By Jennifer Anya
After two postponements this year, electricity distribution companies are finally being allowed to increase tariffs for consumers across the country. The new tariff incorporates a new metric that was previously absent in the 2019/2020 Minor Review. The new tariff is a Service-Based Tariff that aims to increase consumers tariff based on the service level they currently enjoy. Customers segmented based on energy demand into maximum demand customers (MD) and non-maximum demand (Non-MD) are now classified into bands based on the average hours of energy supplied daily.
A Necessary Bitter Pill
While the tariff increase was received well by the electricity supply industry, Nigerians are finding it to be a pill too bitter to swallow. The tariff increase has increased the cost of electricity for all consumers who receive a minimum of 8 hours above. For the Benin Electricity Distribution Company, tariff increase ranged from 9 – 25 % depending on the current supply rate. This move is one of the preconditions for the approval of a World Bank loan to the country. The aid exclusion was on the premise that the power sector was not operating a cost-reflective tariff regime thus finding it difficult to recover cost and make a profit. This increase presents a shift towards the actualization of cost-reflective tariffs and a path to sustainability for the electricity sector.
The DisCos have stated that the new tariffs will enable them to provide electricity for longer periods, operate a standard voltage profile, and respond quickly to faults as well as provide much-needed funds for infrastructure upgrades. Despite these promises, Nigerians are still not yet sold on their ability to deliver given the inefficiencies that have plagued the system for so long.
Find out the new Service-Based Tariff for your DisCo
The Metering Challenge
One challenge that has consistently eroded trust in the system has been the challenge of consumer metering. In June 2019, NERC reported that of the 8,881,443 registered electricity customers, only 3,811,729 (about 43 per cent) had been metered, with the remaining 57 per cent still on estimated billing. Reviewing the Service-based tariff order and the objectives it set for itself, it is impossible to ignore the value metering brings and it begs the question- what bias is used to determine the electricity run hours and billing of unmetered customers?
Although the country is making strategic efforts to get its citizens metered, timing is of the essence because every day without customers being metered worsens the sector’s liquidity issues. Many are requesting processes that are put in place to track performance. Being that the new tariffs are tied to specific service levels, customers are keen to find out what happens if the stipulated hours are not met for a consecutive period? How will the DisCos be held accountable?
The Nigerian electricity sector has earned quite a bad reputation for itself over the last couple of years owing to bad service delivery, customer service and regulatory inefficiencies and oversight shortcomings. Shortly after the tariff was announced, customers took to social media to express difficulties with their meter top-up or electricity supply. It is impressive seeing the effort DisCos are putting to solving customer complaints, a more hands-on-deck approach from all stakeholders would be needed to achieve customer-oriented service delivery.
We have all been waiting for the silver bullet for the service delivery challenges in the electricity sector, is it the Service-Based Tariff?