Cost-reflective Tariffs Amid Darkness

Minister of Power, Works and Housing, Mr. Babatunde Fashola

With the abysmally low level of power supply since the take off of the new electricity tariffs, Ejiofor Alike reports that the failure of the various participants in the electricity value chain will dampen the morale of consumers to pay the new rates

It is no longer news that a new tariff electricity regime took effect from February 1, 2016 amid protests by the organised labour, allegedly acting on behalf of the masses, with the backing of the National Assembly and supported by court injunctions.

Announcing the so- called cost-reflective tariff, the Nigerian Electricity Regulatory Commission (NERC) said it was designed to incentivise investments and enthrone bankable agreements that will attract funding to the sector. However, the poor electricity supply situation in the country, in addition to the inadequate metering in the sector, has fueled mass revolt against the increase.

While some aggrieved customers approached the courts to ventilate their grievances, the organised labour took to the streets to protest against the new tariffs.

Both the House of Representatives and the Senate have also in their various legislative pronouncements not hidden their disdain for the new tariffs order.

Minister of Power, Works and Housing, Mr. Babatunde Fashola, acknowledged that there were already at least seven cases instituted against the tariff increase in different Federal High Courts in Nigeria – three in Lagos, one in Abuja, one in Umuahia, one in Owerri and one in Awka.

He said it was curious that even manufacturers had taken up some of these cases as plaintiffs, as if they themselves had maintained the same price of their finished products.

“The truth is that Tariff is about price and if the raw materials like gas, power plants, spare parts, labour have gone up the price of the finished product cannot be the same. If the price of the product is not right there is no incentive to produce more of it. This can only result in scarcity and high prices. It is simple economics. Without the right tariff there will be no power because it is now in the control of entrepreneurs,” Fashola explained.

Even after the NERC had announced the take-off of the new tariffs regime, a Federal High Court sitting in Lagos re-affirmed the order it made restraining the regulatory body from implementing any upward review of electricity tariffs, pending the hearing and final determination of the suit filed by a lawyer and rights activist, Toluwani Adebiyi, over the issue.

Trial judge, Justice Mohammed Idris, while delivering a ruling on the preliminary objections of NERC against the filing of contempt charge by the plaintiff, said “let me warn that when the disciplinary jurisdiction of this court is properly invoked, anyone who is found to have ignored the order of the court will be dealt with severely”.

“Those who intend to take the judicial system for a ride should think twice and those who have done so should retrace their steps, the long arm of the law will catch up with them no matter how long it takes,” the court said.

Adebiyi had sought to commit NERC Chairman and Chief Executive Officers, CEOs of the Distribution Companies, Discos, to prison for announcing the implementation of the new electricity tariff despite a subsisting court order barring same.

Adebiyi, in the substantive suit, is seeking an order restraining NERC from implementing any upward review of electricity tariff without a meaningful and significant improvement in power supply at least for 18 hours in a day in most communities in Nigeria.

Fashola had earlier argued that it would not be commercially viable for power supply to be regulator before increasing tariffs, insisting that consumers must pay first before supply would improve.

“The question on the mouth and lips of everybody is: why can’t we have the power first before increasing tariffs? The answer is that power business is funded with finance from banks. So, no bank is going to lend money to you if cannot show a recovery price. So, if you want to do a transport business, and you want to buy a bus and you are telling the bank that you are going to run it as social service where no price is paid, the bank will say that you are joking and that it will not lend you money. That is the reason why we can’t have power first before increasing tariffs; it has to be produced before we have it and it has to be paid for,” he had explained.

Opposition by National Assembly

Apart from the Nigeria Labour Congress (NLC), which organised a nationwide protest, the Senate at its recent plenary had also ordered NERC to halt the 45 per cent proposed increase in tariff.

Apparently miffed by NERC’s perceived disobedience to its earlier resolutions, the Upper Chamber had adopted a two-prayer motion moved by Suleiman Nazif (APC Bauchi North), and directed its Committee on Labour to carefully review the law establishing NERC with the principal aim of establishing a strong regulatory body that would ensure proper and pocket-friendly billing system in such a way that the consumers and investors would be treated equitably.

The Senate also mandated the Committee on Employment, Labour and Productivity to hold a public hearing of stakeholders, Ministry of Power, NERC, distribution companies and others to re-examine the matter and be able to arrive at a logical conclusion such that Nigeria workers and the entire Nigeria masses would not be short-changed.

Nazif had argued that the increase would have a multiplier effect on the Nigerian economy with manufacturing companies having to pay more for electricity, stressing that due process in the extant laws for such increase was not followed in consonance with Section 76 of the Power Sector Reform Act (2005).

He also alleged that the distribution companies (discos) had continued to exploit Nigerians through an estimated billing system for the majority of consumers while deliberately refusing to make pre-paid meters available.

