Furore Over Electricity Tariff Hike Amidst Epileptic Supply

The scourge that has bedeviled the power sector in the country is as old the sector itself. Right from the days it was known as National Electric Power Authority (NEPA) to Power Holding Company of Nigeria (PHCN) and now a privatized sector, the problems had remained the same- poor power supply, lack of facilities, excess billings, lack of maintenance and others.

When the sector was handed over to the private owners by the Bureau of Public Enterprises (BPE) on November 1, 2013, all sorts of promises were made to Nigerians. Many had thought consumers would heave sigh of relief as witnessed in the telecommunications sector within a short period.

Alas, more than two years of the private owners’ operation, nothing much seems to have changed especially in the area of power supply, billings, metering and maintenance. A situation that has made some Nigerians to call on the present government to review the privatization process which some allege was characterized by fraud.

What has consistently become a bone of contention between consumers and the distribution companies is the tariff. While the companies have argued that they need to review the tariffs upward to enable them provide services, the consumers have insisted that the tariff cannot be reviewed upwards amidst poor power supply, absence of prepaid meters, poor facilities and others.

It would be recalled that on assumption of office, President Muhammadu Buhari’s government challenged the power companies to provide Nigerians with adequate power supply before increasing the tariff. To the amazement of many Nigerians, the country witnessed steady and improved power supply within the first few months that President Buhari assumed office.

But before the consumers could understand or explain the mystery behind the sudden increase in supply, the situation relapsed. Rearing its ugly head recently was the contentious issue of hike in tariff that was championed by the distribution companies.

The move has pitched the distribution companies against the customers. Some of the consumers have dragged the regulatory agency, National Electric Regulatory Commission (NERC) and the distribution companies to court over the planned hike in tariff.

While Nigerians await the outcome of the legal tussle on the matter, the NERC announced a new tariff regime of 45 per cent increase that took effect from February 1.
Across the country, severe criticisms, protests, condemnations and threats have continued to trail the hike since its commencement.

Many Nigerians have questioned the rationale behind the hike, considering that they have been paying for services not rendered to them before now by power distribution companies.

A Lagos- based businessman, Mr. Nixon Okwara, told The Guardian yesterday that the hike is an obvious sign that the present government is insensitive to the plight of Nigerians.

He said: “Where is the light? We have been paying for darkness even after the privatization of the sector. Why the hike now without improved supply? They promised to meter every house, but more than 50 per cent of Nigerians do not have prepaid meters today. Is this the change President Buhari government promised Nigerians? Obviously this cannot stand. It must be resisted.

To Kunle Adewole, the sudden hike is an attempt to defraud Nigerians under the present economic difficulties.

“It is obvious that the private owners of the companies are in alliance with Buhari’s government to impoverish Nigerians. If not, what was the magic behind the steady power supply within President Buhari’s first few months in office and its collapse thereafter?”

Meanwhile, the leadership of the Nigerian Labour Congress (NLC) and other labour groups have concluded plans to organize a nationwide protest on Monday over the hike. They have warned the government, NERC and power companies to revert to the old tariff.

Also speaking to The Guardian on the hike, a US-trained Nigerian Energy Expert and Regulatory Consultant, Mr. Felix Ayanruoh, said the hike should be seen as a positive development, because it will improve power supply and encourage investment in the sector.

He said: “For some, it is a move to further impoverish the indigents in our society. With the combined effect of non-availability of meters and continued power shortages, Nigerians are right to once again be anxious about electricity tariff increase.”

“Nigerians have the right to ask the hard questions, but we must not remain oblivious to the underlying reasons behind the hike. The debate and discussions on this issue should be devoid of emotions and political undertones.

On why the hike now, he said that before the increase, electricity was sold to consumers below the short-run and long-run marginal cost of production, and even the most rudimentary understanding of basic economics and common sense dictates that this is not a sustainable business model.

“Quite simply, power generation, transmission and distribution will be a failure if potential investors cannot get fair returns of their investments, as no investor will be willing to invest in the sector. With the new Multi-Year Tariff Order, investment in the Nigerian power sector is now a bankable venture.

“In addition to its economic impact, underpricing electricity precipitates the wasteful usage of electricity and critically impairs the operating revenues of operating companies, forcing them to reduce efficiencies and capital investment, forego essential maintenance and to seek government subsidies.”

“The unwillingness of governments to raise tariffs in line with costs due to political and labour pressure has led to power reform failures in many economies of the world,” he noted.

The energy expert further stated that in response to consumers’ concern, the new tariff is a 10-year policy that would be reviewed upwards or downwards.

“The new tariff order also removed fixed charges, consumers can now pay for what they use. The Multi Year Tariff Order also provided for a service agreement that mandated the distribution companies to meter all customers within a time frame – failure to meter within the time frame will not result to disconnection or estimated billing,” he said.

In the past, positive effects of the hike had always been outlined and praised by analysts and the operators, but consumers hardly experience them because implementation has always been a knotty issue in Nigeria. Whether there will be any difference this time, around would be determined by time.