Fix the perception problem with electricity tariff increase

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Many Nigerians react negatively to any news about electricity tariff increase and this is largely due to the perception that they are paying for darkness. Since the model on which electricity pricing is based demands a biannual review, it is important that stakeholders fix the perception problem with tariffs.

For example, Nigeria’s eleven power distribution companies (DisCos) collected N56.1billion in December as revenue, the highest ever, on the back of the newly introduced service-based tariff.

According to data from DisCos principal Accounts, for the past six months, the average collections was N45.6billion but collections rose in December, the first full month of the implementation of the Service-Based Tariff for electricity consumers in Bands A – D by over 15 percent more than the November collections of N47.7billion on the back of the SBT.

But customers around the country complained that electricity bills were outrageous in that period. Many took to social media expressing their disappointment. Our review indicates that their complaints were valid. Without meters to measure consumption, and the regulator’s unwillingness to enforce the cap it placed on estimated billing, DisCos were writing bills upon a cruel exercise of discretion.

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While improved DisCo revenue is good as it could spur new investors into the troubled power sector and make available more funds to settle the invoices of other market players, many Nigerians who are on estimated billing say they are being cheated and are calling for rapid deployment of electricity meters. If customers are left feeling cheated that will not augur well for sustainability in the sector.

The Nigerian Electricity Regulatory Commission (NERC) introduced the Service-Based Tariff plan in July 2020 but it could not take effect until December due to the challenges with COVID-19 and labour protests.

Under the SBT, customers are grouped in different tariff bands according to the number of hours of power supplied daily with the highest receiving 20 hours or more, paying between N45 and N55 kwh and the poorest people getting less than 4 hours of supply daily and seeing no increase in their tariff.

Therefore to fix the image problem electricity pricing has, DisCos should begin to communicate better how tariffs are arrived at to their customers in the different bands. This involves more than a routine press release, but convening stakeholder meetings with community development associations and advocacy groups in the sector, as well as deploying technology including social media to drive home the message.

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Much clarity is still required on how the Service-Based Tariff is supposed to work. Many customers are unclear about what tariff bands they are placed. Customers who have been placed on Tariff Band A dispute the DisCos claim that they send them 20 hours of supply daily. In reality, no DisCo is meeting its supply contract under the SBTs and why many are not protesting is because of the uncertainty surrounding which bands different customer clusters are grouped.

The Multi-Year Tariff Order (MYTO) that contains the parameters for pricing electricity is meant to be reviewed twice every year to bring it into harmony with economic realities such as gas prices, inflation, and exchange rates. NERC needs to resist pressure from the Federal Government to halt these reviews. In January, the minister of power intervened to stop the first MYTO review for 2021, a development that makes a mockery of the regulator’s claim that it is independent. This is unacceptable if we must build a sustainable electricity market.

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Current efforts to meter Nigerians should be stepped up as customers are only seeing words rather than meters. On the one hand, the Federal Government claims it is issuing free meters under the National Mass Metering Programme (NMMP) but drill down a little, and confusion sets in. The DisCos tell customers that meters are not free, the Meter Asset Providers tell them that the government has suspended metering, the regulator says someone will pay for the meters, and the Central Bank is writing checks and imposing new conditions.

Nigerians cannot accept a tariff increase if they think they are not getting a fair deal. Therefore metering should be a priority followed by the actual supply of electricity if the communication to improve opposition to tariff increase will succeed.

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