NERC – Regulating In Whose Interest?

By Idowu Oyebanjo

What exactly is happening in the Nigerian Electricity Supply Industry (NESI)? Whose interests are the leaders serving? Whose interest are the operators of the weak electrical network serving? And most importantly, in whose interest is the The Nigerian Electricity Regulatory Commission (NERC) regulating the industry?

*Sam Amadi, NERC Chairman 

(pix: leadership)

These questions have remained with us for a long time now. Each time one examines these questions, more questions come to the fore. Was Nigeria ready for privatisation? Does Nigeria realise that the management of electricity systems is highly technically intensive and would need individuals who know their onions to mediate the course? Is the regulator aware of its role to protect consumers from the regional monopoly of the operators? Why has it taken so long, after "unending" complaints from poor and already impoverished consumers, before NERC was forced by an order from the 8th Senate to carry out what is supposed to be its main function?

Why should consumers be pushed to the wall before a revolution occurs? Why should government wait until a huge crisis of discontent from millions of individuals - North, South, East or West, united in one voice, unleash mayhem on public utility and public officers because of years of neglect and mismanagement of funds meant to provide electricity for the nation? Why is Nigeria yet to have electricity which was discovered over a century ago?

It is widely accepted that regulation, where it is impossible to have competition, as is the case with the distribution of electricity through wires, is a veritable means of providing quality service at low cost to service users. This is true but so much depends on the regulator. The principal role of a regulator in a privatised electricity system is to cater for the interest of the consumers in such a way that operators can make reasonable profit without exploiting the consumers. In this regard, NERC has failed Nigeria woefully in recent times. Why do we say this?

There is ample evidence that NERC has orchestrated a villainous act against customers in the area of estimated billing and fixed charges. In effect, NERC has raised money for the distribution companies (DISCOs) from the pocket of already impoverished Nigerians. With NERC unable to account or monitor how much money has been "borrowed" from individual consumers, this act of treachery is daylight robbery.

Take for example the Credited Advance Payment for Metering Implementation (CAPMI) programme. It is advanced robbery! The CAPMI jargons is simply for exploiting consumers. The CAPMI scheme was to provide a platform for willing consumers to pay the cost of the meter and get the meter installed within 45 days. Also, the distribution company was to return the payment made by the consumer via a percentage deduction in their monthly electricity bills until the distribution companies repaid the consumer for their advance payment.

 It is regrettable that consumers have paid for these meters and years after, they are yet to receive their meters. This is double jeopardy considering that these meters were supposed to have been supplied to consumers free of charge in the first place. For the avoidance of doubt, the electricity meter is the property of the distribution company! NERC is unable to account to date for the number of consumers who have paid but are yet to have their meters nor can they articulate a means of monitoring the return (with interest) of payments made by consumers as promised by distribution companies when the proposal was muted in the first place. No one is looking after the interest of the consumers!!!!

A close examination of the components which make up the tariff payment by Nigerians as stipulated by the multi-year tariff order 2 (MYTO 2) shows a significant amount attributed to the cost of losses. This is  a deliberate act to short-change the consumers because of their lack of awareness and understanding of Power Systems. How can you pay for the cost of losses which cannot be accounted for? The distribution companies to begin with are yet to know their Assets as they claim. They have been unable to determine their losses yet they are being paid for these losses. They have not metered the customers, yet they are being paid for aggregate technical, commercial and collection losses (ATCC).

The use of bogus language and profligacy to confuse the generality of consumers who do not understand the meaning of Megawatt is pulling the wool over their eyes. Worldwide over, consumers are never interested in the details of Power Systems. One thing and only one thing interests consumers anywhere in the world - the availability of electricity! A survey of developed countries of USA, UK and Europe shows this fact too. The role of an efficient regulator is to protect the interest of "disinterested" and disenchanted consumers. Power Systems is hard enough to understand for power engineers, not to talk of the wider citizenry whose businesses and activities differ extensively. For NERC to have allowed distribution companies to extort consumers for this long through the estimated billing conundrum tells the whole world of power systems that it is serving the interest of the cartel behind the woes of the power sector. As long as those who are in charge of the power sector have no clue about the technicalities of power systems, the hope of having an efficient and robust power system will remain a mirage for a distant future.

In one of its latest misdemeanour, NERC suddenly jolted consumers with the idea of negotiating with the distribution companies before any increases in tariff can be approved. Insult upon injury! This is a total begging off from one's duty. Observed on the face of it, this looks like a brilliant idea. However, this is no brainer for those of us who understand how current flows. Apart from the obvious fact stated earlier that consumers know less about the concept of electricity, and care less by the way, this is the role of the regulator. The regulator should as a matter of course include in the regulatory order an incentive for distribution companies to engage the consumers and include this in the regulatory mechanism. These guys don't understand how to run an electricity supply business, and rightly so because we are not used to putting square pegs in square holes.

(pix: uncova)

When asked recently to explain why we are experiencing improvements in power supply, NERC stated that poor project management skills have contributed to their dismal performance in times past. Anyone can come up with an excuse for not doing something at anytime. The problem with that is we cannot move an inch in power system in this way. Says the NERC chairman, "we now realise we need to pay closer details to the details of the electricity market, the issue of gas, metering, legacy debts etc". A lot of putting the cart before the horse. What is the guarantee that this will not be the lame excuse they will offer us after another ten years? How on earth was it possible to build gas-fired power stations without provisions made for gas pipelines to carry gas to such thermal power stations?

It is no wonder then that the many cases of wanton killings and electrocution of Nigerians reported daily to NERC have not been investigated and dealt with according to the provisions within the electricity act. I believe NERC will continue allow Nigerians to be killed because it lacks understanding of how to run the show. Take for example the fight NERC put forth against the establishment of the Nigerian Electricity Management Services Authority (NEMSA) Act. This shows clearly that the regulator does not understand its role. More than that, it betrays the general lack of understanding of power systems in Nigeria today. Nigeria needs a holistic appraisal of the power system and how it should function.

The opportunity is there now to develop the power system in a way that meets the objectives of today and the aspirations of tomorrow in the areas of design, infrastructure development, installation, policies,  and regulation. Since we have come this late, it is best to get it right once and for all time. There is need for seasoned Electrical Power Engineers of Nigerian origin with a minimum of five to ten years of cognate experience in the business of electricity supply within and outside Nigeria to lead this course. The government may have to provide electricity as a social service for some time at least to palliate consumers who have remained in darkness for so long.

*Idowu Oyebanjo, a Power System Professional, contributed this piece to SCRUPLES from the UK