By Obas Esiedesa, Abuja
The dispute over electricity tariff setting in states with their own regulatory commissions escalated yesterday, as power generation and distribution companies (GenCos and DisCos) insisted that electricity pricing at wholesale level must be determined nationally.
The controversy stems from a recent order by the Enugu Electricity Regulatory Commission (EERC), which slashed the Band-A customer tariff from N209/kWh approved by the Nigerian Electricity Regulatory Commission (NERC) to N160/kWh.
While the EERC move has the backing of the Forum of Commissioners for Power and Energy in Nigeria (FOCPEN), it has drawn strong opposition from GenCos and DisCos with industry experts warning that the disagreement could threaten electricity supply and further strain sector liquidity.
The distribution companies in note to Vanguard under the aegis of the Association of Nigerian Electricity Distributors (ANED) said the action of EERC would lead to disruptions in the sector.
According to the Managing/CEO, ANED, Barrister Sunday Oduntan, “since the release of the Tariff Order by EERC for Enugu State residents, the Electricity Distribution Companies in other States have come under intense pressure and scrutiny to also reduce tariffs, while some customers have taken a position that they will no longer pay their electricity bills until tariffs are reduced.
“Permit us to establish the fact that as service providers, it is our hope and desire that electricity tariffs at some point should begin to come down with time. It is not our intention to make life difficult for our loyal customers, and we have been aligning with the Federal Government to ensure provision of stable power supply”.
He argued that the cost reflective tariff for electricity is as a result of the
“economic realities of our nation”.
He noted that with the industry weighed down by over N5 trillion debts due to Federal Government failure to meet its subsidies commitment, a further reduction would worsen the situation.
“We note that one of the principles adopted by EERC is to place reliance on the Policy of the Federal Government on electricity subsidies to enable them crash Band A Tariffs. While Discos are not opposed to subsidies in principle, we strongly emphasize that subsidies must be
transparently structured and promptly funded. Delayed or unfunded subsidies create cashflow disruptions, undermine market confidence, and deepen the existing liquidity crisis across the electricity value chain”.
Similarly, the GenCos expressed concern that the move by the states would increase the level of government indebtedness, wondering how the states would regulate the price of a product they do not produce.
The Executive Director, Association of Power Generation Companies (APGC), Dr Joy Ogaji said: “The fact speaks for itself. The fact that EERC still regulates a product it does not produce at the state level, but from the wholesale market, they cannot unilaterally regulate that price. While their reference to NERC’s tariff regulations which assumes a subsidy that I deem imaginary and a smokescreen (because there is no written policy from FGN that there is a subsidy neither is there a financing plan to backstop the ever growing and accumulating debts which has impaired GenCos books). Their claim based on an imaginary subsidy is baseless. You can’t build something on nothing.
“Tariff documents are not child’s play. They form the fulcrum for many decisions including business decisions, potential investors etc.
This regulatory rascality will not be sustainable for the decentralisation of the electricity market”, she stated.
Dr Ogaji insisted that the states cannot decide on tariffs for products they have no input on.
On his part, electricity market expert, Lanre Elatuyi said with the new situation in the market, the Federal Government has to establish a wholesale market for electricity.
He said: “In the light of inadequate provision for subsidy, it becomes imperative for the Minister and NERC to declare the commencement of Medium Term Market- Competitive Wholesale Electricity Market in phased manner by ensuring that a certain percentage of DisCos load is bought in the Wholesale market to be administered by NISO (National Independent System Operator) while NBET (Nigerian Bulk Electricity Trading Plc) still manages the remaining capacity or there is total novation of contracts.
“NISO should develop a White Paper for the Competitive Wholesale Market, conduct all the stakeholders’ engagement and get the right expertise for the design of the market”.
He added that the assurance of reliability by the Transmission Service Provider (TSP) “must be there and all the trading points adequately metered.
This appears to be the opportunity to become more efficient and take a bold step forward.
“The issues of existing obligations have to be sorted and shared accordingly to all parties. You can’t lay claim to assets while ignoring the liabilities”.
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