Pages Menu
TwitterRssFacebook
Categories Menu

Posted by on Aug 26, 2014 in Happenings, Happenings in Power | 5 comments

Now that Power is Privatised….

Now that Power is Privatised….

lightbulb

Can we switch on the lights now?

Nigerians don’t like technical stuff. Generation this, transmission that, Power Purchase Agreements etc….

They want to know how privatization affects the price of garri.

Where is the electricity the Minister of Power is always talking about? Should they start saving to replace their ailing generators?

This post will attempt to make the technical non-technical.

Power Companies Are Not Charity Organizations
Electricity is similar to any other manufactured product: people in the business spend money to produce it and want to sell it at a profit.

Electricity can’t be economically stored when it is produced, so power plants must generate power 24/7 for electricity to be available to consumers. Consequently, the price of electricity must be high enough to cover costs and ensure a reasonable return on investment. This will keep the current producers happy and attract new investors.

 

Tariffs
Table 1 shows the different tariffs classes and tariffs for consumers.

TARIFF CLASS DESCRIPTIONS
Customer ClassificationClassesDescription of Customer
1ResidentialR1, R2, R3, R4A consumer who uses his premises exclusively as a residence - house, flat or multi-storeyed house where people reside.
2CommercialC1, C2, C3A consumer who uses his premises for any purpose other than exclusively as a residence or as a factory for manufacturing goods.
3IndustrialD1, D2, D3A consumer who uses his premises for manufacturing goods including welding and ironmongery.
4SpecialA1, A2, A3Customers such as agriculture (agro-allied enterprises involving processing are excluded), water boards, religious houses, Government and teaching hospitals, Government research institutes and educational establishments.
5Street LightingS1Street Lighting

Table 1: Tariff Class Descriptions [1]

 

The new customer classification is based on metering capacity. [3] [4]

I will not bother you with a detailed explanation of each class, but 3 of them are of particular interest to most Nigerians:

R1 : The poor who are expected to use a couple of bulbs, radio and small TV. Maximum consumption of 50kWh/month.

R2: The average residential building.

C1: Small businesses – shops, fish-sellers, barbers.

 

Tariffs for consumers under Ikeja Distribution Company are outlined in Table 2:

MYTO II -
2014 Tariff Class
Consumer Type
Fixed Charges

[N/Month]
Cost of Service

[N/kWH]
FG Subsidy

[N/kWH]
Recovered from customers

[N/kWH]
R1 Residential consumer with maximum consumption of 50 kWh/monthNone19.4015.404.00
R2 Single and 3-phase Residential consumer75019.406.3213.21
C1Single and 3-phase Commercial consumer75017.57None17.57

Table 2: 2014 Class Tariffs for Ikeja DisCo [4]

 

Naira & Kobo
The truth is, businessmen will only invest their money into industries where they will get a good return. Electricity tariffs in Nigeria are lower than what is needed to attract investors with plenty money. The Federal Government resolved to solve this problem by increasing tariffs across all consumer classes.

Counting Naira notes

Owo, Ego, Kudi

Wait! Does this mean that tariffs will have to increase before electricity supply improves? Sadly, YES!

To avoid suffering the people, the FG will subsidize the tariffs paid by the R1 & R2 tariff classes that need support. [1]

The removal of the subsidy over a period of time is expected to lessen the burden on consumers while allowing them to adjust to the new price level. The subsidy will be removed when power availability increases enough to enable a rebalancing of tariffs. [2]

 

Story, Story! There Is Still No ‘Light’ In My House

No juju for electricity matter o. Na electricity wey them generate, then transmit, come distribute to your area you go see. If any of the routes get problem, my people, no light.

The epileptic power supply is easy to explain: Nigeria needs about 160,000MW to be at the level of a developed nation.  Generation for August 21 2014 was 3,162.42MW. This meagre 3,162MW must be rationed to critical places like airports, Government establishments,  hospitals, universities etc. The leftover power is distributed to rest of us.

Generation Companies can only generate as much as their capacity & gas supply allow, Transmission Company of Nigeria [TCN] can only transmit up to their evacuation capacity, and the Distribution Companies can only distribute what they are allocated. Power supply will be greater than ever before when the new NIPP plants start operations and so it should also be less erratic.

So, my people, we will have to be patient while the generation companies, TCN, distribution companies and government regulators improve efficiency and electricity delivery.

 

Sources:

1.      Roadmap Power Sector Reform Document

2.     Roadmap for Power Sector Reform – Revision 1

3.     Multi -Year Tariff Order For The Determination Of The Cost Of Electricity Sold By Distribution/Retail Companies For The Period 1 June 2012 To 31 May 2017 – Nigerian Electricity Regulatory Commission 1 June, 2012

4.     http://www.nercng.org/myto/tariffs/ikeja.html

All documents are available on the NERC website:  www.nercng.org

5 Comments

  1. You guys make electricity information very easy to comprehend. Way to go!

  2. This is simple for anybody to understand. Unfortunately people just want the subsidy to continue .

    Any govt that tries to remove it, the govt of the day becomes a bad one. Articles like this are meant to educate nigerians . Not that they’ll accept, but at least they know the truth.

    Telecoms is presently crashing,cos consumers just want the price to fall to zero naira per kobo.

    It’s a societal thing, we don’t like to pay for utilities.

    • Good to know that the info in the post is easy to comprehend. It is not fair to the citizens for the tariffs to jump from low to high in a short time, mostly because the increase in tariff will not be accompanied with steady electricity. The government has to find the right balance between increasing generation and tariffs.

  3. This is a as lucid as water!!! Fantastic write up!!! My question is how long will we keep waiting because it seems the government doesnt wait to take my tax !!! The government should stand up to its responsibility!!! My friend what is the benefit for citizenship….if i am my own water corporation… drilling bore hole, if i am also my own power generation… using generating set… Nigerians are not patient , they already helping themselves.

    • The Power industry should pick up soon but constant electricity is a long way away. The govt has ‘stood up’ with the privatization; it remains for them to put gas, financing and tariffs structures in place. Nigerians should please be patient while helping themselves.

%d bloggers like this: