New Tariff And Bid To Resolve Power Problem

Azura Power Holdings Ltd

From 1st of February this year when the new electricity tariff regime took effect, the determination of the electricity distribution segment to move forward in overcoming the formidable challenges impeding efficient operations will be further enhanced. Upon takeover from the defunct Power Holding Company of Nigeria (PHCN), the new players in the nation’s power sector encountered several hurdles.

Due to years of under investment and inadequate equipment, inadequate and weak transmission network, and the obvious lack of investible funds to improve the power infrastructure nationwide, power supply had been at best epileptic as at November 2013 when the private investors took over the sector. Besides, such a plethora of problems presented a near impossible situation to the new investors especially as the status quo reports they received from PHCN were in many instances, incongruous with field reports.

However, since the new players took over, pieces of evidence abound to show that they are not only repositioning their respective companies, they are also engendering new work culture and a sense of direction for the electricity supply industry in line with best practices associated with the private sector’s commitment to excellence.

Besides, there is groundswell of evidence that they are doing a lot to improve the quality of power supply delivered to their customers, while also providing meters to close the metering gaps in their operating areas and address the hue and cries over estimated billing.

For instance, Abuja Electricity Distribution Company (AEDC) alone has confirmed installation of nearly 400 distribution and power transformers of different sizes in various parts of its operating are—the Federal Capital Territory (FCT), Kogi, Nasarawa and Niger states. This is in addition to many other equipment that enhanced the old and dilapidated network infrastructure it inherited, which enabledbit to take more power to the tune of 1,000MW available for distribution to its customers. It will also install 500,000 meters at the rate of 100,000 per annum for five years after completing the pilot scheme of free meter installation totalling 35,000 for which Minna in Niger State and Life Camp in FCT have been selected as test areas in the ongoing roll-out of projects. An electronic vending system is also in the offing where customers can pay their bills via the internet by logging on to AEDC website, POS terminals, among others.

Notwithstanding the noticeable improvements, however, the combined impact of some of the challenges inhibiting the sector such as the large-scale theft of electricity, and a tariff regime that does not cover the cost of producing, transmitting and distributing power, the distribution companies (Discos) and generating companies (Gencos) have been sustaining huge losses, mostly above 50% of their running costs and facing extreme difficulty of surviving as going concerns. But since there is no going back on the federal government’s power sector reforms and privatization policy, it is imperative to evolve effective strategies to salvage the Nigerian Electricity Supply Industry (NESI) from calamitous collapse.

The new tariff approved by the Nigerian Electricity Regulatory Commission (NERC), therefore, provides one of such veritable opportunities for the NESI to not only survive but also grow to a much desirable level. One of the main thrusts of the tariff review is to stimulate the attraction of private capital into the power sector.

This arduous objective demanded bold initiatives and a great deal of courageous but delicate result-oriented strategising with an all-inclusive approach process that promotes investments in the electricity industry without unfairly burdening electricity consumers,in line with NERC’s guidelines. At the various consultative meetings to sensitise and secure the understanding of electricity consumers in its coverage area last year, the AEDC brought out the hard facts even as it assured consumers that they would get much needed respite sooner than later.

Among the tough measures lined up to address identified challenges in its far-reaching business plan, AEDC unveiled an ambitious proposal to inject $200 million over the next five years as part of its approved capital expenditure programme. The company had already invested N2 billion with a view to improving its network assets and infrastructure as well as service delivery within its operating area since takeover in November 2013.

The AEDC also unveiled some major new initiatives in the tariff regime specifically aimed at resolving thorny issues agitating the huge population of electricity consumers. These include cancellation of the fixed charge from all residential and commercial electricity consumers’ bills such that, although the new tariff regime comes with an increase in energy charges, their total bills will depend on what they actually consume which they can further reduce by conserving electricity. Thus, residential customer classification (R2) in Abuja area of operation will no longer pay N702 fixed charge every month while their energy charge will increase by only N9.60kwh. Ultimately, tariffs will actually come down as the level of generation increases and losses come down.

It was not surprising that these highlights of the AEDC’s approved tariff plan were generally well-received when unveiled to all stakeholders in its franchise area because most consumers, while decrying the prevailing difficult economic conditions, expressed willingness to support the marginal increase in tariff since it will bring improvement in power supply to their areas. There are indeed bright prospects for the smooth implementation of the new tariff regime in the country in the light of the bold but realistic approaches of companies like AEDC to overcoming the formidable challenges in the electricity distribution business in their franchise areas.

—Danladi wrote in from Lokogoma District, Abuja

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