The subject of electricity tariffs in Nigeria has been quite unsettling. According to the Nigerian Electricity Regulatory Commission’s (NERC) Multi-Year Tariff Order (MYTO), which came into force in 2008, NERC should review electricity tariffs bi-annually. However, this has not always been the case. In 2015, end-user consumer tariffs were frozen until 2019, when a minor review occurred.
Since the minor review, tariff adjustments have been irregular, with about a 60% increase in the average tariff within four years. Understandably, prices are adjusted to reflect changes in inflation, exchange rate, and gas prices. This is because the purpose of the MYTO was to set a “cost-reflective” tariff that must consider the costs of generating electricity, transmitting electricity to distribution centres across the country, and distributing it to end-use consumers.
While the MYTO attempts to reflect all these costs, it is imperative to note that the total electricity cost has never been charged to customers. However, in September 2020, NERC commenced the Service Base Tariff regime, where customers are charged based on the hours of supply they receive from their distribution service provider (DisCo).
The above notwithstanding, end-use electricity consumers bemoan under the unbearable weight of the rising cost of power in the face of unreliable power supply and regular grid collapses. Surprisingly, even the “rich” have expressed their gross dissatisfaction with the cost of electricity as a customer in Lagos lamented paying N72 per unit of power, which by far exceeds the maximum price cap for electricity per kilowatt-hour in the highest customer band.
With the recent drive to increase energy access in Nigeria, especially in unserved and underserved areas, which are predominantly rural areas, the electricity tariff increment begs for a redefinition of energy access. This redefinition is critical because 70% of customers in rural regions scrape by for daily sustenance (food and water) and cannot afford basic education and healthcare. If left unchecked, in the long run, the people to whom the electricity supply was extended will be unable to pay for their power consumption.
To ensure that the efforts toward 100 percent energy access are not futile, the vision for universal access to electricity must align with the goal of improved reliability and affordability of power. Failure to address this critical issue will result in available power being unutilized, as end users will be unable to pay for it. Worse still, the rate of energy theft, unauthorized access, and meter bypass (where meters are available) will increase exponentially and spiral out of control. Bearing this in mind, let us think again, what do we want to achieve with energy access: available capacity or reliable and affordable power for the people?