Ejiofor Alike reasons that the increase in electricity tariffs in Nigeria was reasonably fair, but the public outcry is fueled by the exorbitant estimated bills slammed on over 70 per cent of consumers who pay for power they do not consume due to the absence of prepaid meters
Despite the obvious merits of the new cost-reflective tariffs designed to incentivise investments and enthrone bankable agreements that will attract funding to the power sector, the poor electricity supply situation in the country, and the inadequate metering in the sector, has fueled public revolt against the increase.
While some aggrieved customers approached the courts to ventilate their grievances, the organised labour took to the streets to protest against the new tariffs.
Both the House of Representatives and the Senate have also in their various legislative pronouncements not hidden their opposition to the new tariffs order.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola had in a keynote address at a three-day retreat on Nigerian Pension Industry Strategy Implementation Roadmap held in Abuja, disclosed that there were already at least, seven cases against the new tariffs in different Federal High Courts in Nigeria – three in Lagos, one in Abuja, one in Umuahia, one in Owerri and one in Awka.
He said it was curious that even manufacturers had taken up some of these cases as plaintiffs, as if they themselves had maintained the same price of their finished products.
Fashola further suggested that judges handling commercial disputes should refrain from granting injunctive orders that would stop the power business.
But barely four weeks after the new tariffs regime took off, a Federal High Court sitting in Lagos, re-affirmed the order it made restraining NERC, from implementing any upward review of tariffs, pending the hearing and final determination of the suit filed by a lawyer and rights’ activist, Toluwani Adebiyi, over the issue.
The trial judge, Justice Mohammed Idris had on March 29, while delivering a ruling on the preliminary objections of NERC against the filing of contempt charge by the plaintiff, said “let me warn that when the disciplinary jurisdiction of this court is properly invoked, anyone who is found to have ignored the order of the court will be dealt with severely.
Adebiyi had urged the court to restrain the regulatory body from increasing tariffs until most communities enjoy at least 18 hours of electricity supply daily.
In the final judgment delivered last month, Justice Idris nullified the new tariffs and ordered NERC to revert to the former tariffs.
He also restrained the agency from further increasing electricity tariff “unless it complies strictly with the relevant provisions of the Electricity Power Sector Reform Act (EPSRA) 2005.”
Justice Idris described NERC’s action as “procedurally ultra vires, irrational, irregular and illegal,” and awarded the sum of N50,000 in the plaintiff’s favour.
The court said it relied on Sections 31, 32 and 76 of the EPSRA, and held that NERC “acted outside the powers conferred on it by the Act and failed to follow the prescribed procedure.”
The judge added that NERC failed to show that it acted in due obedience to the prescribed procedures and that “there is no evidence that NERC complied with Section 76(6)(7)and (9) of the EPSRA Act.”
“Of all the legal requirements, it appeared that the only one complied with by NERC was that it announced the new tariff in the newspapers. It is clear from the affidavit evidence that the increase in tariff was done by NERC in defiance of the order of this court made on May 28, 2015 which directed parties in the case to maintain the status quo. The law is that every person upon whom an order is made by a court of competent jurisdiction must obey it, unless and until the order is discharged and set aside at the Appeal Court,” Justice Idris said.
Justice Idris also berated the regulatory agency, accusing it of breaking the law and inviting anarchy.
Justification for the increase
A careful analysis of the new tariffs shows that it is not only justifiable but is also a fair reflection of the tariffs obtainable in other countries.
The new increment was carefully worked out by NERC to ensure affordability by the various classes of consumers.
The new tariffs regime is also a fair representation of actual cost of generating electricity in terms of kilowatt hour, using gas or hydro.
Over the years, Nigerians had paid little or nothing as electricity bills as power supply was regarded as social amenity that was provided by the government.
After the privatisation, it was discovered that electricity bills in Nigeria was one of the lowest in the world.
With the poor state of the infrastructure in the power sector and the urgent need for huge investment to replace and upgrade obsolete and collapsed facilities, low tariff regime became a disincentive to investment.
Having been commercialised, the power sector needed a cost-reflective tariff regime to engender investment and justify the reform that midwifed the privatisation of the sector.
Before the increase, Nigeria’s residential electricity tariff was the second lowest in sub-Saharan Africa, after Zambia, according to a research by Briceno-Garmendia and Shkaratan as well as estimates by staff of the International Monetary Fund (IMF).
According to the report, compared to other African countries, Nigeria had one of the lowest tariff rates before and after the recent review by NERC, which took effect from February 1, 2016.
