Conference Hall

March 18, 2014

Consumers have right to challenge unfair tarrif in court

On Friday March 14, we published the second part of the participants’ examination of the privatisation of the power sector. In this concluding part, they argue that consumers have the right to challenge unfair tariffs in court.

LAST year, we used to have at state capitals, but we discovered that perhaps we were talking above people’s head. It was then brought down to local government and we picked three local governments in each of the geographical zones. Ogun State was picked in south west and I was at Ota, Ijebu-Ode, and I was also at Abeokuta.

So, it is a gradual process because we have started from state capital and now we have moved to local government, but you also need to know of the fact that what Nigerians need most is electricity. If you are telling them to pay their electricity bill and the power supply is not there, you even stand the risk of being stoned. Let us not deceive ourselves, electric power supply is not readily available. So you don’t shout more than necessary, otherwise, you will become a nuisance to yourself and the people you are talking to.

The reality on ground is that we don’t have enough and anytime we have power, 10 other people are being disconnected. The fact of the matter is that we are moving gradually and just as I said earlier, it is good that we have a broader perspective, alternative and counter perspective of the way we are going so that whatever mistake we have made, we will be able to correct it and it will be better for us to listen to ourselves.

Mr. Charles Ilofulunwa: You did mention that some people were given licence to generate power and since 2005, they have been unable to do that. I think we need to view it from this angle, we have been having what is called policy inconsistency on the part of the federal government whereby one government will come up and initiate a policy that is mass-driven. At the end of the day, another government will come and change everything without regards to the cost of what investors have put on ground as if that person has somewhere he brought the money to ‘dash’ the people of Nigeria.

Licence to invest

You will discover that most foreigners who have the money are still watching to be sure of the direction government is going. People who were given licences to generate power are also still watching the body language of the government because they can give you licence to invest, then you will go and borrow money and mobilise your technical expert to come into Nigeria and invest. The project may have gone about 60 percent and they will come up and say they don’t want to go toward that direction again.

As at last census, we said there were 170 million Nigerians. 20 years after, we are still using the same power, the same infrastructure. So, there is no way the same capacity will still carry the same number of people. For the past 20 years or since the advent of this democracy, you will discover that the level of economic activity in the country has expanded, so you can expect high level of energy consumption from the populace and there is no commensurate increase on ground to carry it. That is why I am even suggesting to the new investors like Eko and Ikeja and those who bought generation and distribution companies to change the old infrastructure and put in the latest cutting edge technology that will go a long way to save lot of us and even capture the possibility of public expansion in the next ten years.

It is not enough for you to say that you are targeting 10,000 megawatts of electricity without considering the potentials population expansion and huge economic expansion; all of them need to go together. Then on the issue of metering, I think we have to accuse the DISCOs for not doing enough.

Payment for the meters

Dr. Sam Amadi of NERC came up with a wonderful policy called CAPMI where consumers are meant to pay for the meters in advance and unfortunately, I need to say that the DISCOs are not doing what they are meant to do.

They gave us licence to manufacture and import meters and make it available to Nigerians. We equally told them that we have the capacity to get it done but when you get to the DISCOs, you will discover that the process of driving the scheme to the grass root to make sure that electricity consumers are metered is slow. What we need to do is that since they have various business units in all the PHCN offices, they should go and do the jingles, encourage the people to make the payment and we will make the pre-paid meters available to them. We are not talking about analogue meter, but prepaid meter. Analogue meters should be phased out. Even the pre-paid meters we are talking about now is not what we should be talking about. Smart meter, which is in vogue, has the capacity to measure the quantity of energy you consume and the time it was consumed. In the next five years, we should not be talking about prepaid meters, but smart meters, but the DISCOs are not doing enough and they have refused to sensitise the people.

George Etomi: It is important that we understand where we are all coming from. After independent, everything was working, from education to agriculture. In fact, everything was working because regions were competing to catch up with one another. Let’s just put things in perspective because we now have a window to put move things forward. Why on earth do I produce from Mambila or from wherever and I take it to the grid and somebody somewhere in the grid will determine what I get.