According to him, most consumers are not metered in accordance with the signed privatisation Memorandum of Understanding (MoU) of November 1st, 2013, which stipulates that within 18 months gestation period, all consumers are to be metered.

The Senate President, Abubakar Saraki thereafter mandated the Committees on Labour and Power to meet with the relevant agencies of government and find a lasting solution. He also mandated the two committees to conduct public hearings.
“NERC should forthwith suspend the implementation of the new tariff. I believe that when we have a public hearing, these issues will be addressed. Until then, the new regime stands suspended,” Saraki declared.

Prior to NERC’s announcement, the House of Representatives had also ordered the agency to suspend the planned increase in electricity tariff until its inquiry into activities of operators in the sector was concluded.

Its ad-hoc committee investigating the activities of the Discos had in a letter dated December 15, 2015 and addressed to NERC reminded the commission of previous communications in which it was agreed that further actions be suspended regarding review of electricity tariff in Nigeria.

The letter, which was signed by its chairman, Hon. Babajimi Benson referred NERC to all previous correspondences in respect of the matter.

The letter read in part: “In paragraph 3 (three) of our letter dated October 29, 2015 under the same subject heading, we requested you to suspend the implementation of any increase in electricity tariff until the committee concludes its investigations”.

“Further recall that at the joint investigative hearing with the Committee on Power, it was agreed that any tariff increase should be suspended until all stakeholders are carried along,” the letter added.

NERC’s no going back stance

But the immediate past Chairman of NERC, Dr. Sam Amadi, told an online medium that the Senate’s recent directive for the suspension of the new electricity tariff regime was illegal, unconstitutional and a direct encroachment on executive independence.

Amadi, who spoke the mind of the regulatory agency said apart from the Senate lacking the constitutional right to give such a directive, the regulatory body as presently constituted, was incompetent to suspend or rescind the tariff order issued by the former ​​commissioners.

“It will create serious regulatory risks across the market value chain. People will begin to look at it and say there is no independence of the industry regulator. The National Assembly knows how tariffs are arrived at. They follow a process. If the National Assembly is truly objective, they could have invited NERC to come and give evidence that they followed the law and process they made. If they think the laws were not followed or good enough they have a right to streamline the law or make new regulations.

“The order by the Senate for NERC to rescind the tariff is a direct infringement on the independence of the executive to initiate policies, in this case through NERC. It is a subtle derogation of the powers of the executive. It offends the concept of separation of power. The legislature should not interfere and direct executive action. That is clearly against the law. It is unconstitutional,” he explained.

Worsening power woes

The period of debate over the appropriateness or otherwise of the increase in tariffs provided an opportunity for all the participants in the electricity value chain, who are the primary beneficiaries of the increase to re-double their efforts to sustain the 5,074 megawatts peak attained on February 2, so as to justify the increase but that was not the case.

Shortly after the record peak was attained, supply witnessed downward slide due to inadequate supply of gas to the power stations and transmission challenges.

A recent data obtained from a source at Transmission Company of Nigeria (TCN) on the “Daily Load Analysis and Day Ahead Consumption” for yesterday showed that generation at a point dropped to an all-time low of

Though it has ramped up to around 4,000 megawatts, the attainment of 5,000 megawatts and above is still a forlorn hope in view of the failure of the members of the value chain to surmount the age-long challenges.

While transmission has remained the weakest link in the value chain, the gas suppliers’ reasonable commitment to boost supply has been frustrated by pipeline vandalism, which the federal government has failed to find the lasting solutions.

With the slow pace of metering and occasional rejection of power by the distribution companies, the Discos have also not helped matters as consumers continue to vent their anger on them over high estimated billings and alleged focus on high demand (HD) customers, who pay high tariffs.

Some of the Discos, especially Ikeja Electric and few others are yet to implement NERC’s Credited Advance Payment for Metering Implementation (CAPMI) scheme, designed to provide meters to consumers.

Last week, the Enugu Electricity Distribution Company (EEDC) joined the few other Discos in the implementation of the CAPMI.

With the slow pace of metering and poor electricity supply in recent weeks, consumers have now low morale to pay the new tariffs.

Fashola had acknowledged that the grievances of consumers were justified due to the inactions of the previous governments but pleaded with Nigerians to give this present administration the needed support to tackle the country’s power deficit, describing the new tariffs as bitter pills Nigerians should swallow.

“I understand that people who have been disappointed over a long time feel a sense of concern that again tariffs have gone up. But the truth is that this tariff – we ought to have been there from day one. I don’t know why the government of yesterday was not courageous enough to tell us the truth,” he said. “So, our friends in the labour should not start a new fight; we don’t need one. We need productivity.”