Proposed electricity tariff hike will not result in efficiency, says FCCPC

The proposed increase in electricity tariff by the Distribution Companies (DisCos) has experienced a setback, as the Federal Competition and Consumer Protection Commission (FCCPC) said increasing tariffs would not result into efficiency as claimed by the DisCos.

During a public hearing on extraordinary tariff review application organised by the Nigerian Electricity Regulatory Commission (NERC) in Lagos, the Chief Executive Officer of the FCCPC, Babatunde Irukera, alleged that the proposed hike would also affect unmetered customers.

Recall that the DisCos plan to increase electricity tariff in April 2020. According to the DisCos, the tariff increase would cater for revenue shortfalls in the sector and enable the electricity firms to acquire needed equipment that would improve power supply. The hike in electricity tariff is also expected to increase charges for power supply.

But Irukera said, “If you are going to promote efficiency, the only way to promote it certainly cannot be by increasing tariffs. There is absolutely no question about the fact that increasing tariffs will not in itself necessarily promote efficiencies.

“So long as you have fewer people paying for what most use, you will not find a cost-reflective tariff. The answer cannot be burdening those few (who pay their bills) with more. What about metering? There is still a vast majority of bills that are paid today by estimation; 55 per cent of consumers are still unmetered.”

DisCos will exploit unmetered customers: Irukera argued that the tariff can’t be increased as the majority of homes in Nigeria remain unmetered. He explained that every time DisCos record a revenue shortfall, unmetered customers would be the ones to pay for it.

Irukera revealed that the Bureau of Public Enterprises (BPE) was promised by the DisCos in 2015 that they would meter more aggressively but that hasn’t been the case, as the metering gap still exists.

“They said that over the next three years, they would meter approximately 4.5 million customers. And that gave us an annual target of about 1.6 million meters.

“How can we even find a cost-reflective tariff when more than half of your collection is based on estimation or assumption? Every time there is a revenue shortfall, those who are not metered would pay for it. And that is why estimated billing has now become another word for arbitrary billing,” Irukera said during the public hearing.