The Nigerian Electricity Regulatory Commission, NERC, Monday, defied the directive by the Senate to abolish the Fixed Charges, FC, introduced by the commission, noting that there is nothing illegal about the charges. Chairman of NERC, Dr. Sam Amadi, who spoke against the background of the motion by members of the red chamber, maintained that the electricity fixed charges are legal and cannot be abolished. It will be recalled that the Senate had, last Tuesday, directed the commission to abolish the monthly fixed charges being collected from electricity consumers by the Distribution Companies, DISCOs.
The resolution followed a motion entitled, “Unfair trade practices of Electricity Distribution Companies in Nigeria,” sponsored by Senator Sam Egwu, Ebonyi and Senator David Umaru of Niger East Senatorial District. But Amadi maintained that any attempt to promptly abolish the fixed charges will have adverse effect on the electricity market. This is even as the commission has urged communities that are placed on bulk billing to not only reject it, but also insist on individual meters. The commission also revealed that it has abolished the connection of new customers without meters.
According to Amadi, the fixed charges, which appear in different names, are not peculiar to Nigeria, as they are part of electricity markets across the world. He, however, pointed out that the legacy problem of lack of generation capacity, which results in poor supply of electricity, could be the difference with Nigeria’s situation. He explained that the purpose of the fixed charges is to recover the capital and fixed costs of various operators in the electricity industry.
He said: “NERC respectfully argues that the fixed charges that consumers pay in the Nigerian electricity market are not illegal or necessarily fraudulent. Fixed charges (appearing in different names) are part of electricity markets across the world. The difference in Nigeria could be that we don’t have a good supply of electricity because of the legacy problem of lack of generation capacity. Therefore, consumers often pay fixed charges for epileptic or no power supply. Electricity consumers in Nigeria pay both fixed and energy charges. The purpose of the fixed charges is to recover the capital and fixed costs of the various operators in the industry. Section 32 of the EPSR Act 2005 mandates the commission to approve a tariff that allows investors recover their prudent costs with reasonable return on the assets invested in the business. The operators invest in assets on regular basis and recover their investments through the Fixed Charges paid by the consumers.
“In addition to this, it should be noted that once an asset is bought and a consumer is connected to the network, the utilities are by law expected to recover the costs of their investments, whether energy is supplied or not,” adding that the charges are not tied to consumption. On the issue of the practice of bulk-billing residential customers, Amadi added that the commission has already abolished it on a previous ruling brought before it by a customer against the duo of the VGC Estate Management and the Eko Electricity Distribution Company (EEDC) in 2008.
He said: “The decision of the commission stipulated that every customer is expected to be metered individually, irrespective of the status of supply coming into the area, and the class of billing should be on R2 or as appropriately determined by the Disco. The commission has, however, provided a leeway for estimation in situations where residential meters are not provided to customers. In this instance, statistical meters installed as transformer substations are used to calculate the energy to be used as basis for estimating customers on the feeders. Communities, who are placed on bulk billing should reject it, and insist on individual metering.”
He said a public consultation on a proposal to cap the amount an unmetered customer can pay until a meter is installed is on the process of being completed by the commission. “The proposal will also commit Discos to strict deadlines for metering of all its customers. In the interim, the commission has abolished connection of new customers without meters,” he said.