BPE Insists Non-cost Reflective Tariff Hurting Electricity Sector

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  • Says MDAs heavily indebted to the power companies 
  • Canvasses robust institutional framework to be led by VP

Obinna Chima

The Bureau of Public Enterprises (BPE) has reiterated that a cost reflective tariff structure must be developed and implemented to solve the perennial electricity problem in the country and make the sector financially viable. BPE said the electricity market had been haemorrhaging badly needed money due to lack of cost reflective tariff. It said heavy debts by Ministries, Departments and Agencies (MDAs) of government were also hampering the growth of the power sector.

Those assertions were contained in a recent report, titled, “Nigerian Electricity Supply Industry (NESI) Reform: Processes, Challenges and the Way Forward,” which the BPE presented to the National Economic Council (NEC) Ad-hoc Committee on the Power Sector, a copy of which was obtained by THISDAY at the weekend.

BPE pointed out in the report that the federal government’s inability to follow through its commitments had affected the Performance Agreements (PAs), frowning on the refusal of parties to adhere to commitments made before the handover.

The bureau recommended the creation of a robust institutional framework that would be ad-hoc in nature, made up of critical actors, and chaired by the Vice President, as a first step towards resolution of the power crisis. 

THISDAY had reported recently that the Nigerian Electricity Regulatory Commission (NERC) was working towards the implementation of a cost-reflective tariff in the electricity sector.

In the report, BPE said its analysis had revealed that the power sector would require funding to the tune of $7.6 billion over a five-year period, stressing that there is a correlation between energy consumption and Gross Domestic Product (GDP) per capita.

It listed other major challenges facing the sector to include withdrawal of the transitional subsidy support and dumping of the Central Bank of Nigeria (CBN)-backed Nigeria Electricity Market Stabilisation Facility (NEMSF) on the balance sheet of the Distribution Companies (Discos).

BPE also cited the major shift in Nigeria’s macroeconomic indicators (exchange rate, inflation) and lack of stable regulatory environment as factors hurting the electricity sector. It expressed dismay at the grave shortfall in power generation in the country, which averaged about 3,500 megawatts in the past 10 years, and the liquidity crisis in the sector. The agency lamented that Discos collected only about 30 per cent of market requirements.

BPE said regulatory inconsistency over the years had weighed down the sector.

According to the agency, “There is transmission system constraints, where the network can only wheel about 5,000 MW in reality. An independent analysis by Siemens indicated that the existing ‘last mile’ distribution capacity in the operation is about twice as high as the peak supply delivered by TCN to the respective distribution.

“There is also lack of proper coordination of the public sector agencies involved in the power sector and the refusal of parties to adhere strictly to commitments made before handover.”

The bureau said there was an urgent need for implementation of the power sector recovery plan.

It said, “The challenges to the power sector are as old as Nigeria. To solve them, the political leadership must be committed, have sincerity of purpose and the will to take hard decisions.

“The Nigeria goal is to provide universal access to power for Nigerians by 2030. To achieve that, we must have a roadmap and a policy that will attract private sector investment, human capital and an institutional framework to reach set goals.

“The first step in resolving the power logjam is the need to create a robust institutional framework that is ad-hoc in nature and made up of critical actors. The committee is to be chaired by the Vice President and made up of heads of relevant ministries and agencies.”

BPE explained that the role of the committee would be to monitor and coordinate the deliverables in the power sector, adding that it would also eliminate obstacles and bottlenecks in the attainment of agreed targets.

The first assignment of the committee, BPE said, would be to ensure the power sector recovery plan approved by the Federal Executive Council (FEC) was diligently and vigorously implemented.

“The power sector plan clearly defined policy actions, operational and financial interventions meant to restore the financial viability of the power sector bedevilled by liquidity crisis,” it stated, explaining, “The issues raised are germane to the socio-economic development of this country. Without resolving the power crisis, Nigeria will remain underdeveloped, with no major educational, industrial or agricultural development.”

The bureau said, “All hands must be on deck working in the same direction to implement the power sector recovery plan approved by the FEC. Nigeria can solve the power deficit challenges under the current leadership. For that to happen, political leadership at the highest level must make the required bold and ambitious moves.

“After all, New Delhi from where we adapted our distribution companies’ privatisation model went through same pains we are going through today.”