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Criticisms persist over plan to hike electricity tariff

By Kingsley Jeremiah, Abuja
11 July 2020   |   3:18 am
The shelved increase in electricity tariff in the country has continued to generate more reactions, as stakeholders, yesterday, demanded improved service delivery in the sector

…Experts Back Sale Of Power To Neighbouring Countries

The shelved increase in electricity tariff in the country has continued to generate more reactions, as stakeholders, yesterday, demanded improved service delivery in the sector, stressing that the growth of the industry since privatisation has been below par.

This is as findings showed that as Nigeria is tinkering with whether to move to service reflective tariff or not, neighbouring countries are lurking around as the destination for power export, as about 4000 megawatts of electricity remained stranded in the country.

National President of Association of Public Policy Analysts (APPA), Princewill Okorie, said it was proper that the proposed tariff regime was not implemented.

He insisted that there was no justification to increase the tariff, adding: “What is the justification for the increase? There is no transparency in the sector. Service has not improved. Collection issues still remain. There is no metre for consumers.”

He feared that increasing tariff would mean an increase in estimated billing, a situation that persists despite outcry from consumers.

To him, the situation of the power sector is not only pathetic but also reveals how unorganised and porous the country has been.

“Government should take responsibility and address issues. The sector is uncoordinated and inefficient. It is not that they don’t know what to do, but the will to do that is not there,” he said.

Okorie equally accused the private players in the sector of prioritising personal gain even when services were far from being satisfactory, calling on the Federal Competition and Consumer Protection Commission (FCCPC) to rise up against the excesses in the sector.

A consumer right advocate, Kunle Olubiyo, stated that if the sector had gone ahead with the proposed increase, electricity consumption in the country would have been segregated as viable and non-viable customers, a development he said was tactically designed to shift power availability to the rich, thereby worsening energy poverty in the country.

Olubiyo, who is the President of the Nigeria Consumer Protection Network, said though electricity is a product, the country has been running on a business model that does not provide consumers with the right to choices.

Like Okorie, an energy lawyer, Madaki Ameh, did not see any justification to increase tariffs, urging the public to continue to rise up against the move, which he described as “fraudulent.”

Ameh added: “There was a comprehensive review of the tariff issue and a number of town hall meetings were held across the country, where tariff increases were roundly rejected by consumers.

“At the end of that exercise, NERC issued guidelines rejecting the request of DisCos to review tariffs to the so-called ‘cost-reflective’ levels. So, what has changed between April 1 and now? What happened to all those town hall meetings? Were they just for show? What is so urgent about the tariff increase now, especially as there has been no meaningful improvement in service delivery by the DisCos?”

Following discords over continuous supply of electricity to other countries, especially Togo, Niger and Benin Republic in the face of mounting debt and erratic power supply in Nigeria, the country has shifted from the initial diplomatic arrangement to willing buyer-willing seller deal that could make these countries viable destinations for Nigeria’s generated electricity.

While the West African neighbours were reportedly owing Nigeria about $100 million in legacy debt over electricity bills provided to them, the government of Chad Republic last month formally requested Nigeria to connect the country to Nigeria’s electricity grid.

Head, Market Operator, Transmission Company of Nigeria (TCN), Edmund Eje, told The Guardian that although the TCN had threatened to disconnect debtor countries from Nigeria’s power grid, a new business model- ‘willing buyer, willing seller’- has been deployed in serving the affected countries instead of a historic agreement where supply was treated as a diplomatic pact.

With the current arrangement, Eje noted that the countries mainly relate directly with some power generation companies in Nigeria and the invoices are settled with the companies, except for the legacy debt.

A generation company that serves one of the international customers told The Guardian that the country has paid promptly under the new agreement.

Recall that an initiative between Nigeria and some of the countries compels Nigeria to supply power to some of the international customers since they were unable to dam the River Niger, where they would have generated electricity.

And though the country’s electricity generation companies have signed a Power Purchase Agreement (PPA) with the Nigerian Bulk Electricity Trading (NBET), meaning that they are compelled to supply a certain quantity of power under the Multi-Year Tariff Order (MYTO), some stakeholders believe Nigeria could leverage its energy resources to address the country’s power challenges, as well as become a net exporter of electricity to other countries.

With utilised 4,000 megawatts of electricity due to infrastructural gap in the country, Executive Secretary of the Association of Power Generation Companies (APGC), Joy Ogaji, said neighbouring countries are viable destinations for power firms if the right policies are in place, disclosing that quantity of energy being supplied to the international customers may not be up to 500MW. She stressed that the quantity of stranded electricity still remains very high in the country.

“In the gas sector, we need to segregate the market into two- MYTO regulated and bilateral. Since the MYTO is based on 4000mw, the difference should be liberated from NBET and sold through bilateral. This could be off-taken by international or local customers who are able to meet the bilateral requirements,” he noted.

PricewaterhouseCoopers’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, sees a lot of business sense in making electricity a foreign exchange earner for Nigeria, noting that the electricity sector could serve as a major way to diversify the economy if the huge resources in the country are properly harnessed.
“With the existence of hydro and thermal power plants, the ability to expand the capacity of these, build more plants from the abundance of the feedstock- water and gas- and diversify into other generating sources, such as solar, wind and biofuels, Nigeria will continue to be seen as a major potential power generating source for neighboring countries.

“The West African power pool also alludes to this, as Nigeria is seen mostly from its generating prowess and ability to expand.

“This is definitely a great business potential for the country via expansion of G2G agreements and the existence of bilateral agreements with local GenCos.”

Jaiyeola, however, expressed fears that the business potential may be undermined if appropriate cash collection strategies are not adopted, adding that one of the major issues plaguing the Nigerian electricity sector relates to the receivable collection, as a result of the larger social interpretation of power supply locally.

He said international supply must be a strict business transaction that would be guided by various liquidity management schemes such as prepaid supply, letters of credit and other cash management schemes.
“Overall, the local and international power supply has to be looked at from a purely business perspective to enable the private sector to thrive. With increasing investments in local transmission and distribution capacity, Nigeria will be able to harness the full extent of current installed generating capacity for local use.

“This will boost further investment in a generation for increased local supply and foreign exchange earnings via international customers,” Jaiyeola stated.

To the professor of Petroleum Economics and Management, Wunmi Iledare, though bilateral agreements between countries are critical to global peace, privatisation, if it had been done properly, would have resolved most of the power issues confronting the country.

“Implications of power sector failure is the high misery index growth over the last decades, in terms of the high unemployment rate, the negative growth rate of the economy in an aggregate sense, high inflation rate, relatively high exchange rate, extremely high-interest rate and growth in Esau’s syndrome from one generation to the order.  

“To a large extent stable, accessible and affordably power can certainly ameliorate misery index growth among the energetic Nigeria youth,” he stated.

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