The Nigerian Electricity Regulatory Commission (NERC) at the weekend warned against the continued illegal collection of service charge by electricity suppliers, saying violators of the directive would be made to face stiff sanctions.
NERC Chairman, Sam Amadi, who spoke with reporters in Abuja, expressed dismay that in spite of the Commission’s directives against the continued collection of meter maintenance fees by the Power Holding Company of Nigeria (PHCN), consumers are still made to pay for the charge.
NERC had, during a meeting with the Chief Executive Officers (CEOs) of the generation, transmission and distribution companies last April, identified meter maintenance charge usually included in electricity bills to consumers as illegal and directed that it should be discontinued December 1.
“During the meeting, all were agreed that meter maintenance charge was wrong and should be removed. The CEOs also signed the resolution at the end of the meeting. Later, a formal memo was issued to all the CEOs and the Minister intimating them of the resolution, apart from the publication in the national media. The charge is totally unjustified. We owe the consumers a responsibility to protect them from unjustified exploitation, just as we would protect the operators from losses that are not in their business interest,” Mr. Amadi said.
Although he said meter maintenance charge was part of the electricity tariff structure prior to the introduction of the first multi-year tariff order (MYTO) in 2008, the Commission found that they were neither transparent, nor in the interest of the consumers, because “PHCN was collecting money from consumers for services not rendered.”
He maintained that if its investigations confirm reports that consumers were still made to pay the illegal charge, NERC would not hesitate to invoke its regulatory powers by imposing adequate sanctions, which might include an order for refund of the money collected from customers, imposition of fine commensurate to the gravity of the breach or suspension in line with the provisions of the Act.
The NERC boss described the non-compliance with the directive as a real test of government’s commitment to the full implementation of the power sector reform agenda, pointing out that if the reform process is to succeed, the governance structure in the new industry must be modeled in a way that operators would be compelled to comply with directives bordering on issues of integrity.
On electricity tariffs, the NERC Chairman announced that the Commission was planning a major review of the first MYTO following concerns by market operators that the current tariff regime was not cost reflective, as they are not making sufficient returns to offset their costs.
Although the review should not have come earlier than 2013, Mr. Amadi pointed out that it became necessary to carry it out now, to enable the industry have a more realistic cost projection that would enable industry operators efficiently supply electricity.
He said the review would take into consideration the prevailing rate of inflation, interest rates, exchange rate, gas price to establish a cost reflective tariff that would cover the cost of generation, transmission and distribution as well as make room for a reasonable profit margin for operators.
The review, he said, is to pave way for the introduction of a new tariff regime early next year, which might see consumers paying as high as N21.80 per kilowatt hour (N/KWh) up from the current average tariff of about N10 per kilowatt hour.
Under the new tariff regime, expected to come into operation by January 1, some components, including monthly meter maintenance charge, minimum charge and demand charge will be removed, leaving only energy charge and monthly fixed charge.
Energy charge will cover the variable costs directly related to the volume of electricity consumed by the customer, determined by the cost of gas/fuel when power is produced, while fixed charge will cover the industry fixed costs, including recoverable costs such as equipment maintenance costs, administrative and other shared costs, regardless of consumption, even if power is not produced or services are not provided.
The PHCN Corporate Headquarters maintenance charge will also be expunged from the proposed new tariff.