Coronavirus Puts Flawed Electricity Tariff Hike To Test

Nigeria’s electricity supply industry faces yet another regulatory summersault, as the National Assembly, on Monday, toppled plans to increase the cost of electricity supply by as much as 50 percent. This came as senators yesterday vowed to compel the executive arm of government to bear the impact of a planned hike in electricity tariff if eventually deferred to next year.

Coronavirus Puts Flawed Electricity Tariff Hike To Test
Coronavirus Puts Flawed Electricity Tariff Hike To Test

In the same vein, the nation’s power generation companies (GenCos) yesterday in Abuja said they would consider meeting the Federal Government at the court of Arbitration if planned electricity tariff increase is not implemented today (July 1).

Reacting to intervention by the National Assembly, which deferred the tariff increase, Executive Secretary of the Association of Power Generation Companies (APGC), Joy Ogaji, said the government must increase the tariff today, (Wednesday, July 1, 2020) or GenCos would either collect their outstanding fees or head to court.

Ogaji also said that the operators would declare a force majeure and down tools.

“We are sick and tired of this back-and-forth. We are totally in support of the service reflective tariff as a path to viability and sustainability. If the government does not increase the tariff tomorrow (today), it’s either we are paid all our outstanding or we meet at Arbitration. If anyone wants to show favor, not at the expense of GenCos,” she said.

Ogaji added that the GenCos were obligated to generate electricity for Nigeria, and in turn receive 100 percent payment of their monthly market invoice as was agreed in the (PPA).

She disclosed that, while GenCos engaged in a massive capacity recovery, they have been constantly paid less than 100 percent of their invoice monthly.
“ From available data, as recent as April 2020, DisCos remittance was as low as eight percent. In context, an eight percent remittance leads to a 92 percent reduction in remittance to GenCos.

‘‘Six years after the privatization, GenCos’ Available Generation Capacity (AGC) has been exceeded. The implication of this is that GenCos have kept to their industry agreement with the Bureau of Public Enterprises (BPE) and the market.’’

On the contrary, representatives of electricity distribution companies (DisCos) had maintained that they would support the suspension of the planned hike only if the government would bear the differences in current tariffs and what was considered as appropriate.

Speaking on the issue before the Senate Press Corps yesterday, Chairman Senate Committee on power, Gabriel Suswam said: “Nigerians were heavily burdened because of COVID-19. The economy has contracted by 3.2 percent; that’s a lot. So, it makes it difficult for you and me to attend to some of our social problems.”

He expressed the hope that the executive would agree, even though it would come at a cost.

President of the Senate, Ahmad Lawan, Speaker of the House of Representatives, Rt. Hon. Femi Gbajabiamila and other principal officers of the two Chambers had met at the National Assembly with chief executives of electricity regulatory body and DISCOs across the country.

The National Assembly leaders were emphatic that the timing of the planned hike was wrong, even though they had no objection to cost-reflective tariffs to attract the much-needed investments.

In the course of the meeting, the DISCOs also admitted that they were not well prepared for the planned hike in tariffs; even though they desired the increase.

The meeting, therefore, agreed to defer the planned hike until the first quarter of next year, while the leadership of the National Assembly promised to meet with President Muhammadu Buhari on the matter.

Lawan said: “The agreement was that there was not going to be an increase in tariffs on July 1. While we are in agreement here that there is no question on the justification for increase, the time is simply not right and appropriate measures need to be put in place.”

DisCos and leadership of NASS are being accused of working to delay the take-off of the tariff. Owners of the companies reportedly lobbied lawmakers to delay the plan.

Though NASS only deferred the tariff increase to the first quarter of 2021, providing just a temporary relief for consumers, a lot of electricity consumers and civil society groups have expressed concerns, especially given the sorry state of the industry and its impacts on economic development and standard of living.

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