Nigerian govt to recover electricity debts after cutting tariff

The Nigerian Electricity Regulatory Commission on Wednesday said electricity distribution companies have been given the authority to disconnect supply to consumers who fail to pay up their bills.

The Chairman of the Commission, Sam Amadi, who stated this in Abuja while announcing the review of electricity tariffs in the country, said henceforth the distribution companies would be responsible for the recovery of debts from customers who fail to pay their bills.

According to the chairman, in the days ahead the Commission would commence strategic meetings with key government agencies, particularly security establishments like the military, Defence and other sensitive institutions, like hospitals and water works, to acquaint them of the new arrangement on bills payment.

“We want to create a process that would not compromise strategic national interest, and at the same time not leave the distribution companies with an empty purse,” Mr. Amadi said. “That is to allow them work out an arrangement that would enable them know when and how the companies would collect their monies.”

If the power distribution companies failed in their responsibility to collect their revenue from consumers, he said the result of such failure should not be a penalty to those who pay their bills.

He said since the government would not want to penalize those who have been paying their bills, it was now the responsibility of the distribution companies to collect their debts.

He said henceforth collection losses would not be allowed to be transferred automatically to electricity consumers.

Such losses, the chairman said, have now been set at zero for all distribution companies till further notice. He said it was now the responsibility of the distribution companies to convince the Commission about exceptional circumstances that would warrant transferred of such losses to consumers.

“The Commission and BPE (Bureau of Public Enterprises) are working together to advocate for series of fiscal policies that would foster easier access to investible capital so that the new owners of the power assets can increase capacity and enhance reliability of the national grid,” he said.

On the decision to review the tariff for all categories of electricity consumers by 50 per cent, Mr. Amadi, who said this takes effect from the end of March, explained that it followed the decision to remove collection losses from customer tariff under the multi-year tariff order.

Following the approval of the multi-year tariff order, MYTO 2.1 in January 1, 2015, Mr. Amadi said the Commission had received several complaints and petitions against the decision, which resulted in astronomical increases in tariff across the different consumer categories.

He noted particularly the petition by industrial and commercial consumers under the auspices of the Manufacturers Association of Nigeria, which demanded the drastic reduction of their tariffs.

The two categories of consumers had cited the negative impact of their tariffs increases, which they said were threatening their businesses, leading to massive job losses.

Following the review of the petitions, Mr. Amadi said the Commission conducted public hearings to gather evidence from all consumer classes on the affordability of the new tariff.

He said the Commission had consulted with the chief executive officers of the Distribution Companies before deciding to intervene by reviewing the tariffs.

The Chairman said the Commission also decided to review the technical and financial assumptions of multi-year tariff order 2.1, adding that a new order has since March 9, 2015 been issued.

The new order, which amends the MYTO 2.1, Mr. Amadi noted, has reduced the tariffs payable by all classes of consumers by at least 50 percent.

The review comes as part of the commencement of the Transitional Electricity Market in line with the provisions of the Electricity Power Sector Reform Act 2005 and the Business Rules of the Commission’s mandate.

He said findings from the various reviews showed that the major underlining cause of the spiraling consumer tariffs was the huge aggregate technical commercial and collection losses.

Some distribution companies have complained that the collection losses, which are passed to consumers, raised the final tariffs by as much as an average of 80 and 103 per cent.

“The Commission has been listening to consumers’ complaints and taking full account of the impact of the high tariff on consumers and the Nigerian economy,” Mr. Amadi said.

“Therefore, the Commission has reviewed the basis of the MYTO 2.1 assumptions and has determined that it is inappropriate to transfer to consumers collection losses that are controllable by the DISCOs (distribution companies),” he announced.

An analysis of the reviews showed that total loss (technical commercial and collection) for Abuja, which was previously 58.7 per cent would drop to 34.9 per cent, and Enugu, from 80.5 per cent to 24.8 per cent.

In Jos, the total aggregate losses of 103.5 per cent would drop to 34.2 per cent; Port Harcourt, from 67.6 percent to 30.6 per cent; EKO, from 22.4 per cent to 13.8 per cent, and Ikeja, from 28.9 per cent to 13.2 per cent

Kaduna, which used to be 40.8 percent has now dropped to 21.3 per cent; Kano, from 47.7 per cent to 14.3 per cent; Ibadan, from 48.8 per cent to 14.9 per cent; Benin, from 60.6 per cent to 23.3 per cent.

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