Although the regulator plans to increase electricity tariffs on April 1, it says the amount of money recoverable by power distributors from consumers will fall short of their revenue requirements, ’FEMI ASU reports
Electricity distribution companies in the country will record a tariff shortfall of N545bn this year, an analysis of data obtained from the Nigerian Electricity Regulatory Commission has shown.
According to the regulator, the Federal Government will fund the tariff shortfall through the Nigerian Bulk Electricity Trading Plc and the Market Operator, an arm of the Transmission Company of Nigeria.
The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells through vesting contracts to the Discos, which then supply it to the consumers
NERC, in its December 2019 Minor Review of Multi Year Tariff Order 2015 and Minimum Remittance Order for the Year 2020 for the 11 Discos, said on Saturday that consumers would start to pay more for electricity from April 1, 2020.
It said the Federal Government had, in the interim, committed to funding the revenue gap arising from the difference between cost-reflective tariffs determined by the commission and the actual end-user tariffs payable by customers.
According to the commission, tariffs will be fully cost-reflective by the end of 2021.
It said all the Discos “are obligated to settle their market invoices in full as adjusted and netted off by applicable tariff shortfall.”
“All the FGN interventions from the financing plan of the PSRP for funding tariff shortfall shall be applied through the Nigeria Bulk Electricity Trading Plc and the market operator to ensure 100 per cent settlement of invoices issued by market participants,” NERC added.
Tariff shortfall is the difference between the Discos’ revenue requirements and what they are allowed to recover from their customers by the regulator.
Yola Electricity Distribution Company will suffer the biggest tariff shortfall of N68.35bn this year, while it is allowed to recover N107.99bn, according to NERC data.
On July 2015, the Federal Government took over Yola Disco following the exit of the core investor after it declared a force majeure, citing insecurity in the North-East region of the country.
Abuja Electricity Distribution Company has a shortfall of N57bn, with allowed recovery of N86.25bn.
Ikeja, Eko, Ibadan, Enugu, Benin, Kaduna and Jos Discos have tariff shortfall of N48.48bn each while they are allowed to recover N65.79bn each from their customers.
Kano Electricity Distribution Company and Port Harcourt Electricity Distribution Company have tariff shortfalls of N41.68bn and N38.25bn respectively. They are allowed to recover N55.46bn and N45.69bn respectively.
“We need to check the integrity and credibility of the costing; some of the costs arise from inefficiency because there is a lot of inefficiency in the system,” The Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, told our correspondent in a telephone interview.
Yusuf, who noted that the Discos were incurring technical, commercial and collection losses, said it would be unfair to make the consumers bear the burden of their inefficiency.
He said consumers would not be willing to stomach the planned tariff hike because of the current level of power supply and the state of the economy.
“There has been no commensurate improvement in the power delivered to the consumers,” he added.
The LCCI DG said there was a need to revisit the entire structure of the Nigerian electricity supply industry, adding, “We need a model that will work.”
The Minister of Power, Mr Sale Mamman, hinted in December that with the anticipated improvement in power supply, the increase in electricity tariffs was inevitab