Category: Comments

• By Omo S Uwaifo

The Nigerian Electricity Regulatory Commission, NERC, produced a tariff for Nigeria, and the federal government approved it for implementation, effective April 4. NERC approved the tariff only for Band A customers. Those customers termed Band A are the select group of users of electricity of statutory characteristics, who, at the time of negotiation, were willing to pay the price at which the Disco was willing to sell one kWh of electric energy to them, for a daily availability of 20 to 24 hours.

Some will argue as in here, that the financial problem of Nigerian Electricity Supply Industry, NESI has been reduced to the quantum of monthly earnings by Discos. However, without determining why that quantum was as it was, and dealing with whatever the issues were that caused it, increasing electricity rates for anyone or group to partially increase Disco earnings, was overtly discriminatory.

It is unjust, unfeeling and punitive.

Ad hoc chats with engineers and public hearings by NERC on behalf of stakeholders, or NASS undertaking public hearings, are not the way to go. This is a most serious engineering problem affecting the whole country. It should have been handled by Rates and Engineering specialists.

Sadly, this is about the systemic mismanagement of NESI over several decades. Every government has contributed to it. Every one of them would surround themselves with friends, sympathizers including pseudo experts, and begin chasing after shadows that lead nowhere.

Low quantum of monthly earnings is a symptom of a crippling disease that no electric utility has ever survived. The solution has always been best achieved everywhere, by financial transfusion, subsidy, followed by aggressive commercial engineering.

Government has to understand that there can be no development in Nigeria unless there is abundant supply of electrical energy. The disastrous pathways dreamed up by NERC for regulatory practices, Performance Based Regulation, PBR, and for pricing electricity, have resulted in shortage of investments in networks and in the ever increasing social anguish the country has been suffering since privatisation.

No one that understands electric rate-making and rates structuring would choose straight line meter tariff structure as NERC has done without flinching since 2013. It does not incentivize electricity consumption. It is anti-industrialization. Yet NERC and Discos want the people to use more energy without caution. That’s like mounting food high up on an altar and asking the lame public to reach for it.

Electric utilities serve every customer. The more the better. Yet there are three main customer groups in electric utilities: residential, commercial, and industrial. These groups work together everywhere, including Nigeria of between 1951 and the late 1980s, until problems in NESI countrywide, forced major industries to quit the expensive and erratic public distribution networks.

Notably, Dunlop and Michelin, both motor tyre manufacturers, left Nigeria. Industries that wanted to remain in the country built their individual power plants, creating parallel utilities from which NESI has never recovered because of the deleterious effects it had on its earnings.

Elsewhere, especially in the United States, electric utilities prompt or entice industries to their areas of franchise because it’s known that industries are the principal drivers of successful electric utilities. In Nigeria, industries died because they couldn’t compete with others of other countries in the local market. Government intervened, but smugglers had their way.

The key reason was that industries had passed horrendous production costs due to the huge spending on in-house power. How distressing to look back at anaemic NESI, watching industries as they died. As NESI continues to deteriorate, it has no industries to nourish it back to good health. Its problem was that it could not raise funds to help itself because it was incompetent in commercial engineering matters. And so it remains to this day.

Nigeria’s late and beloved Engr. Lawrence Abiodun Amu, and Engr. Foluseke Abidemi Somolu, in their book, The Development of the Nigerian Electric Power System (1973 – 1990), described Nigeria’s distribution networks as ‘the untidy “last mile” in the electricity supply chain.’

The networks are and were medieval in design and had gone decrepit with age and lack of maintenance even in the 1980s. Since then they have been incompetently rehashed across Nigeria. By this 2020s, they are and should be expected to be totally incapable of supporting industrial health and development, 40 years or more after industries quit them. 

Nigeria should re-engineer and rebuild these networks to solve the sectors financial problems. Indeed, the medieval design networks with its lack of flexibility have been Nigeria’s Achilles heel for decades. Instead of this murderous increase in Band A rate scratching the surface of the problem, it will only exacerbate suffering, and deepen poverty in the land.

By approving the tariff that NERC made, government shot itself on the foot. It should know that Nigeria has supplied power to residential and commercial customers with hardly any industry since the late 1980s, and that, at colossal cost per kilowatt-hour hoping for growth, while industries continued to serve themselves at crippling costs without hope.

It’s hard to quarrel with the idea that NESI needs more money from its sales. But it’s easy to understand that making people pay more to cure a symptom, is ridiculous and unworthy of Engineering and rational governance. Why should people suffer while the problems remain? This is why government should subsidize NESI until the problem is solved within five years or less of its decision to act.

In economies especially developing ones such as Nigeria, the only way to bring electric rates down for residential use is to ensure higher industrial productivity and electricity consumption. As it is now in Nigeria, to solve the problem, government should first re-engineer and rebuild the distribution networks. After that all available industries should be electrically linked with the public networks to form an unbroken chain. That is the solution to the problematic nightmare of NESI. Let’s end the long and self-sustaining decadence.

The quickest way forward is to start the process of re-engineering and rebuilding the networks now with improved technology. There should be adequate controls provided for operational flexibility. The re-engineering should involve a shift away from distribution at utilization voltage level, to distribution at primary voltage levels. That alone should very drastically reduce voltage and energy losses and ensure much higher economies of scale, which should redound to Nigeria’s ability to serve the public electricity at the lowest possible cost without overt discrimination as overzealously and blatantly rendered by NERC.

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Several stories have been told of where the problems of NESI began. That’s history. What’s important at this point is to solve the problem. It is submitted and affirmed here that the preceding paragraphs of this post are the recommended ways to go. However, TCN and Gencos should look hard at their links in the power supply chain.

An inchoate problem is to provide adequate 330 kV service to every state capital. A place like Lagos should have a minimum of six injections from different directions to avoid weather disruptions. No state capital should have less than three 330-kV injections. In the rehabilitated and revamped situation envisaged, a good guess of peak load will be higher than 20,000 MW and growing.

Nigeria should prepare for a massive retraining of engineers in every area. Every engineer must learn planning economics. NAPTIN and technological universities should be equipped with the right manpower to teach the various specialties.

NERC works with other disciplines, but that it is an engineering organization, can hardly be denied. It’s led by an engineer. Engineering is at the heart of the NESI mess. There’s no doubt that tariff is a crying shame. Everyone and everything has its tariff. Ridiculous! How and who bills these if we weren’t using prepayment meters? Yet some customers can’t use enough energy for monthly amortizing the cost of the prepayment meter.

Let’s be clear, creating a plethora of cost centres to extort money from hapless customers, is a disservice.

Has NERC allowed true electric rates fall where they may? What population of cities and places did NERC use for its computation? There’s no reason for Ikeja to pay the same electric rate as Epe. Why should Kaduna pay the same electric rate as Zaria? Has Nigeria appetite for egalitarian tariffs? Has NERC used true unit cost per kilowatt for every town and location? These are fair questions. Engineering intends thorough application because human life depends upon it.

•Engr. Uwaifo FAEng, a former District Manager of defunct Electricity Corporation of Nigeria (ECN), is a poet, playwright, author and joint winner of the LNG Nigeria Prize for Literature in 2004, as well as Eisenhower Fellow, writes from Lagos.