SAN FRANCISCO, September 1, (THEWILL) – On Tuesday morning, on the flagship morning programme, ‘Sunrise Daily’ on Channels Television, the multiple award-winning 24-hour news and media organisation, the issue of increased tariffs for electricity consumption in Nigeria was on the front burner. Invited to speak on the burning issues was one of the Directors of EKO Distribution Company, Mr. George Etomi, a reputable Lagos-based lawyer and principal partner at George Etomi & Partners, who addressed power supply problems while providing an insider perspective of how these tariffs will play into the already contentious issues regarding metering, tariffs and cost to consumers.
The hot topic of electricity supply in Nigeria is one that never fails to draw upbraid for successive governments from time. Abysmal performance has been the trademark of the sector from the period it was fully state-owned to what now obtains under private ownership of different segments of the value chain. Unstable power supply, frequent blackouts, intermittent excessive voltage push-through that fries consumer electronic products and the occasional extremely low voltage that is useless for any actual usage are all features of the power company that Nigerians have come to associate more with darkness that light. This appalling performance did not reflect the average annual expenditure of democratic governments from 1999 of about $2bn to provide for the country’s electricity needs.
The 2010 privatisation exercise was supposed to change this through the Power Reform Roadmap of the Dr. Goodluck Jonathan-led administration. This process led to the unbundling of the power generation, transmission and distribution functions of the network by 2013. Expectations were high that the country’s power supply woes will be a thing of the past, that the private hands will bring reprieve to wearied consumers and end the frequent power outages in Africa’s largest economy.
Today, although, there are improvements in some areas, these expectations have been largely unmet. Levels of supply and overall capacity remain essentially inadequate and insufficient.
The new operators have tried to evade the responsibility for this state of affairs. They have voiced their complaints about issues stifling the growth dynamics of the sector, pointing to shortage of gas supply required to operate their thermal plants, high levels of unpaid electricity bills and the outdated, poorly maintained transmission network. The latter, because it is outmoded, can only manage a portion of the load of power generated at peak levels. Contending with this obsolete infrastructure and low investment tranches has meant that these new owners have a herculean task in improving the fortunes of the power sector.
To cushion the effect of all these, the government, working with the Central Bank of Nigeria (CBN) has injected some money into the sector. In 2015, the CBN launched a N213bn ($1.1bn) Nigeria Electricity Market Stabilisation Facility to provide soft loans for the companies. Then, to further sweeten investment, the government raised tariffs on consumers under the Multi-Year Tariff Order (MYTO) programme for what was referred to as a cost-reflective regime to encourage private and public investment in the sector.
The owners contend that the substantial investments necessary for the improvements required in the sector are not going to come if investors are not assured of such a cost-reflective policy. That is why tariffs that should have gone into effect in March but were delayed because of the pandemic and are about to become effective have created an ongoing debate in the country. Consumers have labelled it unjust and expressed their unified opposition to the new tariff regime. But, it is apparent that this is not stopping the tariff adjustment.
That was why the hosts of Sunrise Daily brought Mr. Etomi to the well-watched programme. He remarked that there was no denying the fact that there has been an improvement of power supply and noted, in agreeing with the host who queried that assertion by reminding him that some consumers in certain parts of the country will not acquiesce with that improvement claim, that the improvement is segmented and stretched over a period of time. He said distribution networks, necessary for the improvement to be more balanced, are being improved upon and that more will come on-board with time for everyone to enjoy these improvements.
As to how this tariff increase will affect power supply across board, Mr. Etomi submitted that it will be incremental. He explained that this was the rationale behind the segmentation of the new tariff regime in classes of Bands. Pressed to provide specificity about the timeline for this improvement, he reneged saying rather that the distribution companies will do all in their capacity to scale up the duration of the process because that is what will affect their bottom-line. They trade in power, he stressed, and it makes no sense for them to have power and not give it out as soon as possible.
In explaining the factors that necessitated the increase in tariffs, the EKO Electric Director laid out the need for a cost-reflective tariff as noted earlier. The current tariff regime has led to what he called a “liquidity crisis” in the entire sector which was impeding investments. The best time to have increased the tariffs was five years ago, he said before adding that the next best time is today. For, as he argued, the more the right pricing is delayed the more investments in the sector are delayed and Nigerians continue to wallow in periods of epileptic supply.
“Today, we have the World Bank and other investors who are willing to support the sector but they will be deterred if they feel the liquidity crisis will not be improved if they begin to come to this support. What the government has now done through the regulator is to allow for this increase. But, then, the increase,” he argued, “is to protect the most vulnerable and this is why you find that the tariff increase has been put into so many different Bands. EKO Disco, for example, will have five Bands: Bands A, B, C, D, and E.”
However, pressed by the host to explain why the companies involved did not take the Conditions Precedence of consulting with relevant stakeholders and those still grappling with overpriced estimated billing systems into consideration first before moving to implement the new tariff regime, Mr Etomi was defensive.
He emphasised that these conditions were met and all stakeholders and consumers were considered into the pricing of the different Bands. For the class of people dealing with the evil of overpriced billing, he explained that there was now a cap on estimated billings to protect this specific category of consumers. He said many of them fall into the new Bands B and E who for now will experience tariff freeze.
“There will be a massive metering programme, that’s part of this entire tariff increase that’ll take place, that will be funded by a mixture of the Central Bank, the World Bank, and it is expected that metering should be concluded across the entire value chain in a maximum 18 – 24 months. But, before that time, the estimated cap methodology would apply so those consumers are protected from what I call ‘crazy billing’.”
Mr. Etomi contested the host’s claim of a lack of consultation. He emoted that there was massive consultation with a lot of back-and-forth with the regulator and stakeholders on the details for this cost-reflective tariff regime. He said the host may have been referring to the calls by the National Assembly, when the legislature got involved, on the companies to hold fire on implementing it as the country was in the middle of a pandemic and suggested that they move it to sometime in the future.
“But the problem,” the Director said, “is that each month you delay the implementation, the liquidity crisis gets worse and you deter investors,” he finished.
Some of those interacting online, however, were quick to complain of the insincerity of the companies involved. They hold that the distribution companies have already begun implementing the new tariff regime even before the specified date of commencement.
“In the last 2 weeks of August 2020,” one consumer fired, “the 10k power recharge that lasts a month at home, finished in a week. We now switch off every appliance to monitor the situation. There’s no template to monitor or gauge the accuracy of metre reading,” he wailed.
Another consumer was scathing in her remark. “100% increase in tariff is insensitive and downright wickedness. This admin is just out to squeeze its citizens of its blood.”
