Electricity price hike, the consumer’s burden

ELECTRICITY

ELECTRICITY is the lifeblood of any economy and at a time of economic down- turn, dwindling crude oil prices and the shrinking purchasing power of the Nigerian consumer, a February 1 hike in the electricity tariff is a major blow to the consumers. The “spider web” effect on the economy cannot be under-estimated, as its impact will be far reaching on all sectors of the economy.

Coming at a time when government is sourcing for alternative income generation revenues, its impact on the manufacturing sector is a near-death blow to the manufacturing sector in the midst of other unfriendly policies. Since electricity is a major component in the manufacture of goods, this increase will create a rise in the prices of goods, further impoverishing the Nigeria masses.

There will also be an increase in food prices, as the agricultural sector is not shut out from the fallouts of this policy. The average residential premise which is lucky enough to be metered will also have to pay more, thereby further reducing disposable income.

This price hike affects the telecommunication, medical, education, Information Technology, entertainment, transport, and service sectors. Invariably we will all have to pony up more from our dwindling monthly resources.

We have been told by the Federal Government that the price increase is necessary to fund new infrastructure investments, and encourage private sector participation in the industry to ensure reliable and efficient electricity.

The price hike has been stiffly resisted by labour unions and civil liberties organisations and dare I say most Nigerians as being unjustifiable, given the epileptic and unreliable power supply across the country. Several probes into the activities of past governments in the sector do not imbue confidence in the people as to the noble intentions of government, billions of naira have disappeared with no explanation, uncompleted power projects litter the country’s landscape.

Tax payers’ money has been loaned to the electricity distribution companies, Discos and Gencos (generating companies) to keep them afloat by the CBN, the subsidies do not seem to have solved the problems of these entities. The Nigerian consumers are still being squeezed dry. NERC which is the government watchdog to ensure fairness in the market seems to have assumed the role of a player and a referee in the sector, rolling out policies that further alienate the consumers with myriads of complex tariff structures.

The irony is that it is the low income households who get hit the hardest with estimated billings as they are not metered and remain at the mercy of cut-throat Discos. Lip service has been paid to metering all electricity customers, few people save the technocrats can understand the tariff structure that have been put in place by NERC to regulate the industry. Only recently Nigerians were astonished to hear of the staggering retirement benefits of the outgoing management team of the NERC, which even after parliamentary investigation has been swept under the carpet.

In an environment where there is unreliable and insignificant electricity supply, and a majority of consumers who have to grapple with estimated bills, the cat and mouse game which ensues between them and the staff of these Discos will only result in suspicion and distrust.

Government, its agencies and the military are some of the most recalcitrant debtors of these Discos. It is important that government buckles down to find solutions and creative means of recovering these debts that run into billions to buoy up the finances of the Discos rather than piling additional increments on vulnerable industries, small businesses and residential customers.

The strongest attribute of electricity is that it can be generated from many diverse fuel sources such as coal, nuclear energy, natural gas, hydropower and other renewal sources such as solar, wind, biomass, and geothermal. The government needs to explore alternative non convectional routes to increasing energy supply rather than relying on traditional methods which have proven to be unsustainable.

Electricity and gas are closely related, the country is in dire need of a Gas Master Plan that should be promptly fast-tracked to open up the gas market to private sector participation. One way of doing that is by creating an autonomous body for the gas sector making it independent of the crude oil sector, freeing it from the rigmaroles of the industry.

Government alone is incapable of building the infrastructure and attracting the technical expertise that is key to the development of this very critical sector which has been left untapped for several years in spite of the fact that the country’s gas reserves are enormous and untapped, and flared in most cases.

A number of the multinational oil companies rely on gas to fire their operations in the urban areas and in their offshore locations, it is important that government creates a space for these companies and other local players to enter the market to generate electricity in partnership with the Gencos in their respective regions. A policy framework can be structured that enables these players to recover the cost of their investments whilst providing electricity to businesses and homes.

Gas storage facilities need to be constructed across the country, so they can feed gas-fired generators which can be used to power industrial parks and high density residential areas, which can be off-grid, thereby reducing the pressure on the national grid.

Special policy measures need to be put in place to encourage the development of renewal energy sources to enable access to transmission lines. Government cannot afford to shy away from investment in solar energy, as the sun shines all year round in the country.

Private sector investments need to be encouraged to set up industries in the manufacture of solar technology components, although solar energy is said to be expensive due to cost of the solar panels, grants given to local science and research institutes can mitigate this problem. Partnership with the Chinese Government will also aid in fast-tracking this project.

Replication of wind energy farms as is currently being carried out in Katsina State can be actively supported by government, advancement in technology has brought down the cost of setting up wind power plants, the Niger Delta States which are bounded by the Atlantic Ocean are strategically placed to benefit from offshore wind farms.

The government needs to partner with the various universities of Agriculture across the country to explore the setting up of bio-fuel plants and industries to harness energy from alternative fuels such as biodiesel, bio-alcohol and non-fossil methane. An added advantage to this is that it can be used to reduce landfills. Pilot projects can be established and the cost benefits studied to enable the country derive maximum benefits.

Policies need to be put in place to encourage off-grid electricity production as well as ability of independent power producers to partner the transmission company in the use of their facilities. A number of states like Rivers have invested enormous resources into building independent power plants (IPP) but in the long run the power generated has not been of direct benefit to the locals, as the power has been imputed into the national grid, and the tax payers have been left shortchanged as some of these state investments have been sold off into private hands. When these investments were made, the past government had promised the people 24 hour power supply, which turned out to be a mirage.

The government recently came out with a policy banning the importation of the small generators “i pass my neighbour” in the country; this to me is ill-advised as there were no alternatives put in place for the poor masses who are the ones that usually use these generators as an alternative power source.

Government should have made available alternative electricity storage options like lithium batteries and inverters in place of these generators before banning them, although inverters are not fail-proof, they are efficient enough to provide some hours of uninterrupted power supply. Effort has to be made by all stakeholders to derive novel and more cost efficient options to store electricity which can be put to use when load-shedding.

Consumer education strategies are needed to increase awareness and to promote the use of energy efficient appliances. Dialogue channels need to be opened with the consumers for better understanding of the factors that contribute to price increases to better manage consumer reactions. Consumers should have the ability to manage their consumption; this is not possible when they are not metered.

Government should know that there is no One-size-fits-all approach in the electricity sector, which is vital to all human beings and should be more creative in thinking outside the box, tinkering with policies that are outdated and creating innovative ones where necessary. Transparency is the most effective tool in gaining capital with the people.

Availing them with clear and simple information will equip them with the right tools to make informed decisions in their choices. Finally, government needs to keep to its promises that its policies will not further impoverish the already traumatised masses in the country.
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