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Deconstructing
Nigeria’s Power Distribution Oseloka H. Obaze Nigeria’s power sector remains in a
crisis mode. Thankfully, President Buhari did well
to assign the power portfolio to Babatunde Fashola, a policymaker and problem solver capable of
discerning man-made or systemic flaws, pitfalls of poorly implemented public
policies and the nexus of inadequate power supply and underdevelopment. Since
efficient power supply is the bedrock of national development, epileptic
power supply remains Nigeria’s Achilles heels, despite huge sums sunk into
the power sector. Even with the power
sector well-splintered into generation, holding and distribution components,
(the so-called GENCOS, DISCOS, NDPHC and IPPS) the sector is still performing
below par. The fault line lies with the twelve DISCOS. Putting Nigeria on solid footing requires
resolving the power sector’s core problems. However, power generation and
distribution in Nigeria remains problematic, not due to lack of reform
efforts, but due to lack of sincerity. Nigeria’s critical power needs dictated
the deregulation of the power sector. Deregulation
resulted in the emergence of the Electricity Distribution Companies (DISCOS).
By choice, Nigeria elected an operational platform where DISCOS, as regulated
monopolies, deliver electricity to customers, as opposed to a platform of
“competitive wholesale and retail marketplaces where electricity is traded.” Yet
moving the nation forward and getting uninterrupted electricity into every
home, SMEs and big businesses and industries, is mired in bureaucracy; and stultified
by the DISCOS, through greed, imperious policies and extortionate tariffs. Nigerian DISCOS are collectively behaving
dissolutely. Major equity owners in the
DISCOS represent the special interests. These same special interests for long
orchestrated policies that emasculated the power sector; shunned development
of eco-friendly solar power, stimulated the use of generating sets and pushed
the price of diesel to high heavens. They too, advocated fuel subsidies, ostensibly
to assuage the incidental high-cost to the masses, only to turn around and reap
the benefits of the fuel subsidies. With deregulation completed and the DISCOS in
place, the same special interests now use the pretext infrastructure
expansion and unavailability of pre-paid meters to further fleece Nigerians. Nigeria’s indigenous industries long
decimated by epileptic power supply, now confront inexplicable high tariffs,
based on estimates not actual usage. These
special interest elite have fallen prey to their social standing; their “privilege
blinds, because it’s in its nature to blind”– excuse my usurping Chimamanda Adichie’s phraseology.
As collectivized monopolies, the DISCOS
toe the malign policy of multinational pharmaceutical companies that insist
on recovering their research and development costs, before permitting affordable
generic brands to be produced in the public interest. People
dying as a consequence of such warped policies do not seem to matter. Such a disposition presents Nigeria’s organized
private sector in bad light. In case
of the DISCOS -- the collective monopoly that they are -- there ought to be a
modicum of social consciousness and responsibility, besides their fixation on
profits. But the key challenge lays in the faithful implementation of extant regulatory
policies the Nigerian Electricity Regulatory Commission (NERC) pressing on
with its oversight responsibilities. NERC’s operational modus remains unclear,
considering its remit under the Electric Power Sector Reform Act of the
Federation 2005. Statutorily, it is to undertake, inter alia, technical and economic regulation of the Nigerian
electricity supply industry, license operators, determine operating codes and
standards, protect customer rights and set cost-reflective industry tariffs. Worryingly, there exist a disquieting disconnect
between the NERC, the DISCOS and electricity sector stakeholders. Nigeria’s individual consumer is the worst
affected. But indigenous Business and Commercial consumers that run our industries
are also being strangulated. These
lapses, more so the quantum leap in tariffs is damaging Nigeria’s already
stressed economy, all the more. NERC’s
new Tariff Order issued on 1 January, 2015 drew understandable fury from the
consumer public. Clearly, the tariff variation, which reflects a markup of 103.46% for the Jos distribution area can’t be passed
off as a minor increment. Internationally, any tariff increase beyond 20%
constitutes a “rate shock”. Unsurprisingly,
industrial consumers backed by the Manufacturing Association of Nigeria
(MAN), protested vehemently against the hike, which failed the “public
acceptability and feasibility test.” In
sum, the government continues to fail in its delivery of uninterrupted electricity,
and in engendering the added value electricity brings to development. Considered
