Last week a high court in Lagos annulled the electricity tariff hike that took effect in February saying it wasn't introduced through due process. Power supply firms have appealed the judgement, but the National Electricity Regulatory Commission (NERC) has said it intends to comply.
MAIN FINDINGS
Last year, Nigerian power distribution firms announced there would be a dramatic 45% hike on both business and household tariffs starting in February 2016, having got the go-ahead from NERC. The matter was contentious at the time and has remained so; pitting consumers and their representatives against distribution companies and the regulators.
The matter was even debated in the House of Representatives with some members arguing price increases should not precede improvements in supply. The hike took effect as announced however, discos attempted to offer some reprieve to consumers by also cancelling a fixed, compulsory charge that users had to pay every month. One lawyer Toluwani Adebiyi sued the supply firms and the regulator and last week, the federal high court in Lagos finally ruled that the hike was illegal and should be reversed. The Nigerian Labour Congress applauded the judgment but the situation has unsettled stakeholders in the power industry and the Association of National Electricity Distributors (ANED) has said it will fight the case.
Sunday Oduntan, Director of ANED which comprises all distribution companies in the country, said after last week's ruling, "[We] have no problem with the ruling but we are appealing it, because at that level it is not final. For that reason, we are going on with our business without any distraction and we will continue to fight the case up all the way to the Supreme Court if need be. Therefore, in essence, nothing has changed."1
Meantime the NERC has called the ruling a setback for the power sector but also hinted that it would comply. The regulator said, "[NERC] respects this decision but is dissatisfied because it represents the reversal of the foundation upon which contracts are predicated. This foundation is upon which contracts for gas, hydro, coal and solar feedstock for production of power have been been predicated."2
Not Enough Power to the People
Despite the February hike, power supply has mostly worsened this year mainly due to a chronic shortage in power generation. Generation has been only 2,500MW nationwide—barely enough supply for Lagos on its own, much less the entire country. This has hindered distribution companies from delivering, coupled with the fact that most end-users are on a postpaid plan and often don't pay for their electricity until after they've been supplied. This also disinclines the firms from doing their part to improve supply.
Meanwhile, for the consumer issues such as estimated billing, non-availability of the prepaid meters, etc., linger without solution, coupled with the declining supply capacity, continue. The feeling among stakeholders that their interests have not been adequately considered is an important corollary for this anger also. Although paragraphs 3 and 16 of the guidelines for review of the Multi Year Tariff Order 2 (MYTO 2.1) published by NERC allows for due consultation with all relevant stakeholders before price reviews are implemented, key interest groups argue that these rules have not been respected.
In the Vanguard newspaper a Manufacturers Association of Nigeria executive Ikpong Umoh was quoted earlier this year stating, "My worry is that [increases] in power tariff [are] too frequent and [are] not usually commensurate with the quantity of electricity the power companies gives us, meaning we are actually paying for what we are not using. For example, increase in electricity tariff in the past did not bring about increased in electricity supply for consumers. "So the power companies should have improved on power output for consumers first before increasing the tariff again. But now, they have increased the tariff without increasing the capacity of power supply for consumers to have value for the money they are paying. Something must be done about this."3
OUTLOOK
Low output from generating plants caused by deficient infrastructure will prevent any significant improvement in supply in the short term. At the same time, distribution companies (discos) will continue to challenge court rulings that favour this tariff reversal. Despite the statement in favour of the ruling, NERC's sympathies will likely remain with the discos and the current tariffs will likely remain in the short term, even though the legal setback will deter further hikes in the near future. Meanwhile, Nigerian businesses must continue to factor power generators and inverters into their financial plans and the rationale for off-grid solar energy looks better by the day.
Footnotes
[1] http://punchng.com/power-nerc-reverse-45-tariff-hike/
[2] https://www.twitter.com/NERCNG?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
[3] http://www.vanguardngr.com/2016/02/how-45-electricity-tariff-hike-will-affect-you/
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