Electricity tariff about to increase

The chief executive officer of Benin Distribution Company, BEDC, Mrs. Funke Osibodu has said that electricity tariff increase is inevitable and Nigerians should expect an adjustment which will come at any time.

The present tariff structure she argued is not sufficient to support commercial operations of distribution companies, Discos and therefore not sustainable.

Speaking exclusively with our correspondent yesterday, she said implementation of the Multi Year Tariff Order, MYTO, is key to promoting quality services and efficiency in the system.

LEADERSHIP reports that the MYTO is a tariff system designed for the Nigerian Electricity Market to provide a unified way to determine efficient total industry revenue requirement, and provide a 15 year tariff path in the power sector with minor reviews each year due to certain factors such as gas prices, exchange rate and inflation, and major reviews every five years, when all inputs are discussed with stakeholders.

Also, the MYTO is used to set wholesale and retail prices in the Nigerian Electricity Market and on the 18th December 2015, the Nigerian Electricity Regulatory Commission, NERC, set a new electricity tariff for DISCOs for 2015-2024, which requires consumers in different categories and location to pay different charges for each.

Osibodu also ruled out immediate deployment of meters to all customers as distribution companies, Discos, are constrained financially to execute their metering plans.  She said that various initiatives put in place by government to close the yawning meter gap has failed because they were not properly articulated and managed to ensure a fruitful outcome.

A key hindering factor, according to her, is regulation of capital expenditure, CAPEX, of the distribution companies.

“When you put a peg as to what we spend on capital projects, we are then constrained because metering is a huge project for the Discos and when you have a limitation you cannot make progress”.

She said the country needs a reorientation on energy conservation as most households waste energy because it is very cheap. According to her, 50 per cent of electricity consumers in the country are not customers but a population of energy thieves who are connected illegally on their own or through collaboration of operational staff.

“The system was unable to capture this distortion until we embarked on customer enumeration in an attempt to entrench efficiency and promote accountability, but again we find out that 70 per cent of the remaining 50 per cent also bypass their meters.

“At one point you hear people complain they want meter and then again at some point we encounter resistance from others who will not want meter installed because they cannot manage what they use. So that is why we need total overhaul and reorientation to be able to manage the system and bring efficiency into it”, she added.

Reacting on the recently released draft for establishment of Independent Metering Service Providers, by NERC, Osibodu said, the initiative is all about facilitating government metering project.

“I have not studied it but we are expected to make input to move to its adoption and implementation but again I don’t see this coming immediately.

“We need to sit down and articulate ways of achieving this goal, as Discos it is our desire to meter customers and this we have been doing to our ability and we will continue to support initiatives that will bring about efficiency and transformation”, she said.

Speaking on the controversial eligible customer being introduced by the ministry of power, Osibodu said that it is a decision of the government but which is contrary to agreement entered into before new investors agreed to put down their money to buy the power assets.

LEADERSHIP recalls that in a major policy directive, the Honourable Minister of Power, Works & Housing, Mr. Babatunde Raji Fashola, has on May 15, 2017, declared four (4) categories of eligible customers in the Nigerian Electricity Supply Industry (NESI). The declaration which permits electricity customers to buy power directly from the generation companies is in line with the provisions of Section 27 of the Electric Power Sector Reform Act 2005 whereby eligible customers are permitted to buy power from a licensee other than electricity distribution companies. In exercising the power conferred on him by the said Act, the minister directed the NERC to permit four categories of customers to buy power directly from a licensee other than electricity distribution companies.

The first category of eligible customers comprises of a group of end-users registered with the Commission whose consumption is no less than 2MWhr/h and connected to a metered 11kV or 33kV delivery point on the distribution network and subject to a distribution use of system agreement for the delivery of electrical energy.

The next category of eligible customers are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy. Other category of customers under the declaration consists of those with consumption in excess of 2MWhr/h on monthly basis and connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement.

Eligible customers in this category must have entered into a bilateral agreement with the distribution licensee licensed to operate in the location, for the construction, installation and operation of a distribution system for connection to the 33kV delivery point.

The last category are eligible customers whose minimum consumption is more than 2MWhr/h over a period of one month and directly connected to the metering facility of a generation company, and has entered into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location. The new policy directive is expected to bring into play new and stranded generation capacities which may be contracted between generation companies and eligible customers.

The declaration further provides that at least 20 per cent of the generation capacity added by the existing or prospective generation licensee to supply eligible customer must be above the requirement of the eligible customer and is supplied under a contract with a distribution or trading licensee at a price not exceeding the average wholesale price being charged electricity distribution companies by the Nigerian Bulk Electricity Trader Ltd. The conditions for the declaration of eligible customer is subject to review by the Nigerian Electricity Regulatory Commission from time to time. But Osibodu faulted the move saying it was not conspicuously captured before investors made their investment decisions but again wondered how these customers within the corporate category that have difficulty settling electricity bills charged At about N38 to elect to buy directly from generation companies, Gencos at about N60.

Credit: Leadership Nigeria