Contrary to the directive of the Senate that Electricity Distribution Companies, DISCOs should abolish fixed charges in the billing of consumers, the Nigerian Electricity Regulatory Commission, NERC, has said it would continue to be part of the electricity market.
NERC Chairman, Dr. Sam Amadi, disclosed this yesterday at a press briefing in Abuja, in response to the recent queries issued to the commission by the Senate.
Nigerian Pilot recalls that Senate had asked NERC to immediately stop the monthly fixed charges being collected from electricity consumers across the country. The lawmakers also directed NERC to account for all the monies that had so far been collected on fixed charges across the country.
These directives were the outcome of some of the resolutions adopted by the Senate, which were contained in a motion moved by Senator Sam Egwu Ebonyi North and co-sponsored by Senator David Umaru Niger East entitled: “Unfair Trade Practices of Electricity Distribution Companies in Nigeria.”
Amadi, however, argued that Section 32 of the EPSR Act 2005 mandates the commission to approve a tariff that allows investors recover their prudent cost with reasonable return on the assets invested in the business. The operators invest in assets on a regular basis and recover their investment through the fixed charges paid by the consumer.
He reiterated that payment of fixed charges by customers in Nigerian electricity market is not illegal or necessarily fraudulent as it is a globally accepted standard.
According to him, “fixed charges appearing in different names are part of electricity markets across the world. The difference in Nigeria could be that we don’t have good supply of electricity because of the legacy problem of lack of generation capacity.
“Therefore, consumers in Nigeria pay both fixed and energy charge. The purpose of the fixed charge is to recover the capital and fixed cost of the various operators in the industry.”
He however, said in given the increasing controversies that have surrounded the fixed charge since its introduction into the electricity market, the payment of Fixed Charge would now be limited to commensurate with supply of electricity to consumers.
“In recognition of the negative impact of the fixed charge, the commission has held several public consultations to ascertain a measure that will guarantee financial viability in the industry and
not expose consumers to paying for electricity not consumed.”
“Based on the intervention of the commission, the distribution companies have agreed to find a way to restructure the fixed charge such that a customer who does not receive electricity supply does not pay fixed charge,” he said.
Amadi said that the remodelling of the fixed charge will be part of the ongoing tariff review process being conducted by the distribution companies. He however, added that NERC will continue to ensure that whatever model is presented for its approval is fair and reasonable, ensures the survival of the new electricity market and improves quality of supply to consumers.
He said that the electricity generators are paid both capacity and energy charge and capacity payment to generator covers their capital cost, fixed operations and maintenance cost and 2/3 of tax cost.
Ammadi also said that 75% of the capacity payment is recovered through the fixed charge paid by consumers. “Abolishing fixed charge may impact negatively on the generators who have invested o lot and are continuously making investments in an effort to provide more stable electricity to Nigerians.”

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