Tariff Blues

President Goodluck Jonathan

Disquiet as Federal Government increases electricity tariff, in addition to negotiating for an increase in gas supply to solve the nations perennial power problems
By Oji Odu
Since the takeover of the Ministry of Power by President Goodluck Jonathan, there have been fresh initiatives to bolster power generation and supply in the country.
The Federal Government had on Thursday, May 20, 2010, raised electricity tariff to N8.50 per kilowatt hour (KW/h), insisting that the change will only affect the wholesale price and not the retail price for consumers in the country.
Speaking at the annual review meant to obtain a fair balance in electricity regulation in the country, the Nigeria Electricity Regulatory Commission (NERC) Administrator, Imammudeen Talba said: “The 2008 tariff order had frozen retail of N8.50 for 2010 average per kilowatt hour. This years review will only affect the wholesale price and not retail tariff.
“Therefore, consumers should not expect any increase in their tariff beyond what was approved in 2008.”
Unfortunately, this does not tally with Federal Governments approval to the Power Holding Company of Nigeria (PHCN) to effect a 10 per cent increase in electricity tariff from N6.00 to N6.00 in May 2009, even without any reasonable improvement in power supply.
The Source’s findings also reveal that in order to justify the increase, the Federal Government had ordered an audit into the disbursement of the N177 billion electricity subsidy meant to cushion the effect of the pressure of to tariff variations on consumers under the Multi Year Tariff Order (MYTO) over a three-year period.
In recent past, the issue of disbursement of the fund had raised much dust in the NERC that the former chairman and Chief Executive Officer, Dr. Ransome Owan with seven other members of the board were charged with graft and removed.
Talba also revealed that the Federal Government had already released a total of N43.9billion out of the N177 billion subsidy for onward disbursement to beneficiaries.
“It is also pertinent to mention that the Federal Government has approved a subsidy of N177 billion over a three-year period to avoid rate shock to consumers. In this vein, the government has released a total of N43.9billion to the market operator for onward disbursement to beneficiaries, “ Talba said.
After efforts to reach Pekun Ademyanju, PHCN’s Principal Manager (Public Affairs), Ikeja Distribution Zone were unsuccessful, a reliable senior staff of the power company who does not want his name on print queried: “Where is the money to function? The MYTO which you think is released to us, we don’t have access to it.
“They divert it to the power plants sometimes, and at other times, we believe the money surely grows wings and fly away. Don’t ask me where? It’s really sad, and we hope Goodluck will definitely bring the sector luck.”
Low electricity tariff has been the bane of private investment in the sector, according to The Source’s findings. This makes it necessary for tariff rebalancing in the electricity market to balance the interests of both the producers of electricity and the consumers.
The producers argue that while electricity tariff had remained virtually static from 2002 until recently, yet prices of other products and commodities, transformers, cables and national gas required for the power plants continue to rise. Meaning, the cost of producing electricity has been on the increase and at a loss to producers, which is a high disincentive to investors desiring to participate in the sector.
On the issue of gas supply, in addition to the amnesty programme which has brought peace to the oil rich Nigeria Delta region, Talba noted that the NERC has successful negotiated and increase in gas supply to the PHCN by the Nigeria National Petroleum Corporation (NNPC) in return for an increase in the price of gas by the end of the year.
Talba: “The Commission has successfully negotiated an increase in gas supply to the sector with the NNPC, and agreed on the increase in gas price by the end of the year if the increase in supply sis sustained. In this way, our gas powered stations can have improved feed stock for improvement in generation.”
However, the new increase has been condemned by organized labour and other civil organizations who argue that such an increase is unnecessary bearing in mind the epileptic nature of electricity supply in the country and the extra hardship it will cause. They said that it is unjustifiable for government to effect this increase bearing in mind the recent major 10 per cent increase about a year ago.