Electricity Distribution Companies say the non-review of the Multi-Year Tarrif Order, since February 2016 had resulted in the accumulation of over N1.4trillion shortfall in the nation’s electricity market.
Sunny Oduntan, Executive Secretary, Research and Documentation, Association of Nigerian Electricity Distributors, made the disclosure at a media briefing in Abuja on Sunday.
He said the regulator, Nigeria Electricity Regulatory Commission, carried out a minor review of the tarrif on February 4, 2016.
Oduntan said: “In the MYTO, there is a requirement for what is called minor review of the tarrif.
“That should happen every six month, it may interest you to know that the current tariff that we have, came on board on the February 4, 2016, and there has never been a single minor review.”
According to him, the minor review would have to consider the power generation level in the country, inflation, foreign exchange, lending rate and other index.
He said anything short of a six monthly review period for the sector would not be ideal, adding that records showed over N1.4 trillion had been accumulated as shortfall in the value chain as a result of non-review of tariff since February 2016.
Oduntan explained that on capital investment made by the DisCos, that only a capital expenditure of N45 billion were to be spent by the 11 DisCos annually.
He said: “In every tariff computation, there is allowance for capital expenditure.
“When they say tariff, inside it, they work out a lot of things including how much you can use for capital expenditure.
“That CAPEX, you cannot spend outside of it, if you do, you cannot recover it.”
According to Oduntan, the current tariff gives each DisCos capital expenditure of N5.5billion per annum, that is N45 billion for all the DisCos for CAPEX, and that thus far, no DisCos had such an amount on their table to spend, since they had not done 100 per cent collection.
He said: “And even with the 100 per cent collection that money is not enough to deal with the DisCos capital expenditure.
“While TCN on the order hand has maximum capital investment fund of N50billion to spend yearly, with that heavy CAPEX, TCN has not been able to solve their transmission challenges.”
Oduntan, however, listed measures that could be adopted to salvage the nation’s power sector from further deterioration by saying: `Let Nigerians know the cost of the electricity and let them pay for it and get the electricity 24 hours.
He said: “The other option is for government to subsidise the price of electricity for the poor, who cannot pay for 24 hour electricity.
“If we introduce subsidy, the short fall from the subsidy have to be paid for, countries such as Ethiopa, Morocco, Uganda, Tunisia ,Algeria, Egypt, they are subsidising electricity.
“The third one, if you don’t want people to pay for the actual price of electricity, and you have no money as a government to subsidise:
“Then you should enable the regulator to make a law that will create an instrument called regulatory asset, that instrument can be used by the DisCos to borrow money from banks to cover the short fall.”