In a significant development that has been the subject of much anticipation, the Nigerian Electricity Regulatory Commission (NERC) has officially given its approval for tariff increases affecting the 11 Electricity Distribution Companies (DisCos) across Nigeria.
Following NERC’s endorsement of the tariff hikes, the DisCos are now poised to enact the implementation of these new rates, impacting electricity consumers in all 36 states of the Federation.
Sanusi Garba, the Chairman of NERC, made this announcement during a press conference held in Abuja, FCT, following the conclusion of the Federal Executive Council (FEC) meeting on January 17, 2024. Garba affirmed that the Commission has indeed granted permission for an upward revision of electricity tariffs for consumers.
According to reports, the Nigerian Government is prepared to allocate a staggering sum of N1.6 trillion in subsidies to support the cost of electricity in 2024.
Earlier, in June 2023, the DisCos had informed their customers about an impending increase in electricity tariffs, which became effective on July 1 of the same year.
The DisCos attributed the tariff hikes to the devaluation of the Naira and the necessity of ensuring the financial viability and sustainability of the electricity industry amidst ongoing currency challenges.
Consequently, with the unveiling of a new tariff plan applicable to electricity consumers, the industry’s Multi-Year Tariff Order (MYTO) stipulates that the order will take effect from January 1 of the current year and will remain in force until the issuance of a subsequent tariff review order by the Commission.
Garba elaborated that the Order delineates the appropriate tariffs that consumers should pay, allowing investors in the power sector to recuperate their operational costs within the Nigerian economy.
Furthermore, he emphasized that the Order reflects the Federal Government’s commitment to ensuring that, given the prevailing cost-of-living crisis, consumers are not burdened with higher rates than those charged previously.
“The order seeks to establish fair prices for customers and guarantees that DisCos can fully recover their operational costs, while also earning a reasonable return on the capital they have invested in the business, as stipulated by section 116 of the Electricity Act 2023,” Garba stated.
Elaborating on the specifics, Garba added, “Different DisCos will have different tariff rates based on their distinct legal entities, operating parameters, and efficiency levels. Therefore, you will see tariffs such as N110/kWh, N120/kWh, N130/kWh, and so on. For the first time, we have published the rates they should charge. We have also published the amount they are allowed to charge based on government policy.”
The Chairman further explained, “Given the ongoing cost-of-living crisis, the government has decided, for the time being, to continue subsidizing electricity. Thus, in the recently published order, you will observe that tariffs are not increasing. Instead, you will see what the DisCos should have been charging, as well as the amount of subsidy the government will provide to bridge the gap between the approved tariffs and the actual charges. With the approved tariff, the Federal Government is expected to subsidize electricity with a sum as high as N1.6 trillion in 2024, averaging N120 billion per month.”
The Tariff Order also revealed that the government will provide subsidies amounting to N233.26 billion (or N19.44 billion per month) for consumers served by the Abuja Electricity Distribution Company (AEDC) franchise in 2024.
For Ikeja Electric (IKEDC) customers, the government is expected to subsidize approximately N238.20 billion (or N19.85 billion per month) in 2024. Similarly, Enugu Electricity Distribution plc (EEDC) consumers will receive subsidies totaling N128.92 billion (or N10.74 billion per month) in the same year. Lastly, Benin Electricity Distribution Plc (BEDC) patrons will benefit from a cumulative subsidy of N140.85 billion (or N11.74 billion per month).
Regarding the issue of metering consumers, Garba acknowledged that DisCos face financial challenges in providing meters to their customers. He explained that the Commission has identified financing as a key obstacle, as DisCos struggle to secure capital from banks for metering initiatives.
“To address this challenge, we have set aside a fixed amount from market revenues, which will be ring-fenced and dedicated to metering provision. This measure is intended to demonstrate to potential lenders that there is a viable pathway for DisCos to repay any loans they acquire,” Garba stated.
The Chairman clarified, “We are not implying that the monthly market revenues will be solely used for purchasing meters. Rather, the funds will serve as evidence to lenders that there is a sustainable mechanism for the DisCos to finance their metering projects.