Amid Planned Electricity Tariff Increase, DisCos Generate N842.42bn In 2022

The 11 electricity distribution companies (DisCos) in Nigeria’s electricity supply industry earned N842.42 billion in revenue in 2022, the highest in five years, according to a new report by the Nigerian Electricity Regulatory Commission (NERC).

This is as the DisCos will, from July 1, review electricity tariff as stipulated under the Multi-Year Tariff Order (MYTO)

Recall that the MYTO had already stipulated that a minor review of electricity tariffs should be done twice a year, while a major review is carried out every five years.

Experts are saying that electricity tariff would increase by as much as 40 per cent in the coming review period due to the free float of the Naira which has resulted in the devaluation of the currency against the US dollar.

President Bola Tinubu has already removed subsidies on Premium Motor Spirit (PMS) and floated the naira, decisions that have complicated the price-setting of the Nigerian Electricity Regulatory Commission (NERC) 2022 Multi-Year Tariff Order (MYTO).

New Electricity Act To Trigger Development in Nigeria – NERC

NERC’s current Service Based Tariff (SBT) was benchmarked on an exchange rate of N441/$ and inflation of 16.97 per cent.

With a floating exchange rate and inflation rate of 22.41 per cent, electricity tariff will be increased to reflect the current reality

Data sourced from the report shows that the total revenue collected by all DisCos increased by 91 percent from N442 billion in 2018.

Experts say the surge in DisCos revenue can be attributed to improved metering technology monitoring, regulatory oversight, increased tariff, infrastructural investments, increased customer base, and improved collection efficiency.

Chinedu Onyegbula, an energy sector expert and director at Bullox Resources Limited, attributes the revenue increase to improved metering, technological monitoring of money flows, enhanced regulatory oversight by NERC and Bureau of Public Enterprises, and increased investments in infrastructural projects by discos.

Data from the electricity regulator indicates a substantial increase in metering installations, rising from 85,510 in Q1 2022 to 164,612 in Q4 of the same year, reflecting a 93 percent growth.

“The intentional efforts by the DisCos to meter the citizens are seen in their revenues. Metering has improved and the price of power has also increased,” said Pedro Omontuemhen, Partner, PricewaterCoopers (PwC).

In the last eight years of the previous administration, electricity tariff rose by 168 per cent, with billing jumping from an average of N23.5 a kilowatt-hour (kWh) in 2015 to N63 kWh as of January this year.

For James Akwaji, an experienced professional in the oil, gas, and energy industries, the revenue increase can be attributed to three factors: an increase in the estimated number of customers, a rise in the number of customers using prepaid meters, and improved collection efficiency.

“This resulted in a higher recovery of funds, approaching or matching the amount billed to customers,” he said.

According to NERC, the collection efficiency of DisCos showed a gradual increase from 67.36 percent in the first quarter of 2022 to 73.33 percent in the fourth quarter of 2022, with total revenue collected improving compared to the billed amounts.

On the other hand, it has been reported that the administration of President Bola Tinubu is looking to increase the electricity tariff by 40 per cent in the coming days, which will further increase DisCos revenue.

In addition, the hike in tariff will be in full effect starting July 1, 2023.

In a related development, NERC also reported that about 58 per cent of registered electricity consumers in the country are without meters.

Without meters, consumers are billed under the estimated billing system by the electricity distribution companies, DisCos.

NERC in its fourth quarter 2022 report released at the weekend said as at 31st December 2022, there were 12,152,106 registered customers out of which 5,134,871 have been metered, representing 42.25 per cent metering rate.

The report stated that between 2022/Q3 and 2022/Q4, the number of registered customers decreased by 639,791 (-5.00%), while the metering rate increased by +2.99 pp from 39.26% in 2022/Q3.

“The decline in the number of registered customers is due to the ceding of customers in Aba and Ariaria under nugu isCo’s franchise area to Aba Power Limited, as well as the ongoing customer database sanitization (cleaning the customer database to remove dormant accounts) at Benin DisCo”, it added.

The Commission observed that metering “addresses one of the major concerns customers have with DisCos – the fear of unfair billing”, disclosing that “an additional 164,612 end-user customers were metered in 2022/Q4.

“This represents an increase of +21,725 installations (+15.20%) compared to the 142,887 meters installed in 2022/Q3. Out of the 164,612 meters installed for end users in 2022/Q4, 3,831 (2.33%) were metered under the NMMP (National Mass Metering Programme) scheme, 160,114 (97.26%) customers were metered under the MAP (Meter Asset Providers) intervention and 667 (0.41%) were metered under the Vendor Financed scheme.

The report stated that the progress recorded in metering was driven majorly by six DisCos which accounted for 97.63 percent of the total installations in 2022/Q4.

“The group was led by Ikeja with 52,177 installations (31.70% of the total). Seven DisCos recorded an increase in the number of meters installed in 2022/Q4 relative to 2022/Q3 with Ikeja having the highest increase of +81.59%. On the other hand, three DisCos recorded decreases in the number of meters installed in 2022/Q4 relative to 2022/Q3 with Yola having the highest decline of -91.37 per cent.