The Association of Nigerian Electricity Distributors (ANED) has responded to the Senate’s resolution directing a reversal of the recently increased electricity tariffs, saying such an action would not be without consequences.
In a statement Wednesday by its Executive Director, Advocacy and Research, Barrister Sunday Oduntan, ANED said that a market priced tariff is a fundamental requirement under the agreements signed between the distribution companies operating in the Nigerian Electricity Supply Industry (NESI) and the Bureau for Public Enterprises (BPE), and thus, raises concern about the sanctity of contracts.
The Senate on Tuesday passed a resolution directing the Nigeria Electricity Regulatory Commission (NERC) to suspend the recently implemented electricity tariff hike (MYTO-2015).
However, in the statement titled, “Electricity Tariffs: Truth and Consequences,” ANED maintained that the absence of a market-priced tariff creates the possibility of performance failure by the operators, adding that “such a failure will be at a price that the government can ill-afford in these times of dire economic challenges.”
The group stressed that suspending the implementation of the tariff will leave the country in continued darkness, with diminished and no future prospects of economic growth.
The statement further noted that, “A market-priced tariff is critical to address decades of under-investment; for instance, the five million metering gap in the sector. World-wide, electricity reforms have always been tied to increased investment, resulting in improved production efficiency. Such investment is predicated on access to capital which will be jeopardised in the absence of a market-priced tariff.
“The absence of a market-priced tariff will endanger the viability of the entire value-chain of distributors, generators, transmission and gas suppliers, resulting in the failure of the sector as the upstream operators will not receive required payment. Discos only receive 25 per cent of the revenues associated with the tariff,” it said.
The Discos further informed the Senate that the failure of the sector will result in, among other things, loss of employment and livelihoods for approximately 50,000 Nigerians, indirect job losses from factory and other business closures, possibly, in the millions as well as a related outcome of discouraging further investments in the development of gas reserves and production for local consumption.
On the other hand, the investors stated that expected performance improvement, with appropriate investment, will lead to a reduction of tariffs in subsequent years, stressing that this is empirically supported.
-Leadership