Why electricity tariff was increased – Amadi

Dr. Sam Amadi29 September 2013, Abuja – Following reports in the media recently on the decadence in the electricity sector in Nigeria, we engaged the CEO of the Nigeria Electricity Regulatory Commission, NERC, Dr. Sam Amadi on the issue. He speaks on the better reformation of electricity service soon, as licensed operators by NERC plunge millions of dollars to revamp the sector with better service at a fair rate.


As regards the ongoing privatization process, what level of success do you think this will bring to the electricity industry and do you think this is the solution to the power problem on Nigeria presently?
Theoretically, privatization policy is the best policy we can embark on today that will yield result. From the history of this country, you and I know that the Power Holding Company of Nigeria, PHCN, has not been efficiently handled. The consumers complain bitterly about the sector and their complaint is an indicator that the services provided by the sector is very poor. So, that is a clear evidence that privatisation of the sector is very essential. So the reform is based on changing the market structure of the sector.

Let’s look at the effect of privatisation process on the masses, how would thise affect consumers financially ?
The reason private operators are coming to Nigeria is to improve power supply because Nigerian people have complained a lot about the sector. So private operators have invested a lot to improve the sector. I strongly believe that it is a fair bargain as far as Nigerians get better services at a fair price. People are yearning for adequate power supply, they want quality service with a fair pricing. They don’t want to be exploited by estimated billing.

As the regulator of the sector, you consider both the consumers yearning for quality service at a fair price and the operators who want a good return for their investment. The equation of private investment has to be balanced. Some of the equation is that the pricing must be good and must attract investment to recover cost. Nigerians should focus on fair pricing and quality service.

What is the possibility of the provision of 40,000 mega watts by opposition political parties if they come into power within a short while?
I know miracles happen but there is a limit to how much power you can generate within the next two years that can be effectively distributed. So if some people say in the next two three years they can generate 40,000MW, we would like to see their business plan and their policy framework, but I believe the policy President Goodluck Jonathan’s administration has adopted is a very intelligent one.

It is a value chain approach where we are expanding capacity generation, improving distribution and increasing transmission. Even if you have hundreds of thousands of megawatts, there is no way they can implement it within a short time. In South Africa, they are doing up to 40,000MW but they have no capacity of doing 80,000MW within a short time.

They should not liken electricity to a factory where goods are manufactured and imported; electricity is a very complex business transaction that is managed hand to hand. When government says they plan to increase power supply to 7,000MW within a year, they are as well looking at the responsibility of generating that power within that year and the ability to distribute that power has to be in line.

The power framework in Nigeria now is very intelligent and sustainable. I can assure you that there will be massive power haulage in the next three to four years from now because we have gone past the time when for five years, we don’t have any additional mega watt; to a period where we now have a very strong faith that in the next two to three years from now, we would be adding 2,000MW or more. So, I believe that is what it means to be providing sustainable power supply to Nigerians.

The present policy is the right one that focuses on real improvement and not cosmetics; we are resetting the power sector in Nigeria to bring about sustainable progress in the power sector.

What is your view about the report of megawatts decreasing by 400 instead of increasing?
I am of the opinion that the major problem facing the electricity sector in Nigeria is not about increase or decrease in megawatts. If we are doing 4,500MW in December and maybe due to vandalisation of gas pipeline, repair and other unforeseen challenges, it dropped to 4,000 or thereabout, it happens all over the world and because we are at a very acute shortage in MW, it becomes a news. There are peak and off peak time where the power available will not be able to carry us but by the time we enter adequate sustainability, all the issues about shortage will be a thing of the past.

How soon are Nigerians going to experience the reform agenda?
We are already getting there. If presently, we are operating on 2,000MW, that simply means we started the operation three to four years ago. So, you won’t see the result of the one we are making today until the next three to four years. For instance, a lot of things are being done today. Hopefully, geometric power will be operational next month and that has been there for the past six years. They were stagnant for some years but it was the framework of Jonathan’s administration that fast-tracked their efforts. If not, it would have been difficult for them to have gotten to this level.

What that means is that in a couple of months and years, new power plants would be constructed by companies licensed by NERC to start operation. Geometric is the first organization who got licensed because they already signed a Memorandum of Understanding,MOU, with the Federal Government before NERC came on board.

But if you look back to about two years ago, what would you say about Geometrics? You would probably say no progress had been made but if you fast-track to the end of next year when 3,000MW has been added, you would probably say a lot of progress has been made because power projects are capital intensive and the gestation period is very long.

NERC has created a market that attracted millions of dollars on investment. It is a vote of confidence that NERC has put in place to better the sector. The reason the sector did not enjoy 20,000, to 30,000MW in the early 60s, 70s, 80s, was because the system was not well structured but in the next 10 years, we should be talking about multiple of tens of thousands mega watts and even more. In other words, there will be geometric increase.

Reports are being received from electricity applicants of pre-paid meters that N25,000 is being requested for its acquisition?
We have realized that the issue of meter is causing so much problem and people don’t seem to understand it. You don’t pay twice. The moment you pay the money; they will deduct it from the service you’re enjoying. Meters and transformers ideally belong to the service provider. Even if you buy a transformer, it does not belong to you, that is why you should not buy anything by yourself.

They should be provided for by the service provider based on the investment plan and the distribution plan of the operator. There are two problems here: the distribution company said they have no money and the consumers are left in the dark for too long. Secondly, Nigerians built houses where there is no access to electric power supply and they are not patient enough to wait for the service providers to bring in transformers and meters and if you pay, the meter belongs to the government.

The situation was that when NERC did the tariff review, we made it very clear that customers should not pay for the meter. The ideal thing was that the investors will come and provide meter to everybody at a price that is financially feasible but consumers were calling us, saying they want to pay for their own meter in order to escape from what they call over-estimated billings or outrageous billings.

So we approved it but with the intention of refunding the money to them in the form of fixed tariff charges until that amount is re-acquired fully. But the ideal market created is that you’re not to pay for the meter. That you must get a meter as soon as possible is the intelligent plan of the distribution company.But because this plan is not working effectively, we now allow our consumers to front load meter.

Is the recent increase in the electricity service-charge from N500 to 750 justifiable?
When we launched the tariff plan, the methodology was for five years, which is proned to change every six months. The tariff review was meant to run from 2012 to 2016. In 2012, people forgot that the service charge will change except something beyond control happens. We did not introduce any new tariff review. We should have communicated to the people how the plan works. NERC did not increase the tariff this year.
*Olayinka Ajayi, Vanguard

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