Analysts: Revised Tariffs May Not End Power Sector’s Woes

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Peter Uzoho

Following the review of the Multi-Year Tariff Order (MYTO) of the power industry by the Nigerian Electricity Regulatory Commission (NERC), which will pave the way for a cost-reflective tariffs with effect from April 1, 2020, some analysts and advocacy groups have expressed  reservations about the effectiveness of the new tariffs to resolve the challenges of the power sector.

Commenting on the new tariff proposition, CSL Global Limited; Lagos Chamber of Commerce and Industry (LCCI); PwC Africa, as well as some electricity consumers’ advocacy groups, said the increase in electricity tariffs would not ensure a lasting solution to the problems bedeviling the power sector.

The Director General of LCCI, Mr. Muda Yusuf, said increasing the tariff would not solve the nation’s power problem, adding that any approach towards solving the challenge of the power sector must be holistic.

According to him, “the power sector problem is a multi-faceted problem; it is not only about the tariffs. The approach should be holistic; otherwise the consumers would be vulnerable.  Only recently there was an increase, now, another is being proposed.”

While acknowledging that the tariffs question was one of the problems facing the sector, Yusuf, however, asked what NERC was doing about other issues including Discos’ capacity, estimated billing, the technical and commercial losses, metering problem, quality and adequacy of investment by the Discos, transmission issues,  the proposal on the decentralisation of the sector, the promotion of off-grid solutions and incentives for renewable energy solutions, among others.

He added: “All of these need to be addressed in order to inspire the confidence of consumers.  NERC should protect the interests of consumers as well as that of the investors. There is also the social dimension of electricity provision to those at the bottom of the pyramid.

“It is also critical to disaggregate and interrogate the components of cost being claimed by the Discos. Already many small businesses have complained about prohibitive tariffs by Discos following the last review. What is needed is a holistic reform rather than the simplistic solution of tariff review.”

Similarly, the National President of Energy Consumer Rights and Responsibilities Initiative, Mr. Sural Fadairo, said increasing the cost of electricity was not the panacea to Nigeria’s energy crisis.

According to Fadairo, “if they want to increase tariffs because the distribution companies are under-remitting due to debts by consumers, that will not solve the problem. If people are refusing to pay now because they are disputing their bills, will they now pay if it is further increased?

“What they need to do is to meter all electricity customers so that we can end the issue of estimated billing. So, from the consumer point of view, we are totally against any increment because power generation and supply have not improved significantly in the country.”

On his part, the National Coordinator, All Electricity Consumers Protection Forum,   Mr. Adeola Samuel-Ilori, said the increase was needless as the basis for such increase at this time could not be justified.

He added that many consumers have not been metered and that they still purchase transformers and other line materials by themselves with attendant extortion via estimated billings.

“All these are not taken into consideration and extensively dealt with before contemplating tariff increase,” he said.

However, in its latest report on the Nigeria power sector, with the caption: “Liquidity Crisis-Same Old Story in 2020?”, CSL Global said: “We are uncertain if the proposed new tariffs have been implemented or are yet to be implemented but what is clear to us is that consumers may again revolt against the price increases.

“We have always believed that low tariffs retard development of the power sector and as such, we see the efforts to come up with a fair tariff system as a major step towards boosting electricity supply in the country. However, we believe the revised tariffs scheduled to take effect this year still dwarfs cost-reflective tariffs.

“This suggests that the year 2020 may not be entirely different from historical trends where the nation’s power sector rested on the shoulders of the federal government, which has been forced to intervene to keep it afloat and prevent a total collapse”.

Also reacting to the proposed cost-reflective tariff, Partner/West Africa Energy Leader, PwC, Mr. Pedro Omontuemhen, who said the move was a welcome development, however, noted that it would not solve the problems of the sector given the many challenges facing it.

Omontuemhen, in a telephone interview  with THISDAY, said: “The challenges of the power sector in Nigeria are many, but one of the challenges is financing. Technology is a challenge, recovery of debts is a challenge, infrastructure is a challenge, but sometimes you do need money to solve some of these challenges that we have.

“If you don’t have enough money, you will not be able to invest in the required infrastructure. So the issue now is that, if you price this product appropriately and it is well managed, the management of the distribution companies will now have money to invest in the right infrastructure.

“So our view is that it is a step taken in the right direction. But the challenge now is for the distribution companies to ensure that power is now available”.

For the Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED),  Mr. Sunday Oduntan, appropriate pricing through cost-reflective tariff will go a long way in solving the sector’s problems.

He said:  “When you are talking about efficiency, efficiency is also linked to pricing. You cannot be efficient in any business, even in bakery if there is no appropriate pricing.”