TEXT OF PRESS CONFERENCE BY DR. SAM AMADI, CHAIRMAN OF THE NIGERIAN ELECTRICITY REGULATORY COMMISSION (NERC), ON THE FREEZING OF ELECTRICITY TARIFF FOR RESIDENTIAL CONSUMERS

Tuesday, 06 January 2015

(NIGERIA) You may recall that after a recently conducted special review, the Nigerian Electricity Regulatory Commission (NERC) approved a revised Multi-Year Tariff Order (MYTO 2.1), which came into effect on 1st January 2015. A major highlight of MYTO 2.1 is a six-month freeze from January1, 2015 on tariff increase for residential consumers, who constitute about 80% of the electricity consumers (known in the industry as R2 customer class) in the country. This press conference was called to elaborate on the reason for this freeze.
 
Let me state upfront, and for the sake of clarity, that NERC has not increased tariff for residential consumers. I need to emphasise this point because it seems lost in the swirl of things. While the scheduled increase will apply to other classes of consumers from 1st January 2015, it will not affect residential consumers until after June 2015.
 
The decision to grant this moratorium is a carefully considered one, arrived at after adequate consultations with stakeholders and careful consideration of the imperative to balance the legitimate demand for adequate electricity supply with the need for fair tariff. The freeze was designed primarily to protect and to promote the interests of the consumers as well as stimulate operators to serve customers better.  
 
Expectedly, the electricity distribution companies are not happy about the phased approach adopted by the Commission. This means they cannot recoup their growing and previously unanticipated costs, and this may negatively impact their bottom-line in the short run. But while we have a responsibility to protect consumers, NERC is not anti-business. Indeed, NERC is mandated by the Electric Sector Power Reform (ESPR) Act 20005 to set tariffs that reflect the cost of operators as a way of attracting and sustaining necessary investments in the sector.
 
What NERC has done with the freeze for residential consumers is to creatively use rate-setting as a balancing tool for achieving desired outcome, to grant relief to one set of stakeholders while providing incentives to the other as a means of ensuring adequate and regular power supply and optimal customer service. The intention therefore is to give the consumers a break for six months and provide the operators incentives to improve supply and services. To us, this is not a zero sum. Rather, it is ultimate win-win not just for consumers and operators, but also for the electricity sector and for the country as a whole.
 
Essentially, NERC has additionally decided to grant a six-month waiver of the full tariff to the bulk of electricity consumers because the Commission strongly believes that it would be unfair to ask them to pay a higher tariff now given the current levels service delivery and consumer perceptions.
 
Specifically, the Commission is not happy with the level of meter deployment by the electricity distribution companies. This is inspite of the Credited Advancement Payment Metering Initiatives. It is expected that the DISCOs will use this moratorium period to improve on their deployment of meters.
 
To conclude, this moratorium is a regulatory mechanism for incentivising operators to improve power supply and be more responsive to the needs and complaints of their customers, especially in the area of metering. Our expectation is that by the time the full MYTO 2.1 tariff begins to apply to residential consumers both supply and service delivery would have improved significantly.
 
Let me use this occasion to reassure you that NERC will continue to exercise its regulatory powers in a fair, just and rules-based manner and in ways aimed at ensuring adequate, regular and safe electricity supply in the country.