Insist electricity service has to be priced appropriately
Chineme Okafor in Abuja
Electricity distributing companies in Nigeria (Discos) has said Nigerians would have to choose between working with them to improve the country’s electricity system for their benefits and going back to darkness which they said had been the situation long before they took over from the government.
They insisted that the decision of a Lagos Federal High Court to outlaw the 2015 electricity tariff used by electricity distribution companies (Discos) to supply power to electricity consumers across the country was not in the interest of the power sector.
The Discos, through their association, the Association of Electricity Distribution Companies (ANED), said at a press briefing in Abuja that even with the 2015 tariff which the court disbanded last week, it was still quite difficult for them to operate and meet the demands of consumers in their networks.
They also stated that public electricity services in the country would have to be priced appropriately for steady investments and improvements to be recorded, hence its decision to respect the Lagos court judgment; file for a stay of its execution and then appeal against it at a higher court.
The Executive Director for Research and Documentation of ANED, Mr. Sunday Oduntan, alleged at the briefing that the Nigerian Electricity Regulatory Commission (NERC) knew that the 2015 tariff was inadequate to attract investment in the sector because it is not absolutely cost reflective.
He said NERC and the government have for more than two years failed to live up to the agreement it reached with the Discos that a cost reflective tariff would be allowed in the sector to attract investments into it.
Oduntan noted that with the current situation, financial institutions in the country are already cutting back their investments in the sector, a situation he said would impact on the Discos’ network expansion plans.
“Nigerians have an option between light and darkness. If we need darkness, let us continue the way we are going now. Let’s continue to say they should reverse the tariff, let’s continue to steal energy, let’s continue to vandalise gas pipelines, let’s continue not paying our bills.
“If we continue, darkness looms, if we can change, we can increase the power supply. We can progress gradually from incremental to stable to uninterrupted power supply, but we can’t achieve these without the cooperation of everybody.
“Inappropriate tariff leads to shortfall, shortfall leads to funding gap and funding gap leads to inefficiency because we will not be able to give appropriate service,” said Oduntan.
He further stated that: “Part of the agreement at pre-privatisation was that appropriate tariff will be given. The problem we have had ever since is that two and half years down the line, the government did not fulfill their pledge. It did not keep its side of the agreement and that has affected us.
“On November 1, 2013, we were supposed to have an average of N24 per kilowatt hour across board and all we had was N11 per kilowatt hour. Over that period till now, you are talking of a huge funding gap.
“Today, the funding gap is over N300 billion and somebody needs to pay for that shortfall. What we are saying is that we need to ensure that the product is appropriately priced. The MYTO 2.0, 2.1 and 2.1 amended, NERC was just playing to the gallery.
“They knew they got it wrong when they started and everything they tried to do to get it right did not measure up, the funding gap continued. It was only the one they did on December 22, 2015, that measured up. But we couldn’t understand why they said it should commence on February 1, after they have left office.
“That also left January with another huge gap. We are asking that the product should be appropriately priced and it is the job of NERC to ensure that. We all know how much it cost to produce electricity. So, the shortfall keeps growing in the industry.”
Oduntan said while banks in the country have been unable to fund the financial shortages in the sector, the Discos would welcome a discussion with the government on how to close the shortfall through a long term measure.
“Also, there has been the inability of the banks to finance the deficit over the years; that happens because the business was not bankable. A bank will only finance your business if they know that they can recoup their finance. If your business is being run at a loss, no bank will finance it.
“Therefore, federal government needs to come up with a mechanism to deal with the shortfall which can now be financed long term because the revenue shortfall has adversely impacted the ability of the Discos to make capital investment in the system like metering; network expansion; equipment rehabilitation and other critical works,” he stated.