A Review of the Nigerian Energy Industry

NERC finally sets up network to advance electricity consumer rights

Sam-Amadi, NERC
Sam-Amadi, NERC

Oscarline Onwuemenyi

03 May 2015, Sweetcrude, Houston – The Nigerian Electricity Regulatory Commission (NERC) has announced a major effort towards strengthening electricity consumers’ rights, as it formally sets up Nigerian Electricity Consumers Advocacy Network (NECAN), which is aimed at advancing the interests of electricity consumers in the country.

The Chairman of NERC, Dr. Sam Amadi has in the past few weeks been pushing an initiative for a joint tariff design process by electricity consumers and distribution companies as a way of deepening the service relationship between electricity consumers and distribution companies by the joint tariff review process.

The Network is expected to emerge as a focused consumers’ advocacy group in the industry and expected to draw membership from resident associations, Manufacturers Association of Nigeria (MAN), National Association of Small Scale Industries (NASSI), business, artisanal and professional groups as well as non-governmental organisations.

It is also expected to provide a structured platform for better engagement with electricity consumers, as well as enhance the bargaining power of consumers. NERC said that it would first midwife the NECAN to allow it gain some level of bargaining advantages in the sector.

According to Amadi, the new policy was informed by the need to expand the knowledge of consumers on the operations of the distribution companies to enable them make informed criticism of their actions, get the distribution companies to empathise with consumers in making demands for higher tariffs as well as push the distribution companies to come up with and defend credible data for the tariff review.

He further noted that the decision on joint consultation and determination of electricity rates by consumers and distribution companies was based on the need to foster transparency and inclusiveness in the way electricity rates are decided and paid in the sector.

Amadi stated that both consumers and distribution companies will now have to sit down together to discuss and determine a mutually acceptable cost reflective tariff to be paid by consumers.

He explained that NERC, which will take up an independent umpire role in the process, will also review the propositions and indices presented by the distribution companies during and after the consultation with consumers before signing off the mutually agreed tariff to be used by the distribution companies.

He also said that the new process will eliminate extant bickering on any tariff rolled out in the sector, adding that consumers now have the opportunity to critically examine propositions made by distribution companies for tariff review.

“Let us understand one thing, the new initiative or approach to tariff design in this sector is not totally new. In most jurisdiction in the world, it is the Discos that prepare their bill and even in the NERC here but then they don’t always do a robust wok on the process but based on that we try to help design a tariff that is fair and affordable to all parties involved.

“What is happening here is that we are saying to the Discos, take charge of your network, look at your system and then come to us and tell us what they think is the cost at which they need to provide efficient electricity service to their consumers,” Amadi said.

He explained further: “We now said that instead of reporting to us, they should first go to the consumers and explain to them about the tariff because when they do their cost profile, they also have to prepare how they will recover it as there are different classes of consumers; they now design their tariff and show us how they will recover according to these classes of the consumers.

“They now have to consult with the consumers on this but the consultation process is not a consensus process and does not mean that at the end of the day, both parties will agree but it is that it gives the consumers an opportunity to deny, reject or contradict what they are proposing.”

The commission blamed the deficit of consumer voice and power on the fragmented nature of individual consumers and consumer groups, stressing that their levels of engagement were too superficial to make the desired impact in the sector. NERC is to redefine the way electricity consumers are engaged in the sector with the advocacy network.

At a meeting between commission and consumer advocacy groups in Abuja last week, NERC Chairman, Dr. Sam Amadi, stressed that undue operators’ advantages also undermine transparent and accountable processes which define a fairly regulated electricity market.

Such overbearing influences, he noted, would be cut down by introducing and sustaining democratic processes and models in the way decision and choices are arrived at by operators and consumers in the sector, hence the network. He said: “We have institutionalised anti-corruption practices and procedures to inoculate NERC against regulatory capture, but in spite of our noble intent and progressive actions, outcomes are still not fair to consumers.

“Until consumers are organised and therefore able to contend against operators, the democracy bargain in the Nigerian electricity market will remain deficient.

“To cure this deficit, we are proposing the establishment of consumer advocacy organisation that can easily build technical and political capability to effectively contend against other organised interests in the electricity market,” he added.

According to Amadi, this organised consumer advocacy is not just focusing on challenges in tariff setting and such other commercial activities like metering and billing.

It should also step up as a major contributor to the big debates about building smart grid, clean energy, privatisation and modernisation of the electricity grid.

It should also be involved in the debate about the constitutional framework for energy policy in Nigeria.” The NERC boss, who noted that consumers are critical agents in the emerging electricity industry, said: “Either as consumers per se or as pro-consumers who could sell self-generated electricity to the grid, the consumer needs to be more engaged and more eloquent in the deliberation about the future of electricity in Nigeria.

There is a strong case to incorporate the consumers as part of the decision makers in the electricity market. This is the reason we are proposing the set-up of NECAN. The fact is that consumer voice is under-represented in the electricity in the emergent electricity market.”

On the benefits of the entire process, Amadi said: “It benefits us because we are pushing the Discos to understand that actually these tariffs that they are designing is not for NERC but consumers who will pay for it and they should be establishing greater relationship with them, they have to show good faith and legitimacy so that consumers will know that they are always there for them.

It will also help drive consumer power as I have always emphasised that a comprehensive regulatory framework must have strong consumer power just like in advanced countries where there is always strong consumer advocacy groups which strengthen consumer engagements and advocacy.

In today’s economy, market power goes with political power and operators who have access to market power can buy voice because they have access to consultant who can prepare special reports to justify their requests, we also think that consumers should be able to develop that capacity and share information.”

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