The report, which ranked 24 countries, showed that Nigeria’s residential tariff is higher than only that of Zambia but far much lower than the tariffs in 22 other countries, including Uganda and Kenya, which are seen as two successful case of privatisation in the sub-Saharan Africa.
The residential tariff in Uganda and Kenya is said to be higher than average residential tariff in East Asia and Latin America, according to the IMF estimates.
According to the report, Chad has the highest residential tariff in the sub-Saharan Africa, followed by Cape Verde; Madagascar; Uganda; Burkina Faso; Senegal; Congo Republic; Kenya and Rwanda.
Others include: Cameroon; Niger; Benin; Cote d’ Ivoire; Namibia; Ghana; Lesotho; South Africa; Mozambique and Tanzania.
The remaining countries, according to the descending order of their tariff rates include Ethiopia; DRC; Malawi; Nigeria and Zambia.
So, the upward review of tariffs makes commercial sense and is justifiable to reposition the sector and boost power supply.
Outrageous estimated bills
There is no doubt that outrageous estimated billing is responsible for the widespread opposition against the increase in tariffs, and not that the new increment is not reasonable and affordable by the various classes of consumers.
The fact that actual electricity consumption is not accurately metered has given the distribution companies the latitude to determine arbitrarily, the bills paid by unmetered consumers through estimation.
It is unfortunate that while some Discos are making genuine efforts to supply prepaid meters to their customers, most of the companies pay lip service to the issue of providing meters and they extort customers through estimated billing.
It is ironical that these Discos, who failed in their obligation to supply meters, turn around to force their customers to pay the cost of their own inefficiencies in the form of arbitrary bills.
While prepaid customers pay for only what they consume, unmetered customers, who constitute over 70 per cent of the customer population, pay exorbitant estimated bills, whether there is electricity supply or not.
Before the new increase in tariffs, there had been nationwide protests against the exorbitant estimated bills slammed on the consumers who did not have prepaid meters to capture their actual meter reading.
Exorbitant estimated bills have led to violent attacks on staff of the Discos by aggrieved customers, especially military personnel, who were protesting disconnection for failure to pay the unjustifiable outrageous bills.
Before the increase in tariffs, outrageous estimated bills had created mutual distrust between the Discos and most of their customers, who viewed the companies with suspicion for subjecting them to the payment of electricity they did not consume.
So, while customers were suffering the effects of inadequate supply of power, most of the Discos were busy billing them arbitrarily for power that was not supplied.
Most of the Discos not only ignored NERC’s guidelines on estimated billing but also made no efforts to provide meters to capture the actual electricity consumed by the customers.
While most of them claim that they are losing money through estimated bills, the reverse appears to be the case as they may actually be making money by slamming unjustifiable bills on customers, who have no meters.
The reluctance of most of the Discos to submit their audited accounts to NERC is a strong indication that they do not want to open their books for scrutiny because of the dummy they sell to consumers and the regulatory agency that they are losing money to estimated billing.
NERC and the operators in the power sector had at one of the monthly meetings convened by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, agreed on a reporting timeline for their audited year-end financial reports.
But acting Chairman of NERC, Dr. Anthony Akah, disclosed recently that the commission had opted to take punitive actions against the Discos after it discovered that some of them were unwilling to file their audited financial reports, while some even file in formats that are not consistent with agreed reporting standards.
Akah, who refused to disclose the identity of the Discos that have filed their reports or those that have not filed, said the commission was going ahead to fine them for such breach of its regulatory order.
“I don’t have the situation report here but not all distribution companies have submitted their audited financial statements but I want to let you know that the commission has triggered an enforcement process against these distribution companies,” Akah said.
So, the mutual distrust between the Discos and their customers over non-provision of meters and the collection of arbitrary bills for power that was not supplied is responsible for the public discontent against the new tariffs.
If consumers only pay for the actual power supplied to them, be it 18 hours in a day or one hour daily, there would be no opposition to the increment as it is reasonable, affordable and a fair reflection of the cost of generating electricity.
What ignites protests by consumers is that they pay for power that is not supplied as there are no prepaid meters to capture their actual consumption.
Some people have argued that there should be adequate supply of electricity before any increase in tariffs but that is not the bone of contention.
Whether there is 18 hours of electricity supply or one hour of supply is not the problem; the issue is that customers should pay for only what they consume.
Discos should be open and transparent by installing prepaid meters to curb the opposition against the increase in tariffs.