Electricity tariff increase is not the way to go to improve the country’s power sector, experts have said.
Speaking with Daily Trust yesterday, an economist, Dr. Bongo Adi, said the timing of any economic policy is critical, and timing of the planned electricity tariff increase left much to be desired.
He said increasing the tariff might not be a problem, adding that the challenge is in the reliability of electricity supply which is not guaranteed.
Adi, a lecturer at the Lagos Business School, said while the electricity distribution companies continue to complain about low tariff collection rate, what consumers get in terms of supply is still not commensurate even if the collection rate is 100 per cent.
He stressed that over the years, the distribution companies have been complaining also of not generating enough money to cover cost despite the existence of the Multi-Year Tariff Order (MYTO) which provides for regular tariff increase to cover cost.
Adi said the nation’s electricity industry is bedevilled by “a whole complex network of problems” which started from the time it was privatised.
According to him, it appears the industry was given to those who were not competent. “We have competency problems here,” he said. “We have a lot of problems beyond tariffing and I don’t think tariff hike is the best way to go now,” Adi added.
READ ALSO: Turkish firm partners IHS Abuja to host World Industry Construction Forum
To address the perennial supply problem, the economist advocated for the revisiting of privatisation. He said: “Let’s revisit the privatisation. Who are the managers? Who acquired them? Do they have the resources, both human and material? “Also, there is serious problem with transmission. The transmission infrastructures are very old, and like those of the Stone Age.”
Also, speaking, Dr. Austin Nweze, another economist said the planned tariff increase is unfortunate and showed that government was insensitive to the suffering of the masses.
He called for a rethink at this time of the year when people have just resumed from holidays. According to him, the poor man has almost been squeezed out of existence.
“The whole thing is quite unfortunate. The poor man has almost been squeezed out of existence. The generation is less than 4000mw. There is some kind of insincerity in some quarters. If you are providing service and charging higher, people would be reluctant to complain. But you are not providing service and you are charging higher yet there is poverty in the land,” he said.
LCCI: There should be new approach
The Lagos Chamber of Commerce and Industry (LCCI) has called for a holistic approach in tackling the problems in the power sector to address consumers’ vulnerability.
Its Director-General, Mr Muda Yusuf, made the call in a statement on Monday in Lagos. Yusuf urged NERC to address the issue of the capacity of the Distribution Companies (DisCos), estimated billing, technical and commercial losses, and metering problems.
He also said the quality and adequacy of investment by the DisCos, transmission issues, proposal on the decentralisation of the sector, promotion of off grid solutions and incentives for renewable energy solutions should also be resolved. “The power sector problem is a multifaceted problem and it is not only about tariff. The approach should be holistic, otherwise the consumers would be vulnerable.
“Only recently, there was an increase, and now another is being proposed. “The tariff question is no doubt one of the problems,” Yusuf said, adding that NERC should, however, also be doing something about the other issues.
The LCCI boss said addressing these issues of concern would inspire the confidence of consumers.
READ ALSO: Lagos, Abuja To Witness Rise In Housing Cost
He said it was also critical to disaggregate and interrogate the components of cost being claimed by the discos. “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. “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,” he said.
NECA supports electricity tariff increase
Speaking on the planned tariff hike, the Director-General of Nigeria Employers’ Consultative Association (NECA), Dr. Timothy Olawale said: “though the proposed increase in tariff might cause a shock from the consumers’ perspective, it is, however, a necessity in order to get the power sector back on track.”
The issue of tariff has remained topical in the sector since shortly after privatisation. While the customers have said tariff review should only take place after there has been improvement in service, service providers have said for service to improve, the right amount has to be paid.
According to Olawale, “The argument has always been the chicken and egg argument, a cyclical one. Putting the matter in context therefore, the issue of the increase is intended to enable the sector realise what can be described as right price for the product. “It is with this right that more investment can be attracted and consequently, improved service.”
Speaking further on the challenges of regular power supply and imperative for appropriate pricing of electricity, the NECA boss noted that “tariff reviews are expected’’.
He said there had been minor and major reviews to adjust all the variables that make up the tariffs such as generation volumes, FX price etc. “All these play a role in determining the tariffs,” he added. He said NERC for some reasons had delayed implementation of minor reviews that should normally occur bi-annually by regulation.
Olawale said: “The NERC tariff order in June 2019 took all these into account and adjusted the variables to ensure a cost reflective tariff. Cost reflective tariff is important to ensure the provider of the commodity or service can cover operational and capital expenses and most importantly stay in business and deliver on service.
“While the DisCos have had six minor reviews totalling 16%, micro and macro-economic indices have affected the ability of the DisCos to meet their cost. However, the Generation Companies have had several reviews bringing their % increase to about 116%”.
While urging the DisCos to justify the proposed tariff hike, Dr. Olawale averred that “consumers and businesses are not averse to paying appropriate price for electricity consumed.’’
He said the major contention has been estimated and sometimes outrageous billing for power not consumed, implications on cost of living and cost of doing business without a guarantee of commensurate improvement in quality of service.
READ ALSO: Minister blames Fashola for current poor state of power sector
He said the DisCos would do well to fast-track the provision of prepaid metres, the GenCos should ensure availability of Power for the DisCos to distribute and Government should support the DisCos to curb the rampant incidence of electricity theft across the nation.
He urged the NERC to live up to its responsibility and ensure strict adherence to the Regulations. “While we note the political consideration that goes into the issue of appropriate pricing and the timing of same because of the multiplier effect of hike on the society, we urge that the larger interest of the nation should guide all Stakeholders to enable Nigerians and the business community enjoy 24 hours uninterrupted power supply they crave for,” he added.
Source: Daily Trust
Leave a comment
