10 Facts About The New Service Reflective Tariff

The new service reflective tariff was effective from September 1, 2020, as approved by the Nigerian Electricity Regulatory Commission (NERC).

The commencement of the service reflective tariff entails customers to pay for electricity based on how long they receive power daily.

Hence, payments reflect the quality of services offered, based on a minimum average hours of supply and other metrics.

Facts about the new service reflective tariff

First time in Nigeria.

The new service reflective tariff is Nigeria’s first attempt, where electricity distribution companies (DISCOs) charge for electricity supplied according to the quality of service delivered.

The practice has been in Peru, a South American country, that started power sector reforms at the same time as Nigeria in the late 1990s.

In Peru, Service quality regulation has been an integral part of their electricity market, as outlined in their Law of Electric Concessions and the Service Quality Regulation.

Customers are divided into five bands.

Customers have been divided into five (A – E) bands so that payments can reflect the quality of services rendered.

Band A is for customers who get 20 hours of power and above daily.

Band B has customers who get power for 16 hours daily.

C-band has customers who enjoy power for 12 hours and above a day.

Those that enjoy power for 8hours and above fall under D-band.

E-band has customers who only get 4 hours and above but below 8 hours of power supply daily.

Tariff Increase Bears On Premium Customers

As increase in Tariff means improved quality of service, there are concerns that electricity supply will only improve for ‘premium customers.’

However, It is usually up to the DISCOs to meet the set target for that band of customers.

N4/kWh Maintained

NERC had directed DisCos to maintain the life-line tariff of N4 for all customers consuming less than 50kWh of energy per month, as a safeguard for the less privileged members of the society.

Reduction of unsustainable electricity subsidy.

The Discos are now expected to increase remittances to the Central Bank and other players across the value chain. This should ideally improve the liquidity within the sector and boost investors’ confidence.

Encouragement for metering

Unmetered electricity customers would be encouraged to procure meters so as to avoid estimated billings, a situation which led to protests in Ojota area of Lagos, where customers denounced “crazy bills” by Ikeja Electric.

Postponed thrice

In December 2019, NERC had announced its plans to immediately review electricity tariffs in the country from January 1, 2020.

The order was titled “December 2019 MYTO Minor Review Order” for the 11 electricity distribution companies (DISCos).

Sometime later, NERC said the new tariff regime would not take effect until April 1, 2020 to allow sufficient time to consult all the interest groups.

When April 1, 2020 arrived, COVID-19 was dominant, which led to lockdowns that affected many businesses.

It tentatively had to be postponed till July 1, another failed attempt at reviewing the tariffs after a meeting between the leadership of the National Assembly, NERC and Discos.

Eventually, the new tariff officially commenced on September 1, 2020.

Efficient Power Sector

The prevalent concept that electricity should be cheap due to the fact it is a ‘social good’ made the power sector inefficient.

Although the subsidies presents electricity as a social good, DISCOs consider electricity as a market commodity just like any other product or service where the higher the amount you pay, the higher the likelihood that you will receive better quality of that product or service.

Bad timing for some Nigerians

The new tariff did not meet some Nigerians well, as many took to social media to voice their discontent.

The accompanying fuel price hike was immediately paired with that of electricity, which many described as government’s effort to wreck hardship on Nigerians.