Electricity Distribution Companies (DisCos) are reporting higher collection and improved remittance from the market based on the Service-based tariff which took effect in November 2020. But in many areas, service is still poor. It is unjust to inflict high tariff rates on customers without commensurate service delivery.
Nigeria’s eleven DisCos collected N56.1billion in December as revenue, the highest in 2020 on the back of the newly introduced service-based tariff, which divided customers into five service bands – A to E – and forced a tariff increase of between 30 and 50 percent.
According to data from DisCos principal Accounts, for the past six months, the average collections was N45.6billion but collections rose in December, the first full month of the implementation of the Service-Based Tariff for electricity consumers in Bands A – D by over 15 percent, more than the November collections of N47.7billion on the back of the new tariff system.
We find it absurd that commitment to help DisCos ramp up collection and remittance is not reflected in addressing poor power supply to homes and businesses. The Nigerian Electricity Regulatory Commission (NERC) that instituted the service-based tariff has no mechanism to check abuse by DisCos. Rather it draws up elaborate dispute resolution mechanisms for customers that evidence has shown are ineffectual.
The Service-based tariff methodology was adopted to introduce equity in power supply and billing but it has only raised costs for customers without instituting a credible process to guarantee that DisCos would hold up to their end of the bargain. Does NERC measure supply across the different franchise areas to ensure that customers placed in Band A actually receive up 20 hours of supply daily?
Inquiries show that many customers placed under high tariff bands get less than the actual number of hours contracted. Sometimes, those in Band A go days without supply. What measures are in place to hold DisCos accountable? This is especially worse for customers who are not metered and are now saddled with higher tariffs without commensurate supply. We urge NERC to be proactive when writing regulations.
Yet, these DisCos are benefiting from massive loans through the apex bank. The Central Bank of Nigeria has issued loans to DisCos to assist them in procuring meters, improve their network, and bridge the shortfall in the market due to the absence of cost-reflective tariff.
Through a Special Purpose Vehicle (SPV) called the NESI-SSL Limited, the CBN is extending facilities to the power sector for three different programmes covering metering, improving the ability of operators to ramp up capital, and boosting operation expenses. This funding has reached over N500billion.
Over the years, the CBN has granted various facilities to the power sector, to make up for its inefficiencies. Some of the recent programmes include the Nigerian Electricity Market Stabilisation Facility (NEMSF), which was made to settle outstanding payment obligations due to market participants during the interim rules of the market as well as legacy debts owed by the Power Holding Company of Nigeria (PHCN) to gas suppliers.
There is the N701billion Payment Assurance Facility (PAF) extended to the Nigerian Bulk Electricity Trading Plc (NBET) to settle invoices of generation companies (Gencos) to a minimum level of 80 per cent. In 2019, another N600billion was extended to operators under this programme.
It is understandable why the sector needs all the help it can get. The Power Sector Recovery Programme document prepared by the World Bank and the Nigerian government states that the economy loses over $29 billion every year due to epileptic power supply. Therefore adequate power supply is the key to unlocking economic growth.
However, the regulators, as well as the financiers, must put in place a framework to measure performance so that Nigerians can get value for their money.