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Power Firms Agree To Temporary Reduction Of Fixed Charge

Power Firms Agree To Temporary Reduction Of Fixed Charge

Dr. Sam Amadi, NERC Chairman

Against the backdrop of growing agitation from many quarters for the removal of electricity fixed charges, most of the electricity distribution companies in the country have proposed a temporary reduction in the charges.

The Discos stated this in their 10-year tariff plan submitted to the Nigerian Electricity Regulatory Commission (NERC), copies of which were published on the commission’s website.

According to the tariff review guidelines from NERC, in filling their tariff applications, Discos shall reduce fixed charge from customer bills by increasing the energy charge.

The power firms, including Ikeja, Eko, Ibadan, Enugu, Yola, Jos and Kano Discos, said there was a risk in reducing the fixed charge component of cost recovery, that market-related fluctuations in the future, which they feared might result in an under or over-recovery of costs because tariffs, would no longer correspond with the fixed and variable components of NESI costs.

They said, “It may therefore be prudent to consider the proposed reduction in the fixed charge as a temporary measure that may be reversed when electricity supply in Nigeria is no longer chronically suppressed by shortage of generation capacity.”

Ikeja Disco proposed to reduce the fixed charges by 25, 35, 40 and 50 per cent, adding that, “The fixed charges from 2017 will grow at the rate of 7.9 per cent.”

According to the new fixed charges, R2-S (residential) and C1-S (commercial) customers will pay N375 as against N750, while R2-T customers will pay N450; R3 will pay N13,134, down from N26,269 and R4, N82,087 as against N164,174.

Eko Electricity Distribution Company said it proposed the removal of fixed charges in naira per month, replacing it with a naira per unit charge.

It said, “EKEDC has proposed a removal of monthly fixed charges using the following methodology. The fixed charge is changed to energy per unit and transferred to the energy charge of the same tariff class to avoid cross-subsidisation and to maintain expected income.”

It said the additional unit from the conversion of fixed charge in naira per month to naira per unit was added to the energy charge and this would serve as the basic for tariff analysis.

Enugu Electricity Distribution Plc said the percentage reduction of the fixed charge per customer class was transferred to the energy charge of the same tariff class to avoid cross-subsidisation and to maintain expected income. The reduction ranged between two per cent and 48 per cent.

Ibadan EDC said its fixed charge reduction would be 15 per cent for all residential customers and five per cent for all others in November 2015 with no subsequent increases thereafter.

Based on the proposed new fixed charge, R2 customers will pay N531 as against N625, while R3 customers will pay N15,949, down from N18,764. The C1 customers will pay N475 as against N500, while the C2 customers will N16,160, down from N17,010.

Yola Electricity Distribution Company said it would reduce the fixed charges for many customers and keep flat those of others.

It said its fixed charge reduction would occur in January 2016 and would apply only to R2-S, R2- T, R3 and the C1-S customers, adding that, “There will be no subsequent increases or decreases to fixed charges thereafter.”

The R2-S and the C1-2 customers will see their fixed charge reduce to N250 from N750; R2-T N500 from N750 and R3 to pay N12,103, down from N24,205.

The Abuja Disco proposed a reduction in the fixed charge for all tariff classes, saying the tariff proposal assumed a reduction of five per cent across all tariff classes on an annual basis over the full 10-year period.

Benin Electricity Distribution Company said, “Considering recent customers’ demand for elimination of fixed charge, Benin Disco propose a minimal fixed charge for the newly carved out tariff subclass R2S, which is predominantly for one-phase domestic customers consuming less than 350 unit a month.

“However, we propose higher fixed charge for all the three-phase category of customers,” it added.

Port Harcourt Electricity Distribution Company said reductions of 10, 30 and 50 per cent in the fixed charge would start in November.

The company said the fixed charge would remain unchanged until year 2020, when it would increase by 10 per cent.

NERC has urged customers and other public to review to download the tariff submissions of the Discos on its website and submit appropriate comments on or before October 12, 2015.

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