02 February 2016, Lagos – February 1, the Nigerian Electricity Regulatory Commission, NERC, approved new electricity structure under the Multi Year Tariff Order, MYTO 2015 took effect. Prior to the takeoff, there were scepticisms about whether the new rates will come to be or not given the public outcry and resistance even from the legislators.
Indeed, the House of Representatives specifically ordered for a stay of action on the new structure pending when its Committee on Power concludes its public hearing on the power situation in the country. This is despite pleas by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, for understanding on the need to have commensurate return on investment to make the sector attractive to investors.
But four days to the takeoff, NERCsurreptitiously issued a statement that MYTO 2015 take off remained as planned, February 1st, saying:”…at no time did the Commission change the date of the takeoff of the new tariff.”
The Commission also said that “in implementing this cost reflective tariff (it) will effectively monitor and enforce all service delivery agreements in the new tariff order.”
Palliatives on service agreements
NERC wants to convince electricity consumers that the new tariff structure is not as draconian as feared; especially as its Acting Head, Dr. Anthony Akah, was quoted as sayingthat “there are inbuilt consumer protection mechanisms and incentives for improved service delivery by the DISCOs and fair return on investment in the new Tariff Order.”
A part of these incentives is the removal of fixed charge under the new tariff regime, which he said: “was in response to electricity consumers’ complaints and a measure to ensure electricity distribution companies improved on service delivery as their income is dependent on the quantity of electricity used by their customers.”
He added that aside from eliminating fixed charge, the new order also “has a robust mechanism to ensure that electricity distribution companies fully meter their consumers and eliminate ‘crazy’ billing within one year.”
A very tall order to accomplish, as the Association of Nigerian Electricity Distributors, ANED, insisted that “It is not possible to meter all Nigerians within one year.”
ANED Executive Director, Otumba Sunday Oduntan, argued that “there is nowhere in the world that this can happen even in the developed countries. The best DISCos will do is to meter about 20,000 in one month.”
NERC ordering Discosto meter all their customers within one year is nothing new as such orders have been issued countless times in the past, and successively failed to meet the deadline without any consequences.
For ANED, such orders are merely playing to the gallery in view of the challenges facing operators.
But any hope for a fall back on government is even not feasible, as the legislators, who are supposed to keep promises made to the electorates are to take a decision on the matter.
The Chairman, House Committee on Power, Hon. Daniel Asuquo, confided in Sweetcrude that his Committee, after several months, is yet to take decision on the matter, but stressed that it is important to balance business realities with the situation on ground.
Notwithstanding the lawmakers’ indecision, Akah assured that NERC will continue to engage stakeholders including members of the National Assembly to address their concerns on the new tariff regime. “NERC holds National Assembly in high esteem and we are sure that both institutions are working to ensure thatnational and consumer interests are protected,” he offered.
New Tariff Order
NERC said the new MYTOis”for the period 1st January 2015 to December 2024 to all the distribution companies, generation companies, the Transmission Company of Nigeria and all stakeholders,” which will be adjusted from time to time to suit current realities.
The Order was signed off December 21st, a day before the exit of the previous leadership of the Commission, led by Dr. Sam Amadi, and Dr. Steven Andzenge, its former Chairman/CEO, and Commissioner, Legal Licensing and Enforcement, respectively.
The duo defended that they acted “In exercise of the powers conferred upon it by Section 76(6) of the Electric Power Sector Reform Act 2005 and all other powers enabling it in that behalf.”
With the exception of babies, every other Nigerian equally feels he or shehas certain rights over electricity provision, because power is at the core of every socio-economic activity. But the majority of opinionsare that current supply of electricity in the country falls way short of the expectations from the privatisation of assets
Expectedly, majority Nigerians who spoke to Sweetcrude, are not happy about the tariff hike. Their sadness is not so much from the fact that some consumers under the same classification have to pay more than their counterparts in other regions (as shown in the approved rates for the respective DISCos), but more because they feel that there is no corresponding improvement in service delivery to deserve the increases.
Mr. Donatus Bishung, an engineer, resident in Iganmu, Lagos, is very worried about the incidence of estimated billing. “Many times I receive a bill that blows my head, and this has to stop,” he decried.
He added that he will not feel so bad about the increases if such additional funds were “channeled towards strengthening the country’s epileptic power supply situation.”
Mrs. Obianujun Olebu, who resides in Ikorodu, argued that tariff hike at this critical point in time is anti the people.
She said: “I read Fashola’s statement on the increase of the tariff, and it appears this government doesn’t care about the immediate effect it would have on the populace. I guess they are thinking of many years to come and not the immediate impact. Besides, what is the assurance that the monies raised would be re-invested into rehabilitation of our infrastructure?”
She lamented that; “It baffles me how the tariff keeps increasing yet the hours we get on a daily basis either dwindles or has remained stagnant. If we had a situation where there was constant light and they decide to increase tariff as often as they do, there’d be little resistance. “Why will they increase electricity tariff when there is no light? Some of us have been wallowing in darkness for weeks in Ikorodu, and when they eventually bring it, it lasts only for 30 minutes. I pay electricity bill of N8,000 every month without enjoying what I am paying for.”
A trader, who simply identified herself as Joy, argued that the increase will make living more difficult, especially patronage had weakened. “This increase will not be easy for us because sales have dropped. If we don’t sell, how do they expect us to pay our bills?” Already, there is crisis looming in businessesas sales have dropped. The prices of items in the market are very high because of Naira fall. If all of these issues are put together, I can only imagine the nightmare Nigerians will have to face, she said and urged “Government should find an incentive around this whole tariff increment.”
