Electricity Tariff Hike: Is it Lawful?

That Nigerians are presently going through tough times, is an understatement. With the spiralling rate of inflation, most were unprepared for the recent upward review in electricity tariffs. Was due process followed, before the tariff increase was effected? What was the need for this huge tariff increase, even though it is said to be limited to a particular category of users, that is, the ‘Band A’ Customers that purportedly receive up 20 hours electricity supply daily? Has it been proven that any band of consumers get up to 20 hours of electricity supply daily? Is the tariff increase discriminatory against Band A Customers, in that they have to cross-subsidise the other Band Users by paying so much more, so that the DisCos can ramp up their revenue? Or will electricity supply to Band A Customers be reduced after the increase in their tariff, while that of Band B is increased, in order to be able to upgrade them and increase the number of Band A Customers, again to increase revenue? Will the tariff increase result in even less power supply to the other Band Users whose tariff remains unchanged? Is Band A even possible, under these more than frequent national grid collapses? Is the increase in tariff even legal? Femi Falana, SAN, George Etomi and Dr Sam Amadi discuss the issues surrounding what Nigerians now perceive to be ‘suffering and smiling,’ and, in doing so, answer some of these posers Illegality of the New Electricity Tariff Femi Falana, SAN Procedure Not Followed

By virtue of Section 116(2) (e) of the Electricity Act of 2023, the National Electricity Regulatory Commission (NERC) is empowered to allow a licensee that operates efficiently to recover the full costs of its business activities, including a reasonable return on the capital invested in the business. But, prior to approving a tariff methodology, the Commission shall give notice in the Federal Government Gazette, and in one or more newspapers, with wide circulation, of the proposed establishment of

“But, in utter violation of the Electricity Act, the Commission announced that it had approved an increase of electricity tariff to N225 ($0.15) per kilowatt-hour from N68….This is about a 230% increase, in one fell swoop. In electricity industry parlance, any single increase of more than 20%, constitutes a rate shock”

a tariff methodology, indicating the period within which objections or representations in connection with the same may be made to the Commission.

Upon receipt of the application for a new electricity tariff, the Commission shall conduct a public hearing on the applications prior to making a ruling.

But, in utter violation of the Electricity Act, the Commission announced that it had approved an increase of electricity tariff to N225 ($0.15) per kilowatt-hour from N68. The 230% hike for urban consumers, also known as Band A consumers in the country, took effect from April 1, 2024.

Before the announcement, no prior information of the proposed tariff was published, consumers and other stakeholders were not given the opportunity to make a representation to the Commission while no public hearing was conducted by the Commission. To that extent, the new electricity tariff cannot be justified under the Electricity Act. Furthermore, in order to give the impression that the DisCos are operating "efficiently", the payment of the new tariff is premised on electricity supply of not less than 20 hours per day for the Band A consumers. But, the DisCos have admitted publicly that they are unable to comply with the directive due to a variety of reasons. Is this ground not sufficient to vitiate the new tariff? Contradictions

However, in justifying the insensitive hike, the Minister of Power, Mr Adelabu, said that Government was subsidising 67% of the cost of generating, transmitting and distributing power in Nigeria, amounting to over N3 trillion, which he put at 10% of Government total revenue. Mr Adelabu has apparently forgotten that he had claimed on January 15, 2024 that, “.. If tariffs are left at this current rate, it is projected that the Government will spend about N1.7 trillion to subsidise electricity. The FG cannot afford that”.

On its own part, the International Monetary Fund (IMF) had warned on March 6, 2024, that the continuation of fuel and electricity subsidy will cost Nigeria N2.33 trillion or 3% of its Gross Domestic Product (GDP) in