More for less: The agony of Nigerian electricity consumers
The Nigerian Electricity Regulatory Commission at the weekend, approved increase in tariff by the 11 Distribution Companies (DisCos) in the country, in line with updating the Multi Year Tariff Order (MYTO). While the increase is expected and legal, the issues of quality of service and distribution of pre-paid meters to consumers remain in the backburner suggesting profit maximisation over service delivery. Will Nigerians get value for the new tariff? FEMI ADEKOYA writes.
Since the privatisation of the power assets, it has been series of blame game between operators and lamentation of losses with quest to increase tariff without necessarily improving the quality of service. The distribution companies were worst hit by complaints from consumers, the regulators and other stakeholders. Challenges of metering remained despite the introduction of Meter Asset Providers scheme (MAPs). Accusations of non-remittance of fund and lack of investment continued against the DisCos.
With DisCos as the primary target, at some point, Market Operator (MO) had to penalise operators found to have repeatedly failed to abide by the Market Rules guiding operations in Nigeria’s electricity market.
Indeed, the Vice President, Prof. Yemi Osinbajo, had earlier in the year, expressed dissatisfaction over the performance of electricity distribution companies in the country, saying there was the need for a substantial change of strategy in order to meet the electricity needs of homes and businesses.He lamented the inability of the Discos to distribute available grid power to consumers.
“The distribution capacity in the 11 Discos is significantly low, hovering at around 4,000 megawatts on average with a peak at about 5,400MW. So, despite all the availability of about 8,000MW of generation and 7,000MW of transmission capacity, the lack of Disco infrastructure to absorb and deliver grid power to end-users has largely restricted generation to an average of about 4,000MW, and sometimes even falling below 4,000MW,” the Vice-President said.On his part, the Minister of Power, Saleh Mamman, said that effective metering of electricity consumers remains the best option to help distribution companies get more money to pay generating companies.
According to the Minister, metering is one of the serious issues bothering Nigerians, particularly consumers of electricity, even as he restated his ministry’s commitment to supporting local meter manufacturers while also creating a level playing field for foreign investments.
With metering remaining a critical problem in the power with the DisCos failing to meet up with their target, the sector’s regulator, Nigerian Electricity Regulatory Commission introduced MAPs with the intention of bridging prevailing gap, reduce estimated billing of consumers and improve revenue collection.
The Meter Asset Providers (MAPs) scheme which was expected to commence in May, last year, continues to experience several bottlenecks as distribution companies drag its implementation. Though the Distribution Companies across the country had signed a Performance – Agreement to ensure that the gap in metering is bridged, the practice of estimated billing remained a critical challenge in the sector, as the agreement which commenced 1st January, 2015 has just been reviewed.
A report by PWC had indicated that although, the 11 DisCos committed to metering 1.75million customers yearly, the metering capacity of the DisCos has been constrained due to limited allowable capital expenditure (“CAPEX”) in the Multi-Year Tariff Order (“MYTO”).
The total annual CAPEX provision of N46.3 billion in the MYTO, according to PwC, if utilised wholly for metering, is insufficient to meet the DisCos’ yearly metering commitment, which is estimated at N52.5 billion yearly.
In terms of performance, only the Abuja Electricity Distribution Company (AEDC) noted that it has hit a 50,000-meter installation milestone within six months of the commencement of the regulation.
When The Guardian reached out to operators with the largest distribution network, Eko Distribution Company and Ikeja Disco, on the number of meter installations recorded so far, no response was provided, despite consumer complaints about metering gaps in many parts of Lagos.
Consumers kick as NERC explains review
Though the Coordinator of Electricity Consumer Advocacy Network, AbdulHakim Balogun, said that the increase was expected, as provision had been made for such under the law, he, however, stated that the timing might not be appropriate, considering the state of the economy, increase in VAT and pressure on consumers’ disposable incomes.
“We can never have 24 hours uninterrupted power supply as regards to the distribution system. The government has failed us. Why are they giving the operators funds after privatising assets? Consumers have been paying for meters and this shouldn’t be the case. NERC should compel Discos to distribute meters before effecting the tariff or else consumers will continue to pay increased estimated bills for energy that they did not consume.
The Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, said the power sector problem was multifaceted, adding that the approach to addressing it should be holistic, otherwise the consumers would be vulnerable.“The tariff question is no doubt one of the problems. But what is NERC doing about the issues of the capacity of the Discos, estimated billing, technical and commercial losses, metering problem, quality and adequacy of investment by the Discos, transmission, proposal on the decentralisation of the sector, promotion of off grid solutions and incentives for renewable energy solutions? All of these need to be addressed in order to inspire the confidence of consumers.
“NERC should protect the interests of consumers as well as those of the investors. There is also the social dimension of electricity provision to those at the bottom of the pyramid. It is also critical to disaggregate and interrogate the components of cost being claimed by the Discos. Already, many small businesses have complained about prohibitive tariffs by Discos following the last review. What is needed is a holistic reform rather than the simplistic solution of tariff review,” he stated.
Empowered by EPSRA to carry out minor reviews of the Multi-Year Tariff Order (MYTO) 2015 (the Electricity Tariff), twice a year, NERC notes that Tariffs shall remain the same as they presently are (i.e. 2015 levels) until April 01, 2020 when there will be a slight increment to cater for tariff shortfalls which shall be gradually passed on to the consumer until this is fully completed by the end of 2021.
Any succour from FCCPC?
To check monopoly and protect consumers from unfair prices, President Muhammadu Buhari, in February last year, assented to the Federal Competition and Consumer Protection Bill, thereby making it the Federal Competition and Consumer Protection (FCCP) Act 2019.The Act prohibits agreements made to restrain competition such as agreements for price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements, employment, among others).Under the new Act, the FCCP Commission replaces the Consumer Protection Council (CPC) established by the Act, and also makes provision for the establishment of a Tribunal to handle issues and disputes arising from the operations of the Act.
While the move has been lauded by operators, consumers believe more should be done by the FCCPC in getting a reprieve for them from actions of many business entities that provide essential services.According to the 2019 Edelman Trust Barometer, Nigerians’ trust in government, business, and non-governmental organisations remain on the decline.
Though the FCCPC was able to get the court to back its actions against businesses found to be engaged in unfair pricing, there are concerns about its ability to secure compliance and also extend its influence across other sectors where consumer complaints are very loud.
In a bid to address some of such consumer concerns, the FCCPC coordinated a meeting with electricity consumers of Ikeja Electric and Eko Electricity Distribution Company in Lagos, on their challenges and the way forward in the electricity sector.
Transparency in the operations of Discos
FCCPC boss, Babatunde Irukera, pointed out the need for transparency in the operations of the distribution companies while urging customers to be disciplined and civil in their engagement with the companies.Irukera argues that companies need to begin to be more transparent in the way they do their business.Irukera agreed that there were absolutely no reason people should pay for what they have not consumed. He noted the infrastructure challenge and poor customer relationship.
For the period over which estimated billing will subsist, he makes a case for rational, transparent, reasonable bills, and insist that there should be a linear connection between the bill estimate and actual usage. He argues that the arbitrariness in the billing must stop.
Discos have to be more responsible
He believes that the next thing that needs to happen is that distribution companies need to be more responsible. They must work to recover their debt and hold the communities accountable for unpaid liabilities. He insists that Group Disconnection must stop.
The FCCPC DG asserted that the Discos must improve their operational efficiency and ensure that their equipment such as transformers is upgraded, to meet the demands of their customers. He castigated Disco officials for deceiving customers into spending money on replacing transformers and other equipment; a practice he says must stop.
“What I will call for is regulators coming together to meet with these companies and find ways to address the problems and penalize infractions appropriately. I believe a stick and carrot regime of regulation would prove effective. Ensuring good conduct in the power sector is not what the regulator can handle alone; it needs the support of other operators and consumers.” He further points out that, “we are in a difficult situation in the sense that; we are trapped between a rock and a hard place. We cannot cancel licenses at this point, so we are condemned to work with what we have and nurture the process and people for improved performance.”
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