Why the Power Ministry has continued to appeal to electricity consumers on price review


By Ofem Uket

The Federal Ministry of Power has continued to appeal to electricity consumers in the country to understand the position of the law that empowers the Nigerian Electricity Regulatory Commission NERC to periodically review the price of electricity in tandem with generation cost by GENCOS, and purchased by the distribution companies.  

The NERC was created under section 76 of the Electric power Sector Reform Act EPSRA (which empowers it to establish one or more price review methodology for regulating electricity, against the backdrop of section 32(d) of EPSRA by which the NERC must ensure that the prices charged by licensees and operators are fair to consumers and are sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation.

This relevant section provides for a 15-year tariff plan for the electricity industry with minor and major reviews twice a year and every five years respectively, the essence is to ensure that consumers of electricity are not overcharged and as well persuaded to pay minimally to cover the cost of production in the sector.

At various levels of the policy discussion in the power sector reforms, the Ministers of Power, Engineer Saleh Mamman and Gody Jeddy Agba have always made appeals to consumers of electricity to see price reviews as a methodology for efficiency and sustainably in business, stressing that generation cost determines the price distribution companies will purchase electricity which in turn determines the price consumers will pay.

 President Muhammdu Buhari had in September last year approved a minor review in the price of electricity, while the National Assembly in its resolution posited that the price review should be deferred to the first quarter of 2021.

 Only a few days back, the parliament invited the chairman of Nigerian Electricity Regulatory Commission NERC Sanusi Garba to appear before it, where members urged the Federal government not to go ahead with the planned price review in electricity scheduled to be effective in July 2021.

 The Chairman of the commission had before now taken time to extrapolate on salient issues of the power sector that has to do with price regime in which case he said the generation companies sells electricity to the distribution companies at a price, and the DISCOS will certainly not sell to consumers at the same price.

He, however, noted that it is the responsibility of NERC to regulate the prices between GENCOS and DISCOS to ensure that the burden of price is not transferred to consumers in a manner that will be exploitive; rather the commission will not be hesitant to moderate prices to lessen the burden of cost on the consumers.

Although, Nigerians are saying this is not the best of times for an increase or upward review of electricity price nor any other essential product of government, on the account of the prevailing high cost of living in the country over time.

 Experts have consistently viewed the price increase of essential products in critical sectors of the economy as a threat to growth and development in the daily lives of citizens who are already overstretched through one form of taxation or the other.

However, the power sector reforms as encapsulated in the Act has provided a regulatory framework empowering NERC to take responsibility for incoherence in the defects that may occur in the power structure established to regulate price regime aimed at ensuring and striking a balance between consumers of electricity, the generation and distribution companies.   

The presidential committee on the review of electricity cost has carried out many interventions but presently constrained by the prevailing cost of electricity as sold by GENCOS, who are core investors in the power sector reforms project, this action has been a determinant to the position of NERC for price review in fairness, openness and transparency to all parties.

 Industry players have continued to put forward arguments of low-profit margins and operating with high operating cost in production activities, which puts NERC at the center of the heat from investors and actors in the sector and the consumers of electricity.

NERC, therefore, has only one way out of the entire process of growth in the electricity sector, which is going back to the document, the law establishing the commission, its functions and regulatory framework, except the laws are amended, no individual or group of persons can circumvent the application of operational guidelines.

Clearly, and in fairness to NERC, it has been empowered to review the cost of electricity at least two times annually, but from facts available to everyone the last review was carried out in September last year, and in the coming days precisely July, another review will be effective, which demonstrate the fact that the commission is mindful of the fact that upward review of cost in electricity is an additional burden to every home.

To put the question, is the commission empowered to ensure a regular supply of electricity? And if not, why are its functions inhibited by ways of ensuring steady supply, but trusted with the responsibility to adjust and review prices, however, NERC can actually intervene in short supply in so far as you have been categorized and your supply falls short of stipulations.

It is therefore important for the Federal ministry of power to close ranks with the Nigerian Electricity Regulatory Commission NERC, the generation, Transmission and Distribution companies to create a world-class power sector environment that will guarantee a steady and regular supply of electricity to consumers at affordable cost.


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