NERC - New Electricity tariff takes off July 1
I wrote an article earlier in response to the setting up of a committee on electricity consumption. I have since seen several publications in reaction to my article. Some of the comments, I agree with while others are just face saving. Anyway, that was on demand management. However, my reference to the that topic again is because the same principle which I was advocating for is missing again in NERC's latest Action. I opined that, for
demand side management to make impact, the NERC ought to prepare the grounds allowing an enabling environment which will encourage users to see the gains.
Unfortunately, NERC's chief executive who some days ago stated that the new tariff will take effect from January 2012, is now proposing to increase tariff from July 1. Again, I consider this proposal totally disheartening and perhaps inept. I am not against increase in tariff as from my own observation, Poor Nigerians are already paying for the lack of power via fuel for running poor quality generators and regular maintenance and repairs of these generators but what I thinks is not right in NERC's proposal is the fact that it continues to put the cart before the horse. Critical issues of measurement which has to do with accurate measurement and effective pricing do not appear to have been adequately considered. Electricity as a services falls under economics of scale; so for instance if metering is inaccurate, private companies will rake in millions of Naira daily for services not provided. As it stands today, Nigerians especially the poor are having to pay for PHCN unmetered connection with no service for over 70% of the time. Why would any right thinking person allow such to continue? The NERC has the responsibility to bring the right change in this area but the agency appear to have chosen to maintain the status quo i.e. enjoying the largese that comes with the job and forgetting that Nigerians are suffering as a result of their action and inaction. I have always wondered if monies realised from the unmetered bills are adequately accounted for or if N2000 collected for the continual disconnection and reconnection in mostly poor areas are receipted for. It will be interesting to see the PHCN accounts some day.
The point I am trying to make here is that the management of NERC is expected to implement regulation in a systematic manner. The days of jumping before the gun is over. I expect that things like adequate metering strategy for every connection should be the mantra at this moment. In the United Kingdom, the regulation places the responsibility on the service provider to provide a metered connection to households and the same exist in Nigeria but no one is interested in its implementation. Till date, NERC has not come out to tell Nigerians what proposals are in place to address this key issue. If meters are installed in households, consumption, losses and other related data like ROIs can be determined and will then inform the MYTO review. At the moment, what NERC is doing is typical to what the most Nigerian agencies do; use crude estimated data (some of which have no basis) in arriving at their decision making process.
On the insensitivity of NERC to public opinion, most public office holders in Nigeria forget where they have come from; ignoring the fact that there are several poor Nigerians (about 70%) who have to pay through their noses for services. Electricity is considered a social good, therefore the elements of social development must be given serious consideration in policy making and pricing mechanism of any regulatory agency. The reason many services in developing countries have been, and continue to remain under the control of Government or public ownership is to prevent loss of the social element of the service which will guarantee wider access. This makes it pertinent that managers of regulatory agencies and utilities must understand Pro-poor policy requirements. So, electricity, like water, health and education even when privatised must be done in such a way as to retain its social contribution. The provision of electricity services to all Nigerians is a key human development objective because access to services can on the one hand empower poor Nigerians by providing them a means of competing through increase productivity. This is even more true for a country like Nigeria where mostly Micro-enterprises (laundry and dry cleaning, market women, street traders and hawkers, subsistence farmers, taxi drivers, electricians, mechanics, welders, plumbers, petrol station attendants, etc) make up the larger percentage of its businesses. On the other hand lack of access to services like stable and affordable electricity can effectively lead to marginalisation and a widening of the gap between the poor and the rich and also resulting in ill health, inadequate education because money meant for these areas could be reduced by energy bills.
Whilst It is true that poor management, decaying infrastructure and poor service delivery has remained a problem with publicly owned services leading to the global drive for privitisation. The FG policy thrust (as formulated by NERC in the case of electricity) must be geared towards approapriately designed and cleverly thought through processes. Privitisation leads to increase in services coverage along with increase tariff to users and profit taking by Utilities and Government. Meaning that post privitisation, there is a possibility that the service will become available but affordable only to the small percentage that can pay. So to guarantee service to the poor, NERC will have to review its regulatory strategy through wide consultations because regulation required under private ownership can be very complex. I expect NERC to seriously consider affordability or ability/willingness to pay in determining its policy decisions because I believe that the huge debt owed PHCN and the willingness of poor Nigerians pay bribes to illegally reconnect their supply once disconnected may just be an indication that there are issues with the pricing as it currently is and the availability/quality of the service.
NERC has deliberately provided limited information on its proposal to assist the very poor regarding their access to electricity. In the UK where a household is classified poor (referred to as fuel poverty) if more than 10% of its income is utilised to pay for energy, the Government provides an action plan to support these people. Such a measurable and radical plan means everybody government has a grip on the nos that move in and out of fuel poverty at any time. It is not clear what strategy NERC is strategy NERC is proposing to adopt in Nigeria and in my opinion, issues like this one ought to be discussed and made available to the public, similar the plan of how to ensure that there adequate metering in addition to a better regulatory enforcement on illegal tempering of meters should be dealt with before jumping into the other issues of increase tariff and demand side management.
Finally, my advise to the leadership of NERC is to slow down in its strong inclination to only deal with the issues that will take money out of the hands of poor Nigerians but to communicate more to the public about how it intends to deal with the more critical key human development issues that support the poor and ensure sustainability of the services.
Lewis
