Electricity in Nigeria

Sanctioning an increase in tariff before addressing all the issues, especially those to do with protection of the consumer is not wise. In the absence of a competitive environment, we must have an independently prepared and verifiable template for arriving at appropriate tariffs. That is the least we can do to enthrone a transparent and sustainable system in place.

We are mid-way into the month of December, with a lot of businesses beginning to wind down. This morning, the Ikeja Distribution Company (IKEDC) came calling, not with a Christmas gift. That will be strange and unusual. The official was here to pin the electricity bill for the month of November to the gate. It has taken IKEDC two weeks to send the bill for the previous month to its customer. Very efficient, you might say. Sometimes last week, I was at one of its offices in our neighbourhood to make payment. There was no-one available. Not even the managers. They had all closed for the day. This was only slightly after 4 p.m. I could not believe that a private entity, one which directly interfaces with the public and depends on direct payments by customers will close shop at such hour of the day in Lagos. With the online payment portal disabled for the customer to use, they are expected to leave their places of work to visit IKEDC, just to make payment. Where is the incentive to pay?

I guess I am wrong to assume that the distribution company actually runs on a business model built around prompt payment for power distributed to consumers, anyway. Obviously, what is in place is a voodoo arrangement where a select group of consumers are bullied, harassed and blackmailed into carrying the can for an inefficient system run by DISCOs, sanctioned by the pretend-regulator known as the Nigerian Electricity Regulatory Commission (NERC). With so much inefficiency deliberately instituted into the system, the collector is not interested in ensuring that the customer only pays what is actually due to him. You would think that distribution companies would be eager to metre their customers to ensure an increase in income. We have come to find out that they are not. They are deliberating working to ensure that pre-paid metres which will help them earn income ahead of service are not installed. Does that make sense? It does make sense to the distribution companies. They are content to ensure the retention of what we have in place, at the moment, a system where distribution companies slam on post-paid customers arbitrary bills in the name of estimated billing.

I once had cause to engage the Ikeja distribution Company and they were quick to let me know that I was being billed on the basis of total supply to the transformer, shared among customers whom they have deliberately refused to supply with pre-paid metres. So, in such a case as witnessed in the last few weeks where there is supply to the transformer, but there is disconnection to some sections in the neighbourhood, the consumer is compelled to pay for service not rendered. Where the consumer is away from his residence for some time, he has to pay the distribution company for power not consumed, over that period. How the distribution company arrives at the consumption level per transformer or neighbourhood, we are not to know. Their position is that all the attendant costs for their inefficiency, ineptitude and energy theft, where it exists must be passed on to the consumer. You will assume that the inefficient collection system ought to impact on the company’s cash flow and bottom line. Because it has hedged against this through a fraudulent system which allows it to pass charges on other customers, it really does not care. There is also the regime of fixed charges foisted on the consumer by the Nigerian Electricity Regulatory Commission, over which it has been blowing hot and cold.

It is obvious that the distribution company has no reason or incentive to metre the customer or set up an efficient collection system, with what it makes from estimated billing and fixed charges. It can sit back and slam whatever bill it likes on the consumer. After all, it is a monopoly in its territory. We have seen our electricity bill double in less than six months. The first set of complaints to IKEDC and NERC received no response. Dr. Amadi, Chairman NERC, had once expressed his inability to explain a situation such as this one, when I presented it to him. A complaint later sent to other institutions of government and copied to the Managing Director of Ikeja Distribution Company finally triggered a formal response from IKEDC in August, with a promise to investigate. Four months after, we are yet to have a report from them, despite follow-up calls to its Customer Service unit.

It is difficult to tell exactly what has changed between what was in operation in the power sector, just before privatisation and now. Indeed, when some cite the ‘privatisation’ of the Power Holding Company as one of the achievements of President Jonathan, I simply wonder. I see what they mean, but I do not understand or accept it as something to be celebrated. To start with, the manner in which that publicly-owned national monopoly was cannibalised and handed over like cookies to select privately-owned monopolies leaves much to be desired, for me. A process which threw up the same members of our rampant oligarchy as owners of many of the Generation companies (GENCOs) and Distribution companies (DISCOs) was so transparent that one does not even need to lift the veil of incorporation to see that again our commonwealth has been cheaply handed over to the usual suspects.

Indeed, the experts that midwifed the process might have considered all the options and the implications of each, but it is still difficult for some of us to see the wisdom in the unbundling that left us with generation, transmission and distribution sitting on different platforms. Is it not possible to licence private entities for regions or the whole country to take full charge of the whole process, from generation to distribution? How do you privatise generation and distribution and then hold on to the go-between transmission platform as a public entity? Now, each of the entities pass on the blame for failure in the system, with no one sure on whom to hold responsible. What is the sense in foisting on Nigerians local and regional monopolies, to carry on as they like within the territory they control? Where is the competition promised by privatisation apostles in replacing a public with a private monopoly? Where is the efficiency promised by market enthusiasts, who sell the market as a cure-all, in this kind of arrangement?

The National Electricity Regulatory Commission personifies everything wrong with the present arrangement. It is not only toothless, even when it chooses to bark, it is so feeble that no one pays it any attention. Perhaps, we might consider regional regulators rather than a single entity, hamstrung by an inability to find its voice, yet trying so hard to shout down the giants placed under its control. Perhaps that is why we are faced with a situation where tariffs are designed by the beneficiaries, who pretend to have run though a consultation process, yet a NERC which has publicly expressed displeasure at the manner in which some of the DISCOs went through the process, is today leading the chorus for an increase in tariffs, in spite of the incurable birth defects that marred the process.

We are not even engaging here with the implications of this increase on the poor man’s economy, households and small businesses, as it should be obvious that what is needed at the bottom of the pyramid and the informal economy, right now, is a measure that infuses capital not one seeking to take away the little there. The point here is that singling out electricity tariff for increase outside a consideration of the inefficiency already ingrained in the DNA of the monopolies who run the system does not commend itself as well thought-out.

Mr. Fashola, please tread carefully when it comes to running with any form of advice offered you by Dr. Sam Amadi and his men from the NERC on an increase in electricity tariff. You might need to ask him what stopped him from implementing the increase before the elections. You might need to ask Dr. Amadi about the debate organised by AIT at which he represented the PDP and canvassed positions against that of the APC represented by Alhaji Lai Mohammed. Over time, we have seen him function more as the spokesperson for operators rather than an Ombudsman for the protection of consumers. You might need him to explain to you whose agenda he is pushing, this time around. A regulator given to double-speak, lacking in will-power to follow through with its directives and pronouncements, is not one to be taken seriously. It is no surprise that the operators have not taken NERC seriously, riding roughshod over it and the consumers.

NERC claims to have a methodology for determination of tariffs, let it open it up to independent verification as basis for justification of any form of increase. Milestones have been set for Distribution companies in different areas – metreing, facility management, investment in infrastructure, etc. Even NERC has publicly admitted that many of the DISCOS have failed in meeting up with these. Yet, they seek to be rewarded with an increase. It comes across as if the only goal set by the DISCOs, with the consent of NERC, is to continue to milk the consumers dry in return for poor or non-existent service. Sanctioning an increase in tariff before addressing all the issues, especially those to do with protection of the consumer is not wise. In the absence of a competitive environment, we must have an independently prepared and verifiable template for arriving at appropriate tariffs. That is the least we can do to enthrone a transparent and sustainable system in place. Let us not put the cart before the horse, again.

Simbo Olorunfemi works for a Nigerian communications consultancy.