The electricity tariff impasse

More than anything else, the Nigerian electricity sector has remained one of the most controversial and intractable sectors to remedy.

Despite the purported transformation and unbundling from the poorly rated government-owned National Electric Power Authority (NEPA) to Power Holding Company of Nigeria (PHCN) and now to privately controlled electricity distribution companies, it still appears like whatever is haunting the sector has refused to give way.

Whereas some countries in Africa have left preliminary problems of electricity supply behind and are moving ahead in other areas of development, Nigeria is still rooted in debates over poor power supply, inadequate transmission facilities, grid collapse and lately tariff increase.

Even in the midst of poor power supply across the country, the 11 distribution companies, despite not meeting the needs of Nigerians, are bearing their fangs, threatening to increase tariff in the current year despite their regulator calling for an understanding.

Somehow, and from unexpected quarters, employers and trade bodies appear to be in tune with the DisCos and they have received support from Nigerian Employers Consultative Association (NECA) and the Lagos Chambers of Commerce and Industry (LCCI) as both agree with the power investors that only an increase in tariff would give room for improved power supply.

Obviously, everything happening in the power sector today is a pointer to the sloppy bidding, negotiation and conclusion of the privatization exercise that saw the assets sold to inefficient money mongers.

Following in this stead is the battle that has raged between the Ministry of Power, especially the immediate past Minister of Power, Babatunde Fashola; the supposed regulator, National Electricity Regulatory Commission (NERC) and the investors.

While it will be necessary to push the other spats aside, the recent polarisation between NERC and the DisCos over tariff increase brings to the fore the basic question of who actually runs the show, and from where.

It remains roundly inappropriate that even without any substantive effort on the side of the DisCos to improve on power supply, the tendency to increase tariff appears more dominant in their schedule.

Even while the regulator is asking for brakes to be applied temporarily, the DisCos are resolute in their quest to increase what consumers are expected to pay in the New Year beginning from April.

The way it stands, and if things eventually work in favour of the investors, consumers would have to pay an additional sum of between N8 and N14 for every kilowatt-hour of energy.

Although they had faced the intractable problem of transmission over the years, the distribution companies are also expected to receive increased quantum of energy in 2020.

From the arrangement, since not all power delivered to the DisCos is distributed to end users, by adding the lowest tariff increase of N8/kWh to the current 2019 tariff of each DisCo and multiplying same with the quantum of energy to be delivered to the DisCo in 2020, it was established that power users would pay more this year.

From public perception, even if there is actually a huge gap between what the DisCos collect from consumers as payment and what is supplied, it still boils down to their failure to improve on their collection system.

The big question that has been begging for answer over the years is the issue of actual investment. The electricity sector in Nigeria is one that has been unbundled but with the Federal Government still subsidising with huge sum of money running into billions of naira.

Under this deplorable arrangement, what then has the so-called investors put on ground since they took over the assets. As little and as important as pre-paid meter is to their business, its supply has become a problem, which is actually deliberate to enable them continue with estimated billing.

NERC should not at this stage encourage inefficiency by approving higher tariff because the DisCos do not collect the billed revenue for the current tariff. That is, they have very low collection efficiency.

Increase in tariff means passing the low-efficiency loss to the customers. If collection efficiency is high enough, it will help reduce the gap in the cost of delivering electricity and reduce the need for higher tariff or make the increase minimal.

Another dimension to the argument is that the DisCos operating under the Association of Nigerian Electricity Distributors (ANED) appear to be lowering their axe on consumers because of NERC’s approach to the Multi-Year Tariff Order (MYTO).

From the position of ANED, NERC has just reviewed the MYTO 2015 and has published an order on tariffs and minimum remittance for January to June 2020. The tariffs anticipate changes in the currency exchange rates between the United States and Nigeria, changes in the rate of inflation and gas prices.

Nigerians are not averse to price hike except in situations where the product is hardly available. Today, we are all used to buying fuel for N145 per litre and for the fact that it is available, no one begrudges government any longer.

From the look of things, we believe the Federal Government has a role to play in the current impasse. Whatever it needs to do to remedy the poor state of power supply in the country should be urgently taken care of.

It should as a matter of urgency endearvour to do something about the problem of transmission as well as the national grid that collapses each time it is over fed.

We believe that between NERC and ANED the tariff imbroglio can be resolved in such a win-win situation that will also reflect an improvement in the nation’s electricity supply.

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