Some electricity distribution companies (DisCos) are carving out portions within their franchise areas to offer premium service which consists of 18-22 hours of constant power supply daily at a higher cost based on willing seller/willing buyer basis.
This strategy is helping these loss-making power companies to increase revenue and cope with the inability of the sector regulator to ensure operators charge tariffs that will guarantee commercial returns.
Eko DisCo was the first utility to begin offering the service. Customers in Banana Island, Ikoyi, Lagos enjoy between 20 and 22 hours of power supply daily and pay around N45 per kilowatt hour.
“Power is hardly ever an issue discussed at our resident association meetings, because we are more than satisfied with the arrangement,” one Banana Island resident told BusinessDay regarding the service.
Customers say it is better than relying on petrol or diesel generators which cost on average N85-N95 per kWh and pollute the environment.
Ikeja Electric is now pushing to expand the service.
“Premium power supply of electricity is the provision of electricity supply beyond the existing standards with guaranteed performance levels,” the DisCo explained in a letter offering the service to one consumer.
It said the “initiative differentiates itself from the grid supply as it bypasses the feeder and grid limitations associated with regular supply”.
“It is aimed at providing exclusive services to identified customers who are willing to pay for stable electricity supply at a premium price,” it said.
Ikeja DisCo is providing power by entering an alliance with Egbin Power Plant that gives it exclusive access to 100MW of supply from the plant that is not contracted to the national grid.
The DisCo will bear the cost of improving infrastructure to take the additional supply.
Customers who are interested in the service will sign a Power Purchase Agreement with the DisCos and will be provided meters under the Meter Asset Provider (MAPs) regulation.
Experts say this is a good move and positive development for the sector.
“They are trying to make the best out of a bad situation,” said Dolapo Kukoyi, partner at Detail Commercial Solicitors, a Lagos-based law firm.
Kukoyi said the new arrangement provides customers choice because all they really want is constant power supply and they are happy to pay for it.
“Everybody has come to the realisation that the blame game won’t help,” said Kukoyi. “Even the generation companies are looking for whom to sell to.”
Since the power sector privatisation in 2013, the Nigerian Electricity Regulatory Commission (NERC), the industry regulator, has failed to review electricity pricing six times under the Multi Year Tariff Order (MYTO) it instituted to price electricity, a failure that has caused shortfalls of over N1.4 trillion.
“Today, electricity pricing is wrong. The model is not fair. The average today is N27.30. What will be reasonable to sustain the industry is N57.40. This includes in the debates around gas pricing too,” said Kola Adeshina, chairman of Sahara Group, in a recent interview with BusinessDay.
“We are suffering from lack of six tariff reviews. Whereas the consumers are agitated and worried, the reality of our life is the generator gives invoices to the bulk trader at an exchange rate of N360/$, the distribution companies are made to charge the customer using an exchange rate of N199/$,” Adeshina said.
According to the MYTO Rules, there would be a 15-year tariff path for the Nigerian Electricity Supply Industry (NERSI) with limited minor reviews each year in light of changes in a limited number of parameters (such as inflation, interest rates, exchange rates and generation capacity) and major reviews every five years when all of the inputs are reviewed with stakeholders, but this has not been done since 2016.
The current electricity pricing does not benefit the customers who cannot enjoy quality service because they are compelled to pay a tariff that is less than the cost of production and are forced to rely on generators where they pay five times the current tariff. It does not also benefit the operators who are compelled to charge below their cost of production and lack motivation to invest and improve service.
DisCos have persistently called for tariff reviews in order to be able to meet operation costs with some profit margins. This inability to charge commercial tariff makes it even difficult for the regulator to hold them accountable to their performance contracts.
Electricity customers have been the worst for it. According to NERC data, there are 7.48 million electricity customers of which only 3.39 million (45.3 percent) are metered, leaving a metering gap of 4.09 million customers compelled to pay exorbitant sums of money for estimated bills.
ISAAC ANYAOGU, STEPHEN ONYEKWELU & DIPO OLADEHINDE