Ikeja Electric promises more power
Flowing from the MYTO, Ikeja Electric said in a statement that “the cost reflective tariff will boost the capacity of distribution companies, strengthen the power value chain and improve the quality of service to customers across the nation.”
Ikeja Electric’s Head of Commercial, Mrs. Folake Soetan, further said: “The new tariff would further drive Ikeja Electric’s continuing investments and expansion plans to ensure sustained excellent service delivery to all customers within its network.
“At Ikeja Electric, the new tariff represents another opportunity for us to demonstrate our commitment to transparent, equitable and reliable power distribution to our esteemed customers. We are passionate about service excellence and will continue to work closely with our customers to achieve our ultimate goal which is: let there be light for all Ikeja Electric customers.”
Soetan also explained that “The new payment structure will be implemented across five major categories including residential, commercial, industrial, special and street lights.”
She promised that”the company would engage all classes of customers to explain the implication of the new tariff on billing going forward as well as reinforce how customers can take advantage of Ikeja Electric’s various payment channels for convenient, reliable and secure bill settlement.”
She added that “Integrity, professionalism and transparency are some of the values that drive our operations at Ikeja Electric. We will embark on multi-stakeholder engagements that will address all enquiries regarding the new tariff to ensure full understanding by our customers. Our customers can rest assured that the process will be transparent.”
She said further that in addition to the engagements, Ikeja Electric would attend to customer queries on the new tariff via its contact center helplines, walk-in customer care centers (IE Serve), dedicated email service, Facebook, Twitter and the company’s corporate website.
According to her, “Ikeja Electric is passionate about powering homes, communities, lives and businesses across its network. We are confident that the new tariff as well as our ongoing metering, customer enumeration and technical audit projects will enhance the quality of our service.”
She equally appealed for customers’support “by way of prompt bill payment and exposure of energy thieves and vandals that attack our equipment and installations. This will make more power available to bonafide Ikeja Electric customers.”
Nigerians whine over everything
Noting that Nigerians are known to whine over everything, even when it is in their favour, the Bureau of Public Entreprises, BPE, said the new MYTO is a pain better borne “now and solve the problems than to allow this complaints to derail us from the achievement of the reform.”
Such a reaction is unexpected, considering that Nigerians hold the Bureau responsible for selling off the power assets without the corresponding value addition promised during the exercise, a development that has made organized labour to call for a review of the exercise.
The former President, National Union of Electricity Employees, NUEE, Comrade Mansur Musa, told Sweetcrude that the situation in power is a galore of unfulfilled promises, as “nothinghas changed.”
Musa insisted that more than two years after privatisation, there has been no foreign direct investment inflow, and no improvement in efficiency, which he attributed to lack of experience in running a power outfit by the new owners.
He said: “What we are asking government to do is to go back to the key performance index, KPIs, and the timelines given to them to see whether they are keeping to the terms or not.”
But a BPE director, who spoke to Sweetcrude in confidence, called for patience, while attributing all the criticisms against developments in power to lack of understanding, saying that the investments and anticipated efficiencies can’t happen overnight.
He noted that, “This is the sector that had been suffering from under-development for over 50 years; a sector that was run as a state utility and was poorly managed.It is not something that can be done in a jiffy.”
Investments in the sector
ANED’s Odutan agreed with BPE that the public’s criticism stem from lack of information, saying that contrary to beliefs, Distribution companies had invested about N65 billionas at August 2015, aside from the cost of purchase for the assets.
He gave the breakdown of the capital expenditures as follows:
He added that these investments were deployed into plant and machinery, ICT, security equipment, andhave since doubled,
It is against this backdrop that ANED’s Odutan assured that with the new MYTO, things will now begin to look up in the sector, as distribution companies will now invest even more to enhance efficiency.
He noted that while MYTO “may not solve the problems immediately,it’ll lead to better things, as was the case in other countries like Kenya, Uganda, India, Peru and a host of others.
He told Sweetcrude exclusively that part of the changes consumers will expect is that “DISCos will send SMS to inform consumers if there will be lights out and for how long, and the reason for taking such a decision.”
Furthermore, he said the issue of load rejection is now a thing of the past, as DISCos can now confidently demand for higher power allocation to serve their customers better.
He put the daily power allocation ratio to the DISCos as follows: Ikeja 15%;Abuja 11.5%; Ibadan 13%;Eko 11%;Enugu 9%; Benin 9%; Kaduna 8%;Kano 8%, PH 6.5%; Jos 5.5%;and Yola 3.5%.
Oduntan explained that the reason DISCos were rejecting load allocation in the past was because they were being penalised for asking for more. “Kano has never been able to get even 5% every day because the transmission grid and distribution network are too weak to take the load, which means if they send 4% to Kano, they will send the other 4% to another Disco. If Abuja takes it, it will pay an imbalance penalty of 160% for taking more than its own share.But this was stopped in August 2015, so no more load rejection.”
MYTO input & debt profile
He noted that a lot of factors make up the MYTO input and they include,”the cost of gas, bank interest rate, foreign exchange rate, cost of investment in networks, cost of investment in technical and commercial equipment. Others are power/energy theft, cost of maintenance, including the cost of vandalism, and payment and non-payment of bills by customers.”
For this reason, he stressed the importance of consumers paying their electricity bills, saying that “Only 25% of the revenues collectedare kept back. About 60% goes generation; 11% to TCN, while other stakeholders like the regulators – NERC, Bulk Trader, Market Operator, and SystemOperator take 4%.
“Majority of what we collect goes into development and that is why the country is suffering. When we collect, we have to pay the generating companies to generate power because they have to pay the gas suppliers so that is why they have the highest percent”.