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INSIDE POWER FIXED CHARGE RACKET

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INSIDE POWER FIXED CHARGE RACKET

How Power Distribution Companies (DISCOs) shortchanged Nigerians for N81bn

By February 1, when the controversial fixed charges were stopped, investors in the Distribution Companies (DISCOs) had ripped-off Nigerians to the tune of N81 billion for electricity not supplied. ADEOLA YUSUF reports

 

Benjamin Dikki, the Director- General of the Bureau of Public Enterprises (BPE), who completed the sale of power assets to new investors on Friday, November 1, 2013, was sacked on Monday, February 15.

Before his sacking, Dikki had been criticised by many Nigerians, especially those in the Senate and House of Representatives for supervising a process that is yet to fulfill its objective of ending epileptic power supply to Nigerians.

But the federal lawmakers are not the only ones criticising Dikki. The labour unions and Civil Society Organisations could not also be convinced by the expla- nation of the immediate past BPE boss that the process was not a rip-off.

Like Dikki, the immediate past Chairman of the Nigeria Electricity Regulatory Commission (NERC), Sam Amadi, equally fought through to sway Nigerians that his agency did not aid the new owners to make money unjustly from the entire excise.

However, these criticisms got to a new peak when the NERC announced a new tariff regime in which it removed the controversial fixed charge but adjusted the tariff upward.

Many applauded the Distribution Companies (DISCOs) for consenting to the directive without realising that the investors had ripped-off the entire nation to the tune of N81 billion while the romance lasted. This, they profited, without supplying the corresponding quantity of electricity to consumers across Nigeria.

The huge sum was made based on an average N750 collected from over four million customers since November 2013, when they took over the assets from the erstwhile government-owned Power Holding Company of Nigeria (PHCN).

Investigations by Saturday Telegraph revealed that the new investors in the 11 distribution companies raked in over N3 billion monthly as fixed charges on both the pre-paid and post-paid customers in the last 27 months.

While the pre-paid customers were, according to findings, made to pay fixed charges while trying to pre-load their cards, the charges were built into the bills of post-paid customers.

Before now, NERC had tried but failed to stop the DISCOs from surcharging customers until they are able to supply electricity for 15 consecutive days.

A document of the Association of Nigeria Electricity Distributors (ANED) showed that the DISCOs have an estimated four million customers in Nigeria, although the figure has been disputed to be grossly undervalued.

The number of houses in Lagos, based on the figure from Lagos State Signage and Advertisement Agency (LASAA), is in conflict with the figure from the duo of Ikeja and Eko DISCOs. While the Ikeja DISCO, which extends to parts of Ogun State, said that it had 716,000 customers, the Eko DISCO claims theirs is 402,000. But the two figures have been disputed by LASSA, which showed that the houses in Lagos alone, even in 2011, were about 1.2 million.

Based on the four million figure of ANED, however, the DISCOs across the country had been collecting over N3 billion monthly from Nigerians between November 1, 2013, and January 31, a figure, which has accumulated to N81 billion. Lagos is not alone on this.

In Abuja, 350,000 of about 700,000 total customers in the entire franchise area of the Abuja Electricity Distribution Company (AEDC) or Abuja DISCO are without meters.

This is an indication that the distribution company may have collected over N6.3 billion fixed charges in the last two years from its customers.

From the billing period, which will be reflected in the February bills, residential customer classification (R2) in Abuja DISCO have their energy charge increased by N9.60.

Also, residential customers (R2 customers) in Eko and Ikeja electricity distribution areas will be getting N10 and N8 increase respectively in their energy charges. Consumers in Kaduna and Benin will see an increase of N11.05 and N9.26 respectively in their energy charges.

New tariff: An end to rip-off?

The Minister of Power, Works and Housing, Babatunde Fashola (SAN), has said that the new Multi Year Tariff Order, would end the fixed charges regime and correct the system in the entire value chain of the power sector. He insisted that it remained the most viable means to achieve steady power supply in the country.

Fashola noted that the power sector would receive the necessary boost if the new tariff was accepted. He maintained that the new tariff regime is better for willing buyer and seller, as well as exploitation of the already exploited Nigerians.

