Deconstructing Nigeria’s Power Distribution
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.