Tariff Hike Will Increase Investment In Nigeria’s Power Sector, Says NERC Vice Chairman Musiliu Oseni

The Vice Chairman Market Competition Rate of the Nigerian Electricity Regulatory Commission (NERC), Musiliu Oseni, has said that the recently implemented increase in electricity tariff will attract more investment into Nigeria’s power sector.

While discussing the NERC’s increase of its electricity tariff from N68 To N225 per kilowatt hour targeting approximately 15% of the commission’s customers in an interview with ARISE NEWS on Thursday, Oseni said that investors will not invest in an area that is still being subsidised by the government.

Speaking of the reasons for the increase in the tariff for Band A users, Oseni said that the increase in tariff will increase the revenue brought into the industry, which will in turn, boost investment in Nigeria’s power sector.

Addressing the need for more revenue in the power sector, Oseni cited the frequent collapses of the national grid as he said, “One factor that was responsible for this last one had to do with reduction in gas to one of the powerplants, and also you have the issues of lack of maintenance by the generation companies. And the question is, what contributed to that- both dip in supply of gas as well as generation companies’ inadequate maintenance? It boils down to money. Any investor will not invest when there is no path to recovery. For instance, the January generation invoice stood around 240 billion.

“So, based on the tariff discos charged before yesterday, they can only be mandated to carry about 10% of that. That means the market will only do about 10% of the invoice, and how do you operate such a market and you expect a quality service? So, those are part of the issues that we need to address. Of course, we can say government will continue subsidizing, but investors are very sensitive when the market they are entering is depending wholly or significantly on government intervention. Investment will drag.

“So, that’s another reason why this review is also necessary, to ensure that we begin to reset the industry for the betterment of everybody. It’s better for people to have power supply at 20 hours and above at the rate of N225 per kilowatt hour than having to spend N600 using diesel generator or spend about N350 or N300+ using petrol fuel generator.”

Further explaining how the increase in tariff will go about, Oseni said, “The feeders that are going to be affected by this increase are the feeders that have been proven to have received average of 20 hours of supply per day. And of course, many people are saying that there are no feeders that have experienced 24 hours, and I did mention that we live in different locations. There are some people in some areas- Maitama, Asokoro, and few other places that have experienced average of 20 hours of supply of electricity. Of course, it’s not uniform, that is the reality of the matter.

“And that’s why initially, the number of feeders that were previously classified by the discos as Band A feeders are more than 1,000, the were around 1,100. So, upon the review of the feeders that have actually been experiencing 20 hours of supply average, with the only approved number of feeders by the commission as of today, is 481. Discos have the opportunity to provide compelling evidence, empirically backed up and verifiable prior to the commissions approving any additional feeders to go through to that.

“So, there are feeders in some locations, in Akpo for instance, in Abuja here, there are a few feeders in Akpo that have access to average of 24 hours of supply, in the same area, you will also see some feeders that probably, they have 8 hours, you will see some feeders with maybe 4 hours and so on. It’s not uniform. But we’ve done our own analysis to ensure that customers that do not have this level of service improvement are not affected by the rate review.”

Oseni then assured that the NERC has put technologies in place to ensure that the implementation of this new tariff goes on smoothly as he said, “First and foremost, the distribution companies were directed some months back to install smart metres on their feeders, and on the basis of that, they get data being streamed into their data system, and initially, we developed an application protocol interface to extract the data from their system into the commission. And when we realised that there are some challenges with that because sometimes, the technology also fails, we now mandated to grant access directly into the commission into their metre data management system so that at least, as they get information, we are also getting it directly.

“And as part of the system being put in place is that NERC has a call centre that any customer that felt exploited can actually call. So, the call centre has been put in place to ensure that customers’ complaints are addressed. And beyond that, as part of the measures, mechanisms leading to this particular review, we’ve set up a situation room comprising our staff, Transmission Company of Nigeria staff, because of course one thing that people say is that discos being the interface point between the sector and the customers, discos bear the brunt sometimes even for something that might not be within their control, which probably if there is an issue with transmission for instance, or there is an issue with generation. So, we have a situation room comprising the disco staff, NERC staff, and Transmission Company of Nigeria staff, many of the field officers, so that as issues emanate based on the reading of the smart metres that are already on the feeders, as well as any complaint that are coming in.”

He also revealed that the NERC has mandated the discos to create a rapid response team for the 15% of customers who will be paying the revised tariff.

Ozioma Samuel-Ugwuezi

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