However, both the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) Presidents, Ayuba Wabba and Bobboi Kaigama respectively, while expressing their displeasure, said that due process in the extant laws for such increment was not followed. This, according to the labour leaders, negates Section 76 of the Power Sector Reform Act, 2005.

They also complained that many have not been metered in accordance with the signed privatisation Memorandum of Understanding (MoU), which specified that consumers must be metered within 18 months after taking over the corporation. Wabba and Kaigama specifically said the planned increase was in violation of an existing order by Justice Mohammed Idris of a Federal High Court in Lagos.

The court had restrained the NERC from implementing any upward review of electricity tariff, pending the hearing and final determination of a suit filed by a lawyer and rights activist, Toluwani Yemi Adebiyi. Because of this, the labour movement maintained that NERC should, as a matter of urgency, halt the planned hike or risk a total shut down of all DISCO offices across the country.

The workers’ unions have also urged Nigerians to resist the new electricity tariff. Adebiyi, in the suit, is seeking an order restraining NERC from implementing any upward review of electricity tariff without a meaningful and significant improvement in power supply at least for 18 hours in a day in most communities in Nigeria.

He equally wants an order restraining the power regulatory body from foisting compulsory service charge on pre-paid meters until “the meters are designed to read charges per second of consumption and not flat rate of service not rendered or power not used.”

In like manner, the House of Representatives has resolved to summon the top management of the commission. The Chairman of the House Committee on Media and Public Affairs, Hon. Abdulrazak Namdas, said the position of the lower chamber on the issue was sacrosanct.

Namdas frowned at the attitude of NERC in defying the resolution of the House, and urged it to stay action on the tariff matter.

He explained that the House was investigating the activities of DISCOs and for the NERC to suddenly increase the tariff when the issue was ongoing showed ‘total disregard for the legislature’. Like the fixed charge, the entire power privatisation left an avenue for cheat, according to the National Assembly.

This may be why the legislators, on October 13, 2015, resolved to probe the administration of former President Goodluck Jonathan, on the sale of power assets. In a resolution on the motion entitled: ‘Alleged Non-transparent and Fraudulent Sale of Power Assets by the Bureau of Public Enterprises by Jonathan’s administration’, the House bemoaned what it called lack of openness in the processes leading to the sale of power infrastructure to private investors.

The sponsor of the motion, John Okafor, representing Ehime Mbano/Ihitte Uboma/Obowo Federal Constituency of Imo State on the platform of All Progressives Congress (APC), stressed the importance of power to every business, family, public or private institution, household and the general growth of the nation’s economy. Okafor alleged that the sale of power assets by the administration lacked transparency and openness and that there was unfair treatment of Nigerians that were disengaged from their jobs in the process, while epileptic power supply continued unabated.

However, major issues within the electricity sector, principally concerning power outages and unreliable services, compelled the government to take the radical action that culminated into privatising the sector.

It enacted the 2005 Electric Power Sector Reform Act (EPSR Act), which called for unbundling of the national power utility company into a series of 18 successor companies.

This was shared among six generation companies, 11 distribution companies covering all 36 states, and a national power transmission company. The Act stipulated that ownership of these companies be granted to the BPE (the privatisation arm of the federal government) and the Ministry of Finance Incorporated.

The unbundling paved the way for an ambitious privatisation programme that was carried out by the BPE. In 2007, the body hired CPCS Transcom Limited, an international consulting firm based in Ottawa, Ontario, Canada, to provide advice on the best ways to move forward with the privatisation process. By 2010, the company was again consulted on the privatisation programme. PHCN officially ceased to exist from September 30, 2013.

The beginning: ECN to DISCO

However, PHCN is not the first acronym for the power distribution asset, which has also gone into extinction. The history of electricity development in Nigeria can be traced back to the end of the 19th Century when the first generating power plant was installed in the city of Lagos in 1898.

From then until 1950, the pattern of electricity development was in the form of individual electricity power undertaking scattered all over the towns.

Some of the few undertakings were federal government bodies under the Public Works Department (PWD), others by the Native Authorities and the Municipal Authorities.

In order to integrate electricity power development and make it effective, the then colonial government passed the Electricity Corporation of Nigeria (ECN) ordinance No. 15 of 1950. With this ordinance in place, the electricity department and all those undertakings which were controlled by various bodies came under one group.

