The Nigerian Electricity Regulatory Commission [NERC] has proposed a review of retail tariff to be paid by consumers for their energy consumption. This is at a time that complaints by electricity consumers on poorelectricity supply are getting to a climax. The commission recently instructed that a customer who has not received continuous or cumulative electricity supply for a period of 15 days in a month shall not be required to pay a fixedcharge provided that the disruption is not due to non-payment of electricity bills.
Both consumers and electricity distributors have raised concerns over the implementation of the commission’s order. The purpose of regulation is to create the necessary incentives to encourage investors to embark upon capacity expansion as well as ensure consumer protection and satisfaction. These objectives need to be pursued with a balanced approach as NERC returns to its strategy room to consult and deliberate on the matter.
Tariff regulation is one of two new regulations that have been proposed by the commission to be introduced in the electricity sector. Tariff regulation specifies the procedure that will guide the operators in the sector in applying to NERC for a tariff review and the steps that the commission will take is responding to such requests.Draft copies of two regulations have now been presentedto industry players and other stakeholders for review.
According to the draft tariff regulation, tariff review shall be considered where additional investments proposed by the operators on facilities or networks have not been factored in the existing approved tariff. These includeemergency expansions and facility replacements. The problem with this provision is that the ultimate purpose for the proposed investments is not factored in. The question is should tariff be reviewed on the basis of proposed investments or on the basis of the marginal increase in the benefit to consumers.
The commission should insist that the additional gains of the new investments planned by the operators should be specified and delivery should be confirmed. The way it is going right now is no different from the trend in the past whereby money is spent or claimed to have been spent to build new capacities in the electricity sector without any improvements to show for it in terms of electricity supply.
Huge sums of money have been spent in this country for the purpose of improving electricity generation and supply since former president, Olusegun Obasanjo began to set targets for electric power generation. Huge funds werespent, the targets for electric power generation werenever achieved but tariffs were raised.
President Goodluck Jonathan made improvement of electricity supply a priority of his government at the commencement of his administration. A lot of money and effort have again been committed to the electricity sector, the objective of improving electricity supply is yet to be achieved but tariff has again been increased. This trend is simply what NERC has expressed in writing in its draft regulation – that new or proposed investments in electricity generation or distribution should warrant a review of electricity tariff whether or not they lead toincreased service delivery to consumers or not.
Electricity consumers are not opposed to paying more for services consumed: what they are kicking against is basically charging for services not rendered. A situation where charges continue to go up while service delivery remains poor or continues to deteriorate is bound to be resisted by the consuming public. The obvious form of resistance is unwillingness to pay the bills. That resistance has continued to grow in the face of estimated bills.
Despite the entry of private operators into the sector, the situation still appears to be business as usual. The apparent inefficiency of PHCN to charge consumers according to what they consume is still continuing with estimated bills, electricity generation remains constrained as before while pressure continues to mount for upward tariff review. Where is the innovation expected with private sector involvement in the sector? Where is the efficiency of the private sector in service delivery and customer satisfaction?
If NERC is committed to getting the feel of consumers in the issue of tariff review, the question of estimated billing, which hides inefficiency in the business, is the heart of the matter. Increasing charges without improving supply is the critical point of conflict of interests.
It should be taken for granted that private sector operators should have anticipated new investments necessary in the post acquisition operations for them to improve electricity supply. NERC should insist that such investments be made at least over the first five years, the expected improvement in electricity supply achieved before consumers should be called upon to pay more.
NERC and service operators should rest assured that consumers are very willing to pay more when electricity supply improves. The need to first improve service delivery is to enable consumers save cost from running private generators, which they can devote to meeting the increased tariff. This is the way that NERC can empower consumers to pay increased charges for electricity. Otherwise, an upward review of tariff without improving supply will lead to consumer resistance and create more bad debts for distributing companies. There cannot be a fairer basis for billing people than the actual service consumed.
