THE Federal Government, on Tuesday, announced the reduction of electricity tariff by 50 per cent.

The Nigerian Electricity Regulatory Commission (NERC) blamed the DISCOs for passing the bulk of lost energy on power consumers, forcing them to pay for what they did not use.

“It is clear that removing the collection losses will lead to lower tariffs for consumers. The removal of collection losses from customer tariff has reduced tariff by more than 50 per cent in some places. Please note that the reduction does not affect the CBN facility and its repayment,” it stated.

In a statement by NERC on Tuesday, signed by the Chief Executive Officer/Chairman, Sam Amadi, the commission stated that since January 1, 2015, when the approved the Multi-Year Tariff Order (MYTO 2.1) took off, “we have received several complaints against the increase in tariff of different consumer classes.

“Industrial and commercial consumers under the auspices of the Manufacturers Association of Nigeria (MAN) petitioned the commission, asking for a review of the MYTO 2.1 and requested drastic reduction of their tariff. They claimed that such astronomical increase in tariff would kill their business and lead to massive job losses.”

Amadi argued that the Electric Power Sector Reform (EPSR) Act and the Business Rules of the Commission mandated the commission to review its decision.

“Pursuant to these rules, we organised public hearing and received evidence from consumer classes on the affordability of the new tariff. The commission also invited the Chief Executive Officers of the distribution companies to the hearing to respond to the case of the consumer groups.

“Furthermore, the commission reviewed the technical and financial assumption of MYTO 2.1. The review showed that the major underlying cause of the skyrocketing increase in the tariff is the huge Aggregate Technical, Commercial and Collection (ATC&C) losses, which are passed through to consumers. In some DISCOs ATC&C losses increased tariff by as much as 80 to 103 per cent.

“Therefore, on Monday, March 9, 2015, the NERC issued a new order to the effect that henceforth, collection loss, which is defined as the ‘amount billed but not collected’, will not be automatically passed on to consumers of electricity.

“Consequently, the collection loss for all DISCOs is set at zero. It is now the responsibility of DISCOs to convince the regulator of any exceptional circumstances for such loss to be passed to the consumers,” he said.

Amadi said this new direction came as part of the commencement of the Transitional Electricity Market (TEM). TEM is built on bilateral trading between parties and is geared towards ensuring an efficient market where cost reflectivity will lead to more affordable electric services for consumers.

He said the new order now amended the MYTO 2.1 and had reduced the tariff to be paid by all class of consumers.

In the review MYTO 2.1, he said the commission followed due process and the regulatory principles.

“NERC remains committed to the principle of cost-reflective pricing and to the development of an efficient and financially viable electricity market. These are important to support the investment that is needed to ensure the electricity supply industry meets the needs of the Nigerian economy.

“The decision to review tariff is completely compatible with the terms of the privatisation and has been reviewed with the Bureau for Public Enterprises (BPE). NERC and BPE are working together to advocate for series of fiscal policies that will foster easier access to investible capital to further increase capacity and enhance reliability in the sector,” it concluded.