PHCN: Consumers To Pay More As New Owners Move To Recover Funds - Business

As new owners set to take over physical possession of the privatised companies of the Power Holding Company of Nigeria (PHCN), electricity consumers in the
country may soon experience increment in their tariff following moves by the new owners to generate more funds. This will come through a review of the provisions of the Multi-Year Tariff Order (MYTO), which will see new electricity price in place.
The new owners are concerned that stipulated tariffs in the draft of interim rules and regulations spelt out by the Nigeria Electricity Regulatory Commission (NERC), prior to their take-over of the plants, were inadequate to guarantee a healthy return on investment.
However, this position becomes conflicting because the reason behind the introduction of MYTO was to review the price upward as prospective investors in the power sector may find it difficult to review the tariff upward immediately. Industry experts say with the volume of additional investment needed to bring the assets at a fair state to provide considerable service required by the users, it
would be better for the investors to recover their monies over a period of 10 years and thereafter make profit. In a joint petition to NERC, the companies rejected the tariffs proposed in the draft rules, accusing the commission and the Bureau of Public Enterprises (BPE) of reneging on the terms of the power sales/purchase agreement which they collectively signed. They threatened to seek legal redress if their grievances were not addressed by the regulatory authorities. NERC General Manager, Marketing and Rates, Abdukadir Shettima, said the commission and the BPE would not renege on the terms of agreement reached with the new owners of the GENCOs prior to their takeover. He explained that the interim rules were proposed since the transitional electricity market was yet to
take off. “The Transitional Electricity Market (TEM) is a market where trading is done by contract. There will be rules, which would be enforced along with all the contracts that would be in play,” he said. He added that the new rules would not be in force as the conditions preceding the Electricity Transition Market were yet to be met. He said the fear expressed by the new owners about possible losses in the proposed tariff structure were unfounded, pointing out that the baseline losses and the population in the tariff needed to determine so as to ensure that there was sufficient revenue in the entire value chain. “We need to have a set of rules to guide the industry within this transition period when the losses will be validated. The tariff will be adjusted and the remaining few issues will be concluded,” he said. He added that NERC had planned to commence the interim period which would be between November 1, 2013 and February 28, 2014. After all the conditions including the ongoing settlement of PHCN workers’ benefits have been concluded, Shetimma said the Federal Government could declare
the Electricity Transition Market on March 1, 2014. He added that if the commencement of the interim period was from November 1, it would coincide with the
physical handover of the plants to their new owners, which is put at February 28.