The Association of Nigerian Electricity Distributors, (ANED) has predicted that the implementation of the newly adopted Eligible Customer policy by the Federal Government in the power sector will raise electricity tariff payable by residential consumers by 14 percent.
The Association, however, said that they had no problem with the declaration by the government, but stressed that the policy would warrant a significant increase in residential tariff.
The group stated:“The removal of customers that are designated as ‘eligible customers’ means that the premium customers that currently cross-subsidise the largest residential customer class can be removed from the pool of Discos’ customers, thereby resulting in a gap in revenue that will result in a significant tariff increase, currently estimated at 14 per cent.
“While we recognise that the minister has a right to declare eligible customers, we doubt that he has a right to further take money out of our customers’ pockets, with the potential tariff hike that will occur, as the designated eligible customers leave the pool of Disco customers”, it added.
According to the power distribution companies, in addition to the associated potential increase in the cost of energy to the customers, the reduction in their own revenue will undermine any plans for improvement in the delivery of service.
For instance, they claimed that most eligible customers were currently being charged about N40/kwh; whereas when they leave, the energy will now be sold at about N26/kwh, adding that this revenue loss of N14 would need to be made up by a tariff increase to the ordinary customers.
As a desirable step towards improving the efficiency of the power sector, the operators canvassed the need for healthy competition in the sector and urged the government to allow all parties to compete on the merits of their offering, as this would result in reduced electricity tariffs for customers and improved service.
They warned that providing or promoting a one-sided advantage for political expediency and to be seen to be making progress where there is none is an antithesis of competition.
According to the Discos, until there is such a balance, it is likely that the eligible customers arrangement will end up in the dustbin with all the other ill-considered initiatives.
Reacting to the controversies that trailed some of the measures adopted by the Federal Government to boost the power sector, including the Eligible Customer Policy, last month, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, cautioned against imposing policies that will be counter-productive in the sector.
Yusuf calrified: “This thing is getting more complex. But what the minister or government should understand is that a Disco is a business concern and if something is a business, then it has a right to recover its cost and make profit. It is not a social service but a business endeavour.
“However, what kind of cost are we talking about here? That is the problem. I ask because they have been talking about all kind of losses. You hear of commercial and technical losses, a high service cost and many problems associated with inefficiencies in the sector.”
“All these are also contributing to high cost. And so by the time you factor all these costs and you are now trying to get a price that will now give you a margin for profit, what you will eventually get will be very high. Some cost should not be passed on to consumers; but right now, they are already passing it on to consumers. So, it is quite a complicated issue”, the economic expert added.