Fixed Electricity Charge Legal, NERC Tells Senate

The Nigerian Electricity Regulatory Commission (NERC) has declared that the fixed charge component of electricity bill is neither illegal, nor fraudulent.

The Senate had last week raised issues on the billing system used by distribution companies and called for abolition of fixed charge.

But NERC Chairman, Dr. Sam Amadi, told newsmen in Abuja on Monday that though the commission was yet to receive official communication from the Senate, it obtained a record of the Upper Chamber proceeding for that day.

Electricity: FG earmarks $3.7b for 20,000mw by 2016 Amadi explained that fixed charge was not peculiar to Nigerian Electricity, but acknowledged that Nigerians pay fixed charge for epileptic or no power supply.

He noted that in fixing the electricity charges, the commission followed the laws granting it such powers.

He said: “The National Assembly made the ESPR Act. And the act said that the commission should produce a methodology. Tariff making is a process based activity. It is not an executive fiat. The reason why law created the regulator is to give confidence to the market – their decisions are procedural, and the decisions are deliberately considered.

“Our decisions are in line with due process. Otherwise, the law should have left the sector under the control of  Ministry of Power the normal way it was with the ministry. So it will issue executive rulings. So NERC cannot wake up in the morning and say we have abolished this. That will undermine the law that the National Assembly made.

“Don’t forget that were created by a clearly legislative defined mandate. And one of these mandates is to create regulations that are done in a particular way. So, we cannot come and say we have abolished fixed charge.

“We will always go through a process and the process is that before that Senate’s decision, we had commenced a process to remove the fixed charge in a way you understand it, then  allowing recoveries to be made as you consume.

“Essentially, we are already in line with the decision of the Senate. The Senate’s concern is the fact that people are paying for what they do not consume. And we are in line with the Senate to say we are already working with the Discos to remove that aspect of the pricing methodology.

“That is to make sure that people pay for what they consume and pay fair and reasonable charges determined through a process allowed by law,” he said.

Amadi stressed that fixed charge is a global component of electricity bill, 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 in Nigeria pay both fixed and energy charge. The purpose of fixed charge is to recover the capital and fixed cost of the various operators in the industry,” he stated.

Amadi stated further said: “Fixed charge is not tied to consumption and not peculiar to Nigeria. Many utilities across the world charge fixed. In essence, it is a universal practice used in many countries across the world.

“Fixed charge is separately identified on bills in most countries, and is most often called daily supply charge or service to property charge.”

He explained further that the generators are paid both capacity and energy charge. “Capacity payment to generators covers their capital cost, fixed operations and maintenance cost and two/thirds of tax cost; 75 per cent of the capital payment is recovered through the fixed charge paid by consumers,” he said.

The NERC boss held that abolishing fixed charge might impact negatively on the generators “who have invested a lot and are continuously making investments in an effort to provide more stable electricity to Nigerians.”

He noted that unlike generators, the Transmission Company of Nigeria (TCN) and Electricity Distribution Companies (Discos) recover most of their cost through energy payment.

He insisted that fixed charge is an important component of the Multi-Year Tariff Order (MYTO) which enables revenue to be shared among operators.

Amadi, however, agreed with the Senate’s position on the need to eliminate the practice of bulk billing residential customers and replacing it with individual metering and billing.

NERC therefore urged communities and estates which are placed on bulk billing to reject it.

In another development, the youths in Afikpo in Afikpo North Local Government Area of Ebonyi State on Monday burnt three vehicles belonging to Enugu Electricity Distribution Company (EEDC)  over increasing blackout of electricity supply in the area.

The protesting youths who barricaded entry and exit points in Afikpo town disrupted business activities for several hours.

Public institutions including banks and markets were shut down following the protest which halted human and vehicular movements in the area.

Travelers were turned back by the rampaging youths who chanted war songs during the protest.

A resident of the area, Egwu Idam, while speaking with journalists said that the youths had besieged the office of the distribution company as early as 7 a.m. and sacked the staff.

He said in the process, three vehicles of the company were vandalised.

He said: “Since seven months we don’t get light and we have been paying for the light we don’t consume. We have been telling the power people to stop bringing bill to us every month since they don’t give us light but to no avail.

“Today, we have decided to say no to all these rubbish. We want the right thing to be done. It iss either they give us light or they stop bringing bills to us because we cannot continue to pay for what wedon’t consume,” he added.

When contacted, the state Police Public Relations Officer, DSP Chris Anyanwu, who confirmed the incident condemned the action of the youths.

He said the Police Area Commander in Afikpo and his team had been directed to calm the situation.

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