to both consumer groups.


Poor electricity supply over the years has depressed living standards and caused heavy losses in the business community, with alternative sourcing of electricity raising industrial production cost by some 40 per cent.
Following the failure of the Federal Government to achieve its promised capacity of 6000 megawatts of electricity by the end of last year, the expectations of Nigerians crashed painfully.


There had been expectations that that homes would be lit for longer hours to improve living conditions; street lights would be on to beautify towns and cities and scare nocturnal criminals; industries would reduce their cost of power supply and so improve their capacity utilisation and provide more employment opportunities; while artisans idling away, would be productively engaged. It was also expected that some of the 90 million Nigerians without access to electricity would have their living standards improved.


It took President Goodluck Johnathan, then the Vice President, to apologise to the nation when he said,  ".....I regret to mention that for a number of unforeseen and unavoidable reasons; the target could not be met. Millions of Nigerians are therefore still without power. For this, I render on behalf of government very sincere regrets."
That is how bad the image of electricity  providers is. But like argument of the egg and the chicken, NERC's case has been that electricity consumers should pay more to get better service.


Accordingly, last week, it increased tariff for domestic consumers from N6 per kilowatts to N8.90; while industrial consumers classified as D1 are to pay N9.80 per kilowatts. It is said that both tariffs are subsidised by 65 per cent, and 54 per cent respectively. Under the increases, other industrial consumers are to pay N12.90 per kilowatts.


Before now, NERC Administrator, Mallam Immamudeen Talba had argued that, "by the end of this year, we will have a major review because we have considered all the complaints being made, especially regarding the pricing. And in view of the fact that gas is being supplied in line with the gas to power policy, it looks as if that is not paying so we need to consider that."
Talba further explained that the new independent power producers that were coming onboard complained that the current electricity tariff was not attractive.


He said, "What NERC is supposed to do is to remove all the critical barriers to allow for private participation, create conducive environment and put in place an attractive price so that investors can come to Nigeria."
One year after MYTO was introduced, NERC effected a 10 per cent increase in electricity tariff across the board, claiming that inflation and changes in the exchange rate of the naira to dollar informed the decision.


We understand appropriate pricing requires that consumers pay higher tariffs, but because government does not want all that to be borne by consumers now it had provided a subsidy fund to bridge the gap between MYTO and the tariff being paid before its introduction.
Government plans to withdraw the subsidy in 2011, when it expects that power generation would have improved substantially.
Sound as the argument may seem, we do not believe it has made adequate consideration of Nigerians' sensibilities. They cannot be blamed for the poor state of electricity infrastructure and the supply of the vital commodity to homes and companies.
Indeed, for over 10 years, billions of dollars have been spent by successive governments on electricity supply without commensurate results. More annoyingly, large chunks of this money found their way into private pockets.


One would therefore have expected government (NERC) to be more considerate of the pains of its consumers, show them some respect by, at least, working to ensure their relative comfort before effecting the new tariffs. Beside, as an agency, NERC needs to work towards securing the confidence of electricity consumers and other stakeholders.


We share the views of the President of the Manufacturers Association of Nigeria, Alhaji Bashir Borodo, who said that PHCN's service is still very poor and inefficient and that it ought to improve on its service delivery before considering an increase in price. He added that the increase would further worsen the situation of the country's industries and impoverish Nigerians.
We strongly believe that this is not the appropriate time for tariff increases. PHCN by its poor supply of electricity has no justification, despite the MYTO plan, to increase prices now. It should therefore be postponed.


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