Electricity Tariff Hike Looms As Discos Apply For Rate Review

Posted by African Examiner Featured, Latest Headlines, News Across Nigeria Friday, July 14th, 2023

(AFRICAN EXAMINER) – Eleven successor electricity companies have applied for a review of their respective electricity tariffs, the Federal Government has disclosed.

Disclosing this through a notice published by the Nigeria Electricity Regulatory Commission (NERC) on Friday, the Federal Government said the request for rate review is premised on the need to incorporate changes in macroeconomic parameters and other factors affecting the quality of service, operations and sustainability of the companies.

In the notice obtained by Channels Television, NERC stated that Discos request for rate review is in pursuant to Section 116 (1) and 2(a&b) of the Electricity Act 2023 and other extant rules.

A recent attempt by some electricity distribution companies to hike tariff from July 1 had caused uproar and met strong resistance from Nigerians.

The Nigerian Labour Congress (NLC) had asked the government to shelve plans aimed at increasing electricity tariffs in the country, saying it was insensitive and callous to effect hike in power tariff when consumers are still grappling with the hardship caused by the removal of petrol subsidy.

It appeared the public outcry worked as it was observed that the Discos shelved the planned tariff increase on July 1.

However, the increase may still happen with the Thursday notice by NERC that the Discos have now applied for rate review.

The regulatory body also stated that it will conduct a Rate Case Hearing on the applications prior to making a ruling as part of the rule-making process and in the exercise of the powers conferred by the Electricity Act.

“Accordingly, the Commission hereby invites the general public for comments on the rate review applications by the distribution licensees. Interested stakeholders are advised to review and take into consideration the excerpts of the Rate Review Applications filed with the Commission by the respective licensees,” NERC stated.

The Commission called on all members of the public and stakeholders to send their comments or representations before the close of business on 20th July 2023.

The NERC tariff review process was designed with the intent of undertaking major reviews every five years.

Additionally, an extraordinary tariff review is triggered when a Disco requires additional investment beyond the permitted capital expenditure, or when unforeseen operational, legal, or regulatory costs need to be reasonably passed on to consumers.

Minor reviews are also scheduled every six months to adjust tariffs based on changes in gas prices, foreign exchange rates, generation output, and inflation.

In the rate review application of one of the Discos, Ikeja Electricity Distribution Company, it stated that the tariffs are consistently falling below cost-reflective levels because the parameters are not aligned with the current reality of the business putting pressure on Discos and government to subsidize the tariff gaps.

This, it added, undermines the Discos’ ability to fulfill their obligations under the Performance Agreements and Vesting Contract and exacerbates the liquidity challenges in the electricity sector.

Also, Abuja Electricity Distribution Company, said it requests that the Commission take into account the amended end-user rate since it represents business realities for continuity and sustainability.