2024 H1 Insights (1)

Simply put, the SBT is a billing system that links your electricity cost directly to the quality and quantity of power you receive. This means you pay more for getting more consistent electricity supply. The Nigerian Electricity Regulatory Commission (NERC) introduced this concept in 2020.

Is this a new concept?

No, SBTs are not entirely new. Many countries, including some in Africa, use variations of this system. The idea is to create a fairer and more efficient pricing structure within the electricity sector.

How does the SBT Regime Work in Nigeria?

Service Bands: Distribution companies (DisCos) categorize customers into different service bands based on the average number of hours of daily electricity supply they receive. Band A, for example, signifies a higher service level (more than 20 hours of power) compared to other lower bands.

Tariff Tiers: Each service band comes with a corresponding tariff tier. This means the price per unit of electricity you consume increases as the service level (number of hours of supply) improves.

Compensation for Shortfall: The SBT framework also includes a compensation mechanism in the methodology, where if a DisCo fails to meet the promised service level for your band, you are entitled to compensation.

Is the SBT Regime Flawed?

While the SBT aims to be fair, there have been challenges.

Metering Gap: A significant portion of Nigerian households lack electricity meters. This makes it difficult to accurately track actual consumption and ensure fair billing based on usage.

DisCo Performance: The success of the SBT relies on DisCos consistently delivering promised service levels, which most times is not within the control of the Discos. Inconsistent supply can lead to frustration for consumers who pay higher tariffs.

Unimplemented Compensation: A major concern is the lack of implementation of the compensation mechanism despite the SBT's introduction in September 2020. This means customers in bands with unfulfilled service level promises may have been overcharged throughout this period.

Does the Infrastructure Exist?

The effectiveness of the SBT also hinges on the ability of the regulator (NERC) and the DisCos to implement a robust compensation mechanism. Questions linger regarding whether they have the necessary infrastructure, such as accurate billing systems and efficient data collection processes, to ensure smooth implementation.

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