NERC’s eligible customers rule injurious to DISCOs, low consumers, says ANED

Distribution Companies (DISCOs) have warned that, with Eligible Customers the major category cross-subsidising electricity supply to residential consumers at about N10/kWh to N1/kWh consumption ratio, the new regulation would significantly increase tariff for low consumers and clog distributors’ capacity growth. The regulation as announced by the Nigerian Electricity Regulatory Commission (NERC) allows consumers of over 2mwhr of electricity per month to contract directly with power generators, primarily to promote competition and increase power supply. However, the Association of Electricity Distributors (ANED) contend that the envisaged efficiency would not happen as the same class of Eligible Customers also contributes an average of 60 per cent to the DISCOs’ revenue, meaning that they would not be able to operate. Explaining the distributors’ reservations over the policy, ANED Executive Director, Research and Advocacy, Sunday Oduntan, said the incidence of the huge revenue gap on the residential class through tariff increase would be a minimum of N4 per kWh. ANED described the policy as counter-productive, “premature and inconsistent with the pre-conditions under the Electric Power Sector Reform Act (EPSRA) 2005,” as “the residential customers, some of whom are already dealing with issues of affordability, will have to bear the burden of the implementation.” It urged policy announcements that might claim that such increases would not be imposed on the consumers to answer the question, “how will the gap be addressed? If the answer is via a subsidy, it is then important to highlight that the current market shortfall of N892 billion (through August 2017) is a product of similar commitments that have not been met.” According to the association, these include “debt free books, cost-reflective tariff, payment of N100 billion subsidy, payment of MDA debt, and commitment to return of, and return on investment for the investors. “Unfortunately, the regulation will further contribute to the DISCOs’ inability to recover the revenues that will enable them make the capital investment critical to injecting efficiency into electricity supply to customers.” Oduntan further explained that the notice of force majeure was not a declaration in itself but of concern that already on the verge of bankruptcy, the DISCOs would be further constrained to meet the obligations of their Performance Agreements with the Bureau of Public Enterprises (BPE. He added: “Unless we begin to see a consistency of sector governance, a critical requirement for the viability and sustainability of the Nigerian Electricity Supply Industry (NESI), it is unlikely that we will achieve the objective of 24/7 power supply, an outcome that all Nigerians deserve.” ANED noted: “The level of competition envisaged, which should be in tandem with sufficiency of power supply, does not currently exist, nor has there been an implementation of the Competition Transition Charge specified under the Act.”