The ECN and the Niger Dam Authority (NDA) were merged to become the National Electric Power Authority (NEPA) with effect from April 1, 1972.

However, the actual merger did not take  place until January 6, 1973 when the first general manager was appointed. Despite the problems faced by NEPA, the authority played an effective role in the nation’s socio-economic development. It steered Nigeria, for instance, into a greater industrial society.

Though, the statutory function of the authority was to develop and maintain an efficient co-ordinate and economical system of electricity supply throughout the federation.

The decree stated that the monopoly of all commercial electric supply shall be enjoyed by NEPA to the exclusion of all other organisations. This, however, does not prevent privy individuals who wish to buy and run thermal plants for domestic use from doing so.

NEPA, from 1989, gained another status, that of quasi-commercialisation. By this, the corporation was granted partial autonomy and by implication, it was to feed itself.

And the total generating capacity of the then six major power stations was 3,450 megawatts. In spite of considerable achievements of the time with regards to its generating capability, additional power plants were needed to be committed to cover expected future loads. Efforts were also made to complete the then on-going power plant projects.

The completion was expected to boost the extension and reinforcement of the existing transmission system to ensure adequate and reliable power supply to all parts of the country.

Despite consistent perceived cash investment by the federal government to the sector, power outages appear to have become the standard for the Nigerian populace, which the citizenry do not see as normal.

This may be why the electricity body was humorously nicknamed “Never Expect Power Always” when it was still NEPA. In recent time, the DISCOs have argued that the electricity tariff in the country is too low compared to the cost of generating power.

This could also be the reason why the federal government has insisted that it increased the tariff in order to meet the growing concern for foreign investors into the electricity sector. This was equally the argument of the government when it balkanised the PHCN distribution sector into separate companies that were later privatised.

11 distribution companies emerged from that experiment. They are: Abuja, Benin, Eko, Enugu, Ibadan, Ikeja and Jos DISCOs. Others are Kaduna, Kano, Port Harcourt and Yola DISCOs. Meanwhile, the take-over of the unbundled PHCN firms generated concerns.

One of such was the credibility of those behind the purchases and what they were expected to deliver in terms of capacity handling, stock of manpower and expertise, as well as quality service delivery across their areas of jurisdiction.

It was observed that the local owners of the new power companies are mostly investors who had hitherto been into other unrelated business ventures and had little or no technical knowledge of how these unbundled power firms operate.

They had, expectedly, partnered with  foreign associates with technical expertise in acquiring the plants and are relying on that expertise to turn the plants round.

But, that seemed not to be working as the issues that bedeviled the sector before the privatisation exercise are still what the new owners are grappling with at present. They were given a target to ensure increased generation of an additional 5,000 megawatts within the first five years.

During the formal handover of share certificates and licenses to the new core owners of the PHCN successor companies at the Presidential Villa, Abuja, then Vice President, Namadi Sambo, emphasised that the target was captured in the performance agreement reached with the investors.

He said: “The new owners of the generation companies are expected to build up capacity from the present levels of performance to additional 5,000MW within a period of five years.

This promise has already been clearly captured in the performance agreement that the new owners have with BPE, which will be monitored by the regulator.”

As for the distribution companies, the Aggregate Technical, Commercial and Collection (ATC&C) loss reduction programme for the first five years as the privatisation strategy for the selection of core investors for distribution companies was used as a measure.

This raised Nigerians hope as they looked forward to brighter days ahead. Though, there were some pessimists.

While some believe the privatisation of the sector would nip the problem of constant power outages in the bud, others said it may not completely solve the problem of epileptic power supply. Still, this category of people believed it should considerably solve the problem of transmission.

The argument was that if they are able to achieve complete privatisation, that is, from generation to distribution, then electricity output will surely improve because no one wants to invest money and lose it.

It was hoped that privatisation will bring about efficiency not only in billing, but also in power supply. So, there were optimism in the air that privatisation will bring some kind of stability into the system.

It was also argued that the entire process was crucial to the economic development and advancement of Nigeria.

This was hinged on the fact that no nation develops with an erratic and unstable supply of electricity, because to a very large extent, the economic and industrial growth of any nation is complicatedly tied to its ability to constantly supply electricity.

This was why many hoped electricity supply in Nigeria will bring relief from the epileptic circle suffered by Nigerians over the years. But, has this been achieved?

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