NERC Reduces Electricity Tariffs by 50%, Cuts Excessive Charge

NERC Reduces Electricity Tariffs by 50%, Cuts
Excessive Charge

Following complaints lodged by all classes
of consumers, the Nigerian Electricity
Regulatory Commission (NERC) on Tuesday
reviewed the rates to be paid for electricity
consumption in the country.
NERC, after its consultation with various
electricity consumer groups across the
country, established that the skyrocketing
increase in tariffs was informed by huge
Aggregate Technical, Commercial and
Collection (ATC&C) losses which are
incurred by the electricity distribution
companies (Discos) and are subsequently
passed through to consumers.
It therefore reviewed the assumptions in
the Multi-Year Tariff Order (MYTO 2.1) and
determined that henceforth, it would be
inappropriate for distribution companies
(Discos) to transfer collection losses that
they record and have control over to
consumers.
The commission explained that its removal
of collection losses from customers’ tariff
has henceforth reduced tariffs by more
than 50 per cent in some places across the
country, adding that it will LEAD to lower
tariffs for consumers.
NERC’s chairman, Dr. Sam Amadi, said in
Abuja that the Electric Power Sector Reform
Act (EPSRA) and NERC’s Business Rules
mandate it to review its decision at the
petition of an interested party who
complains within 60 days of such decision.
Amadi therefore informed that it acted with
regards to complaints lodged by industrial
and commercial consumers under the
auspices of the Manufacturers Association
of Nigeria (MAN), in which they asked for a
review of the MYTO 2.1 and further
requested drastic reduction in their tariff.
MAN had at the consultation claimed that
such astronomical increase in tariff would
kill their business and lead to massive job
losses.
“Since January 1, 2015, when NERC
approved the MYTO 2.1 we have received
several complaints against the increase in
tariff of different consumer classes.
“Pursuant to these rules, the commission
organised public hearing and received
evidence from consumer classes on the
affordability of the new tariff. The
commission also invited the chief executive
officers of the distribution companies to the
hearing to respond to the case of the
consumer groups,” Amadi said.
He stated: “The commission reviewed the
technical and financial assumption of MYTO
2.1. The review shows that the major
underlying cause of the skyrocketing
increase in the tariff is the huge ATC&C
losses, which are passed through to
consumers. In some Discos, ATC&C losses
increased tariff by as much as 80 to 103 per
cent.”
Amadi noted that NERC had been listening
to consumers and taking full account of the
impact of high tariff on them and the
Nigerian economy, and had therefore
reviewed the basis of the MYTO 2.1
assumptions, thus ruling that it is
inappropriate to transfer to consumers
collection losses that are controllable by
Discos.
“It is the responsibility of the Discos to
collect their revenue from their customers.
Failure to do so should not be a penalty to
customers who pay their bills.
It is clear that removing the collection
losses will lead to lower tariffs for
consumers. The removal of collection losses
from customer tariff has reduced tariff by
more than 50 per cent in some places.
Please note that the reduction does not
affect the Central Bank of Nigeria (CBN)
facility and its repayment,” Amadi stated.
He added that with the new order,
collection loss which is defined as the
‘amount billed but not collected’, will not be
automatically passed on to consumers of
electricity going forward.
“Consequently, the collection loss for all
Discos is set at zero. It is now the
responsibility of Discos to convince the
regulator of any exceptional circumstances
for such loss to be passed to the
consumers,” he explained.
NERC equally emphasised that its new
direction in providing firm regulation to the
electricity industry, comes as part of the
commencement of the Transitional
Electricity Market (TEM) which is built on
bilateral trading between parties and is
geared towards ensuring an efficient
market where cost reflectivity will lead to
more affordable electric services for
consumers.
“As part of preparing for TEM, the
commission has issued a tariff review
regulation that requires the utilities to
consult with relevant consumer classes
before presenting a tariff review application
to the commission to approve.
“It is now the responsibility of the Discos to
prepare and present to the commission a
tariff that will ensure that they recover their
costs and ensure efficient operations,”
Amadi said in this regard.
He explained that the new order now
amends the MYTO 2.1 and has reduced the
tariffs to be paid by all class of consumers.
“In the review MYTO 2.1, the commission
followed due process and the regulatory
principles. The EPSR commits the
commission to ensuring full recovery of
prudent costs for efficient operators. In the
EPSR Act, NERC is obligated to make sure
that only prudent and efficient costs are
passed to consumers,” he said.
Continuing, he added: “The principle is to
ensure that the distribution company
operates efficiently and provide quality and
affordable services to consumers.
“NERC remains committed to the principle
of cost-reflective pricing and to the
development of an efficient and financially
viable electricity market.
“These are important to support the
INVESTMENT that is needed to ensure the
electricity supply industry meets the needs
of the Nigerian economy.

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