purely from the economic standpoint; the present operational stance is
non-collaborative, hinders indigenous capacity-building and is killing off
start-up industries. Most complaints tabled at the Electricity
Consumer Forums relate to excessive tariffs. It is a nationwide saga. Complaints
of bogus tariffs persist from customers of the Olorunsogo
Power Plc., Omotosho Power Plc. Magboro
Power Company Ltd., to Yankari Power Company and
Jos Electricity Distribution Company. Entrepreneurs
in the Onitsha-Nnewi-Awka Industrial Axis,
especially those situated in Onitsha Habour Industrial
Layout have protested the high tariffs, characterizing it as “unfair,
unaffordable and beyond our cost absorption capabilities”. Astonishingly, the
NERC is aware that the DISCOS, contrary to globally accepted practice,
continue to cast their uncollected revenue from consumers as “loss”, thus consistently
passing on such presumed losses to non-metered and metered consumers. So,
unsuspecting Nigerians continue to bear the burden of the inefficiencies of
the DISCOS. As of March, 2015, only five of the twelve DISCOS had statutorily
submitted their metering plans. This fact is compounded by NERC’s failure to
communicate its regulations effectively and expeditiously to the general
public. Since full disclosure and transparency remain imperatives for regulatory
bodies like NERC, urgent regulatory intervention is called for as public
complaints rage on. In its letter 14 November, 2015, to NERC Chairman Dr. Sam Amadi, the Intersociety
and CLO, cited infractions rampant with the EEDC, (which covers the five
Southeast States of Anambra, Enugu, Imo, Ebonyi and
Abia) and with most DISCOS, to include;
“non-provision of prepaid meters to customers; mass disconnection of power
lines including those of customers that paid their bills; phasing out post-paid
meters without replacement with pre-paid meters; inadequacy of distribution transformers; and
indiscriminate issuance and collection of inflated estimated monthly bills.”
The letter asserts that “97% of the non-residential consumers” in the
Southeast are yet to be to be metered. As
a regulatory agency, NERC is fully aware of the injurious and incapacitating
impact of its new tariffs on SMEs. Customers within the operational theaters of the Abuja, Benin-City, Enugu, Eko, Kano and Port Harcourt DISCOS, all confront similar challenges
and risks associated with the survival of their businesses. Besides, such steep tariffs are not
investment friendly. It is incredulous that NERC, a publicly-funded
regulatory agency would place profit of DISCOS ahead of customer protection,
affordability of electricity, the developmental needs of the nation and other
benefits derived from uninterrupted power supply. If so, NERC risks accusations of being
remiss in its duties to the Nigerian public.
Broadly, NERC’s mission is to foster global best practices which,
“aims to build the capacity of electricity sector stakeholders—government
agencies, regulators, utilities, the private sector, civil society, and
others— to design and participate in policymaking and implementation
processes.” As I’ve advocated, meeting the electricity requirements for
industrial, commercial and home use remains critically essential to Nigeria’s
development. There is a surfeit of
sunlight required for solar energy generation for domestic use. Nigeria, as a
matter of policy must tap into solar power.
In the national interest, we need to urgently grandfather power
distribution, just as we did with GSM registration. The Federal government
and the NERC must do so immediately to enable the nation leapfrog its
developmental process. What are the
policy options? Good
electricity policies are “designed to improve effectiveness of public
expenditures, reduce unnecessary costs, raise the quality of service, and
minimize social and environmental impacts while seeking to reach specific
policy objectives.” Contextually, we must deconstruct the present challenges
in our power distribution system through several proactive measures. 1) NERC
must ensure compulsory metering and consumers’ right to be metered by Discos
in line with extant regulations; 2) Non-compliant and violating DISCOS should
be heavily sanctioned; 3) Government should enact a national cross subsidy
via a grandfather clause, aimed at making prepaid meters free for all private
homes and SMEs; 4) Government should enact regulation forbidding estimation-based
billing; and 5) Government should criminalize the passing on any costs not approved
by NERC to consumers as conspiracy and racketeering. Finally, we must resolve that Nigerian
consumers shouldn’t pay for inefficiencies of public utilities any longer.
Been there; done that. It’s time to push back. ----- Obaze, MD/CEO of Selonnes
Consult, is a strategic public policy adviser and immediate past Secretary to
the Anambra State Government. |