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

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
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.

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