Private sector groups back new power tariff

Nigeria’s organised private sector groups have given their unreserved backing for the new electricity tariff which became operational on February 1, saying the new multi year rates are vital for the stablisation of the sector after years of neglect and near zero investment.

The tariff imposed by the electricity regulator, NERC after the mandatory consultation, has already become the subject of controversial reviews at the Senate, with senators voting in a motion to suspend the move.

In a 10-page statement last night, the Nigerian Economic Summit Group (NESG) said, “the commencement of the MYTO-2015 will have a positive impact on investments into the industry and turn a bankrupt electricity industry into a financially viable one and embolden private investors to make the large and desperately needed investments, particularly in raising generation capacity.”

The NESG cautioned against undue political agitation and populism, as reflected in the action by the Senate, saying “if recent actions are allowed to derail the electricity sector reform process, the consequences would be extremely regrettable and tragic for a journey that began effectively in 2005.”

According to the NESG, “it is instructive to point out that the Senate, and indeed the National Assembly, do not have the powers to reverse MYTO-2015 and this order is in accordance with the electricity sector reform act, passed into law by the National Assembly in 2005.”

The statement warned that “Unless Nigeria implements a radical change to the pricing regime, we will have an industry where the end user price is insufficient to cover the costs of the sector with the following consequences:

• No incentive to invest in increasing generating capacity

• Thermal generating plants will remain gas constrained

• TCN will not be able to expand transmission capacity

• The new NIPP power plants will not be able to repair and maintain their physical assets.”

Muda Yusuf, the director-general of the Lagos Chamber of Commerce, said in a statement that “the National Electricity Regulatory Commission (NERC) and Minister of Power have argued that the proposed tariff review was a major plank of the Power Sector Reform and critical to the delivery of power. The purpose, according to them is to make electricity tariff cost -reflective in order to make investments in the sector attractive and sustainable.

“It is difficult to fault this position, especially in the light of the clamour by the citizenry for a private sector driven power sector.

“The economics of the investment must be right, to ensure sustainability. In any event, it will still be cheaper (even with the review) than individual firms or households providing electricity through generators powered by diesel, petrol or LPFO. “

He said while pricing is a key component in the puzzle, there were yet other issues,  “such as the availability of gas, security of gas infrastructures; adequacy of investment in gas infrastructure; security and adequacy of the transmission lines; huge indebtedness by the MDAs to the DISCOs and the general framework to mitigate the risk of investment in the sector.

“All these need to be sorted out in order to inspire the confidence of investors, and government has a role to play in resolving some of these impediments.”

The DG emphasised the matter of metering as being crucial to secure the endorsement of stakeholders for the new tariff regime.

According to him, “the current billing regime by many of the DISCOs is perceived by many consumers as inequitable and exploitative.”

According to Sam Amadi, the former chairman of NERC, “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 powers. The legislature should not interfere and direct executive action. That is clearly against the law. It is unconstitutional.”

Amadi explained that apart from the Senate lacking the constitutional right to give such a directive, NERC, as currently constituted, was not competent to suspend or rescind the tariff order issued by its former Board.

He argued that until a new board was reconstituted to consider reviewing or totally suspending the order, “nobody anywhere can validly review or suspend the current tariff.” He said: “It is not wise for the Senate to instruct NERC to stop the tariff. 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.”