This is the Electricity Tariff Structure In Nigeria. Many electricity consumers in Nigeria will want to know how it’s calculated and how much they should pay. On Monday, 1st February 2016, the new electricity tariff under the Multi Year Tariff Offer 2015 (MYTO II) took effect, Nigerian Electricity Regulatory Commission (NERC), the governing body gave several reasons for the 45% increase in tariff such as; enhancement in service delivery, customers’ satisfaction, elimination of fixed charges, and a boost in power sector investment. However, commercial and residential consumers have expressed dissatisfaction with the new tariff system stating high estimated bills, incessant power outages, lack of prepaid meters and ageing/faulty equipment, as major concerns.
Electricity tariff refers to the cost a consumer pays for the availability of electrical power generation to their homes. The cost of power generation depends largely on the type, market value and availability of the fuel used, government subsidies, industry regulations, operating cost, maintenance, electrical grid systems and local weather patterns. Tariff system takes into account these various factors to calculate the total cost of the electricity.
Before discussing the electricity tariff structure in detail, a slight overview of the entire power system structure in Nigeria would be very helpful.
In 2005, the Electric Power Sector Reform Act resulted in the dismantling of the Power Holding Company of Nigeria (PHCN) into 18 companies (6 generating, 1 transmission, and 11 distribution companies). According to research, the revenue growth in the sector has been substantial, from about N80 billion in 2003 to about N110 billion in 2007. This has mostly been because of improvement in tariff collection, generation and distribution capacity. Both distribution and transmission losses have steadily declined over the last few years, with investment in advanced technology.
The power sector consists of these important three sections highlighted below;
Generation > Transmission > Distribution
Generation: There are currently 23 grid-connected generating plants in operation in the Nigerian Electricity Supply Industry (NESI) with a total installed capacity of 10,396.0 MW and available capacity of 6,056 MW. Most generation is thermal based, with an installed capacity of 8,457.6 MW (81% of the total) and an available capacity of 4,996 MW (83% of the total). Hydro-power from three major plants accounts for 1,938.4 MW of total installed capacity. Other power generation methods are via Independent Power Producers (IPPs) and National Integrated Power Projects. As at February 2016, the highest generation peak was 5074.7 MW.
Transmission: The Transmission Company of Nigeria (TCN) is a successor company of the now defunct PHCN, and is currently being managed by Manitoba Hydro International, a Canadian electric power and natural gas utility firm. This company is responsible for TCN’s revamp to achieve technical and financial adequacy in addition to providing stable transmission of power without system failure. Currently, the transmission capacity of the Nigerian Electricity Transmission system is made up of about 5,523.8 km of 330 KV lines and 6,801.49 km of 132 KV lines.
Distribution: There are 11 electricity distribution companies (DISCOs) in Nigeria. These distribution companies cover the vast region of Nigeria, and have a percentage load allocation of 5.5-11.5.
The tariff system practiced in Nigeria for the electrical distribution, which is regulated by NERC, is called the Multi Year Tariff Order (MYTO); a methodology to regulate fair electricity prices between consumers and DISCOs for efficient operation costs.
Multi Year Tariff Order (MYTO): This is a tariff system designed for the Nigerian Electricity Market to provide a unified way to determine efficient total industry revenue requirement, and provide a 15 year tariff path in the power sector with minor reviews each year due to certain factors such as gas prices, exchange rate and inflation, and major reviews every five years, when all inputs are discussed with stakeholders. MYTO is used to set wholesale and retail prices in the Nigerian Electricity Market. On 18th December 2015, NERC, set a new tariff for DISCOs for 2015-2024, this new tariff requires consumers in different categories and location to pay different charges for each kWh.
Electricity consumers in Nigeria are divided into 5 categories, namely,
For your convenience, here’s a summary of the new tariff system
Abuja – N24.30
Jos – N26.93
Ikeja – N21.30
Kaduna – N27.36 and N28.05
Kano – N20.26 and N26.41;
Ikeja – N21.30 and N21.80;
Port Harcourt – N24.91;
Eko- N24.00 and 25.79;
Yola –N23.25 and N24.75
Meanwhile, for the monthly fixed charge removal (consumers now pay for only what they consume), residential customers within Abuja Electricity Distribution Company will no longer pay N702.00; instead, their charge will increase by N9.60/kWh. While, those in this same category within the Eko and Ikeja Electricity Distribution zones will no longer pay N750.00, but will henceforth pay sums of N10kwh and N8kwh increase in their energy charges. The usual sum of N800.00 and N750.00 fixed charges has been removed from Kaduna and Benin electricity consumers, while they will get an increase of N11.05kwh and N9.26kwh in their energy charges, respectively.
In the long run, I do hope that the new tariff system will provide the much-awaited overhaul, that the power sector greatly needs, and also garner investments, improve power generation and reduce power outages nationwide.