Delaying the implementation of the new electricity tariff plan which guarantees that customers pay their fair share will worsen the government’s fiscal situation and continue the culture of wasteful consumption subsidies which takes away scarce resources from critical projects. This is not an option for an economy only a short crawl away from recession.
Last week, the board of the World Bank approved Nigeria’s long-standing request for about a billion dollars, releasing the first tranche of $750 million credit to support the power sector recovery, after the Nigerian government committed to reviewing tariff and ending subsidies which have gulped over N1.72 trillion with the last five years.
Reneging on the terms of this deal will imperil future efforts to secure financing from multilateral institutions. Nigeria already suffers a reputational crisis; it does not help the country’s image if it once again pushes further its obligation due to pressure from interest groups.
We condemn strongly the current lobbying efforts of the legislators by electricity distribution companies (DisCos) to postpone the implementation of the service-reflective tariff plan. After years of campaigning for tariff increase, it is reprehensible to seek its delay now because for once, this is a tariff plan that pegs their revenue to how much service they deliver.
It is disingenuous that the DisCos are leading the campaign that consumers’ purchasing power has been affected by COVID-19, considering that within the same period they have inflicted outrageous bills on customers whose consumption is estimated.
If the Federal Government allows itself to be pressured, it will continue a pattern of spending that ruins the economy. The 11 DisCos agree they owe a combined sum of N622.4 billion and interest accrued on this debt has risen to N308.2 billion, bringing their cumulative debt to N930.6 billion. This pattern of shortfall will continue with the delay of the service-reflective tariff plan.
Today, the electricity sector is on life-support with government support providing a lifeline. This has come mostly from the Central Bank and has reached over N1 trillion. The World Bank’s fresh cash injection is meant to provide financing to help the government repay the CBN for loans to the power sector so that it can support other sectors. But Nigeria must begin a tariff regime that will guarantee cost recovery and abolish subsidies to enjoy this.
The critical decision before the Federal Government is to weigh the cost of postponing this tariff increase against DisCos’ argument that they need more time to be ready. In reality, these DisCos have been getting ready for the past six years. They failed in their obligation to meter customers, they abused the estimated billing programme and short-changed other market participants by keeping more revenue than they should. They have gone to court to stop a forensic audit of their finances. Those who take a cudgel at efforts at transparency usually have a lot to hide.
Yet, the regulator is not totally free of blame. It has issued threats where sanctions should suffice, it has bent over backwards to accommodate every whim of the DisCos who often whine like over-pampered children. The regulator too has been too amenable to political interference.
Some customers have not been faithful, bypassing meters, and stealing power. Many have deliberately refused to pay for power, insisting it should be a social service even when it is not possible. Some have destroyed electrical connections, stolen cables and devices, and some resisted efforts to install transmission lines that should ensure power reaches others.
We admit there is enough blame to go around but with this tariff plan, Nigeria has a real chance to institute equity in the pricing of electricity and enthrone transparency in the process. The new plan provides clarity in the system of billing and what parameters are used to measure output. It empowers consumers to demand better service and ensures that those who use the most power also pay the most cost and these are critical elements for a vibrant electricity market.
According to the new plan, customers have been grouped into different bands based on the number of hours they enjoy power daily. Band A is for customers who get 20 hours of power and above daily. Band B has customers who get power for 16 hours daily. C-band has customers who enjoy power for 12 hours and above a day. Those that enjoy power for eight hours and above are in D-band, and customers who only get four hours and above but below eight hours of power supply daily are in E-band. Under the plan, there will be no increase for customers in Band E and those called lifeline customers, irrespective of how much power they get every day.
The new tariff model does not emphasise only recovering cost but also ensuring that customers get service that reflects what they pay for power and compensates them if they are not treated fairly. It only makes sense that the government should make the process of acquiring meters easier as bringing more customers into DisCos’ books will increase revenue and, perhaps, water the grounds for the government to begin taxing the sector.
