Like most citizens across the globe, most Nigerians including this writer do not understand the complexity of power generation, transmission, distribution, and delivery to the point of use. In effect, most citizens complain about unavailability of electricity when they need it, arbitrary tariff increase without connection to service improvement, and fair or estimated billing. Citizens trust a governance system that empowers their rulers to ensure that technical experts and policy wonks are up to the task of constructing policies capable of assuring citizens that their interests, among others, are duly covered by laws and regulations that guide supply of electricity, the locomotive of modernity.
Just as it was in the days of PHCN, majority of citizens are still complaining about gross inefficiency in the delivery of power to them, since the average citizen does not have the peace of mind to worry about the number of megawatts being turned out from day to day, percentage of which is deliverable by existing infrastructure, and financial capacity of those approved to distribute power to end users.
The privatisation of the country’s power sector, generally referenced as the Electric Power Sector Reform Act of 2013, though hailed at the beginning, has since been the source of doubt for the average consumer of electricity in the country, despite obvious efforts by Nigerian Electricity Regulatory Commission (NERC) and the Ministry of Power to end what has looked for decades as an impish jinxing of a nation. Signals have been going back and forth since 2015 that the power sector privatisation would be reviewed. In this respect, citizens must have been excited by a recent announcement by the Director-General of the Bureau for Public Enterprises (BPE), Alex Okoh, on a decision by the BPE to re-energise two sectors vital to the country’s economy: petroleum refinery and provision of uninterrupted electricity. On refinery, he has said, “Over the years, we have budgeted tons of money for Turn Around Maintenance (TAM) that did not turn anything around…. If a private sector investor is coming into that sector and he is bringing his money for the rehabilitation, you better be sure that he will get that rehabilitation done because if he does not he will lose his money.”
It is the Director-General’s proposal to review “the power sector privatisation process” that is the focus of today’s column: “We want to help address the challenges in the downstream sector of the electricity industry. We do not take an antagonistic position against them because we believe that there are key business challenges that they are facing.” More specifically, the proposed review promises to respond to some of the problems that citizens have with the new power sector. BPE is particularly interested in a review aimed at addressing the fundamental flaws, which include enumeration of customers, provision of meters, pricing and revenues that flow from customers to suppliers under the current model of privatization. Incidentally, the Director-General’s optimism about the refinery was also expressed in relation to privatisation of power in 2013 until the devil in the details of the privatisation process revealed the weakness (or incapacitation?) of companies that came out of de-regulation of power. But it will be uplifting if the optimism about private owners of the four government refineries is made to apply to power sector privatisation process.
It is, however, reassuring that the BPE says it will review Nigeria’s power sector privatisation process to remove fundamental laws hindering operations in the sector. But the review will have to go beyond elimination of billing challenges, improvement of metering infrastructure, and enthronement of cost-reflective pricing and tariff structure. Many citizens have expressed doubt about the philosophy that drove privatisation in the first place and the model of privatisation adopted. Such people have argued that privatisation was unduly political or politicised, and that many of the individuals favoured to inherit components of PHCN are practicing and retired politicians and their friends, rather than investors ready to commit the high level of capital and knowledge required for transition from decades of little or no electricity to one of energy security and stability. Such citizens may be wrong in their assessment of post-regulation power firms but they are yet to be proved wrong, given the situation of electricity supply in the country.
A predominant belief among DISCOS is that citizens are too sensitive to higher tariff for electricity. Such sensitivity arises from the fact that many customers in different parts of the country experience little or no change in electricity supply and thus suspect that they are being ripped off by those calling for a tariff that reflects cost or value of service. It is the erratic nature of electricity supply that explains citizens’ seeming over sensitivity to estimated billing. And the solution to such resistance by citizens to higher tariff and even to estimated billing resides in identifying low-hanging fruits already identified by the government but unsighted by DISCOS: the magical wand hiding in provision of pre-paid metres for every customer.
Citizens are not likely to be interested in counting of megawatts the way government does. It makes no difference to consumers that GENCOS generate 8,000 megawatts when what is distributed or distributable is 6,000 megawatts. It is megawatts that can be distributed that have meaning to customers, and this observation is not meant as a criticism of GENCOS. It is to recognise the staleness of announcing number of increase in megawatts. So is the excuse by DISCOS that estimated billing is necessitated by difficulty to get to many places not tenable. How do DISCOS acquire the data that makes estimated billing possible for consumers living in inaccessible parts of the country? The proposed review should pay attention to another post-de-regulation billing system not mentioned in public discussion of problems in the power sector. There are DISCOS in many parts of the country that enter into deals with estates without pre-paid meters to pay N5,000 for 10 hours of electricity supply per day for one month. Hardly do such estates receive up to 10 hours in most days, yet they are made to honour the deal, largely to avoid being denied electricity supply by the only company approved to distribute electricity in the state in which there is no competition or alternative for customers.
One of the highpoints of marketing before the unbundling of PHCN was (and still is) that privatisation will increase competition while competition will improve efficiency, and the private power companies will, unlike the PHCN, bring electricity to customers as and when needed. This situation remains a myth even five years after the legendary de-regulation of the power sector. Finally, the division of the country into protected zones for each DISCO has not and cannot promote competitiveness on the part of DISCOS. All DISCOS are designed as captains of seller’s market in the territory allocated to them. For example, if there is a better service being provided by the DISCO in Ifetedo in Osun State, the consumer living in Oke-Igbo across the Oni Bridge in Ondo State cannot opt to use such company. And this is because such consumers have been sentenced to economic prisons in their respective zones. Nothing kills innovation faster than monopolies.
As the DISCOS are at present, they look more like illustrations of crony capitalism than as operators in a free market. None of them has any other company to compete with within the area of its franchise. GENCOS have more chance of learning competitiveness than the DISCOS, each of which operates as a monopoly in the state(s) allocated to it. As we had suggested in this column in the past, there is need for another utility company to provide (off-grid or new grid) electricity in each state, perhaps under the scheme of alternative or renewable energy. The kind of competition among telecommunication companies needs to exist between DISCOS. It is not healthy for customers to be captured customers in an energy economy segmented as territorial fiefdoms for favoured business owners.
