Senate Committee Recommends Suspension of Electricity Tariff Hike Pending Legal Resolution

The Senate Committee on Power on Thursday recommended the suspension of the planned hike in the electricity tariff, after the Chairman of the panel, Senator Enyinnaya Abaribe, presented the report at plenary.

Majority of the senators who contributed to the debate commended the panel and urged President Bola Tinubu to suspend its implementation.

Further deliberations on the issue was however stepped down because it is currently before a Federal High Court in Kano.

The Committee in the report, recommended among others, that the Nigerian Electricity Regulatory Commission (NERC) should suspend the ongoing implementation of the Multi Year Tariff Order (MYTO) 2024.

The MYTO as released by the NERC, had approved over 200 per cent upward review of the previous tariffs from N68/kWh to N225/kWh.

The Senate panel said the suspension would allow for robust consultation with customers on the various bands on the cost of service instead of heavy reliance on feeder location and duration of service which are difficult to determine and monitor.

The panel also recommended that the NERC should ensure full compliance with the mandatory requirement of stakeholder consultation under Section 48 of the Electricity Act, 2023 regarding future regulatory decisions to avoid a repeat of the confusion and public outcry that trailed the recent tariff increase.

Other recommendations were: “That the Ministry of Power and NERC should in the meantime adopt measures to address the problem of power scarcity holistically rather than its preoccupation with price manipulation which has proven to be counterproductive.

“That NERC should hold the Discos accountable on Key Performance Indicators (KPIs), including failure to deliver on capital expenditure and operating expenditure allocations, customer metering obligation under the Electricity Act, 2023, essential customer service obligations including customer sensitisation, implementation of energy credits for customers who invested in transformers meters and other assets on the Disco networks.

“That rate designs should only be cost-reflective if proper account is taken of the relevant macroeconomic environment that determine the affordability of electricity to the different segments of the market.

“That the federal government metering intervention should be encouraged and intensified to address current metering gap of 6.3 million.

“This must be pursued by the federal government without prejudice to the statutory obligation of Discos to meter their customers as provided under Section 68(1)(b) of the Electricity Act, 2023.

“In this regard, Mr. President should be commended for the introduction of the Presidential Metering Initiative (PMI).”

It further advised the Ministry of Power to intensify efforts towards honouring the subsisting contract with Ziklagsis Networks Ltd (ZNL) for the manufacture, supply, installation, management and maintenance of Pre-Paid Meters (PPMs) in Nigeria.

“It should also intensify efforts on the recent Tripartite Metering Project Consortium Agreement between ZNL and De-Haryor Global Services Limited and the Nigerian Army dated September7, 2023 which was signed by ZNL for the metering of Army Barracks and other Military Facilities or in the alternative refund the initial funding to the Federal Government.

“That vigorous implementation of power decentralisation provided for under the Constitution of the Federal Republic of Nigeria, 1999 (As Amended) and the Electricity Act, 2023 to relieve the Federal Government of the pressure to electrify every nook and cranny of this country should be encouraged,” the senate added.

It further said that the Ministry of Power should establish Electricity Consumer Protection (ECP) Unit to develop, implement and enforce Electricity Consumer Protection component of the Electricity Act, 2023.

The panel noted that since the conclusion of the privatisation of power assets in 2013, the Nigerian electricity market has been  plagued by huge liquidity crisis that cuts across the entire power value chain.

It explained that the development was attributable to the subsidised tariff regime whereby the federal government bore the responsibility for between 75 per cent to 91 per cent of the monthly invoices as tariff subsidy.

It stated: “The official figures made available to the Committee in the course of its investigative hearing indicates that although federal government subsidy obligation reduced from N528 billion in 2019 to N144 billion in 2022, it  rose again to hit N2.9 trillion in 2024 due to foreign exchange and inflation while legacy debts of gas supply companies now stood at $1.3billion.

“The Minister of Power, the NERC and the Discos were unanimous in their presentation that the over 200 per cent upward review in electricity tariffs which affected Band A category of customers was the best option to reduce subsidy burden from N240 billion per month to about N100 billion per month.

“However, the preponderance of stakeholder opinions support the suspension of the tariff increase due to bad timing and poor consultation which is against the provisions of Sections 48 and 49 of the Electricity Act, 2023.

“The upward review of tariff under the MYTO 2024 is a Service Based Tariff (SBT) rather than a Cost Reflective Tariff and it was justified by NERC on the basis of the feedback NERC received after the public hearing on tariff review which is expected to catalyse investments by Discos and strengthen the current migration away to bilateral contracts which will allow Discos to pay the right rates.”

On the metering, the Committee said it found that 47 per cent out of the 12, 121, 051 grid connected customers are currently metered leaving a metering gap of about 53 per cent (6.3 million) of unmetered customers which is  exclusive of meters that may need to be replaced and the upcoming customer enumeration that is ongoing.

“However, Discos are subject to a Capping Order to ensure that customers under estimated billings are not subjected to arbitrary bills by DISCOs pending when they are metered,” the panel added.

On the mandate of the Committee to ensure judicious utilisation of the N10.5 billion naira penalty imposed on Discos, the Committee said it found out  that the penalty imposed on Discos for non-compliance with the Capping Order is not cash payment but a direct reduction in their approved operating expenses  chargeable to customers via tariffs.

The committee also lamented the absence of consumer affairs department/unit in the Ministry of Power to drive the demand side issues in the sector.

About 10 senators who contributed to the debate which lasted about 20 minutes hailed the Committee’s report and it’s recommendations.

In his contribution, the Chief Whip of the Senate, Ali Ndume said the plan by NERC was discriminatory and unconstitutional.

“I am surprised with the sudden hike in electricity tariff which is against the constitution. When I heard about this, I checked the constitution and what they did was discrimination which is against the constitution.

“If you are living among the masses, you are getting power from Band A and others are not, it’s discrimination,” Ndume said stating that he is happy the president is not buying into such policies.

But the Chairman Senate Rules and Businesses, Senator Titus Zam, suddenly raised a point of order, drawing attention of the Senate leadership and his colleagues to the fact that the matter was subjudice since a federal high court in Kano has issued an injunction on it already.

Senator  Jimoh Ibrahim, supported the position of Zam and said it would be an aberration if the Senate should continue to debate an issue that is subjudice.

Attempts by Abaribe, whose panel presented the report to convince the Presiding Officer to ignore the submissions of Zam and Ibrahim, failed.

In his ruling, the Deputy Senate President, Jibrin Barau, who presided over the plenary, said the legal department should be involved so that the Senate could be properly guided

He advised that the report should be stepped down for further legislative actions.

Sunday Aborisade

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