Some parts of Nigeria don’t pay electricity bill because they don’t have the money to pay but they have light and essentially those who are paying in other places are subsidising it. That is the system we have been running in Nigeria, but now we have a chance to break from it. One of the points I am hoping that we move to is the point where we will have captive generation and it is expanded to regional generation so that they can develop their electricity infrastructure and they will develop at their own pace.

Engr. Kola Balogun: The man from West Power and Gas has actually highlighted some of the points I wanted to make, but the most important thing that is actually derailing the process is still information gap. There is not enough information dissemination from the regulator, NERC. That is why I said earlier that somebody needs to uphold the reform, somebody needs to process and drive it.

NERC needs to drive it more and from my own judgment, they are not doing enough. Let them stand up and drive the process like what NCC did in telecoms sector. They need to educate the entire populace about the business opportunity within the power sector. For instance, he made mention of somebody constructing a power distribution line in accordance with the distribution company. I have never heard it before, so these are the opportunities that some new millionaire will be able to invest in and get some return on investment.
My factory as at today has the capacity to produce 100,000 pre-paid meters in a month. I have a stock of pre-paid meters in my warehouse but I cannot sell because the new DISCOs are just waking up, trying to adjust to the reality on ground. They are not encouraging CAPMI, they probably don’t have sufficient fund now to actually say they want to buy meters in bulk and start distributing.

Joe Ajaero: Let me respond to some of the points that have been raised here. It was mentioned that the new investors will invest $250 million for over five years. I want to say that I don’t think that is realistic because I am aware that they have started operations on debts and I have to say it again that the new investors started their operation on debts because they borrowed from banks and that is the major problem we are having now. Before they took off, they have started paying back, that is to say that they have started servicing their loans from the banks.

Moderator : They have increased electricity tariff, I have a case of a consumer who was billed N50,000 for the month of November alone even when she has been paying her bills in a duplex in Ago, Okota, in Lagos, which is purely a residential building.

Joe Ajaero continues: It is not official. NERC has never approved any tariff increase as we talk now. Now, the new investors borrowed money and they are using borrowed money to run their business, which means they are already in debt and they must finance the loan and to post profit is another issue. Now, you are saying that $250 million will be invested in the power sector. At what return on investment are these guys doing business that they will service their loan, make profit and invest this amount.

The situation you are seeing today is that the power situation is going down, transformers and other power infrastructure are going down. About what the NERC representative said about companies that generate and distribute power, I don’t think it is a new development. The Nigeria Electricity Supply Company, NESCO, Jos, and I have my members there, has been in existence in Nigeria since 1929. They generate and distribute power in Jos up till today before the birth of NERC. In fact, they were covering about two to three states before and they are still there today making their small profit with that customer base. It was on that background that we felt that people who were given licences could equally function even if it is 20megawatts or 50megawatts, we will add to what we have. It is only when they have finished selling to their customers that they will now send to the national grid. Then, PHCN will pay them for the power they supply them.

So, I don’t think this is a new development and Nigerians should have followed suit by building more power plants. Some oil companies started to build power plants, but corruption came in along the line. Mobil and Agip generate and they sell to PHCN at N11 per kilowatt hour, while PHCN sells to customers to N4 per kilowatts hour.

The same thing is applicable to Enron AES in Egbin. They generate about 220 megawatt. Whether they generate or not, it was said that they had an international agreement that at the end of the month, PHCN must pay them. Even if they generate one megawatt, PHCN must pay them for the 220megawatts and PHCN pays them at N11 per kilowatt hour, while it sells at N6 per kilowatts hour after transmitting distributing and all other services.

They were there as generating companies with people that are highly connected that must force PHCN to buy the power at N11 and take N5 loss. So, that was the way PHCN was operating with these companies – Agip, Mobil, AES and so many other companies. It was easier then because PHCN could get gas from the gas companies and say they will pay since PHCN was government agency.

Now, if it is the private man that takes that gas from the gas company, he must pay them and still recoup his profit. The point I am trying to make is that there is much to be done for you to say that you are investing $250 million. We can bet on this on this our programme now and monitor it and see how far they can go in investing this amount. They are not re-investing and if they are not re-investing, the little system that we have will be going down.  So, all this noise that we are making that we are targeting 10,000megawatts is nonsense because our networks are not okay. The distribution networks will not carry it. All the transformers are on over-load. So, until we decide to work and we start somewhere, we will still be speaking grammar.