Earlier this year, it was reported that the Abuja Electricity Distribution Company had conducted mass disconnection in a community called Sabon Gari near Abuja. This came a shock to some people, especially since the Nigerian Electricity Regulatory Commission (NERC) has said that mass disconnection is unacceptable.
NERC had recently warned distribution companies (DISCOs) against mass disconnection, saying that Electricity customers, who pay their bills, should not be disconnected via mass disconnection of their community, block of flats, estate, and so on.
Discos have also in time past used low collections rate in some communities as reasons (or excuses) not to provide enough supply to those places, as it makes more business sense to supply paying communities which in turn reduces commercial losses. With gas prices leapfrogging at international market rates, it thus means that the production cost increases while the tariff stays constant. This being a result of a tariff plan implemented at a time the dollar was N197 (MYTO), today the dollar stands well over N400. Gas is sold to the GENCO in dollars and thus energy costs fluctuate with the forex rates. You may like to know that it is still cheaper to flare gas in the Niger Delta than to pipe the same amount of gas to a power generating plant, we may not easily derive the opportunity cost of that or the level of degradation suffered due to gas flaring.
We can say that it is not our concern how the DisCos run their business because access to electricity is our right. Especially for those of us who diligently pay our bills. Or we can take a minute to put the structure under a microscope.
Consider a community with 70% percent of its population being minimum wage earners who simply cannot afford to pay their electricity bills (not by choice). These people are individually disconnected but because of the crucial need for electricity and their inability to pay for it, they resort to illegal connections and other forms electricity theft. That means major loss for the DisCos.
The DisCos, recording major loss of energy, unpaid for in that area are now forced to totally disconnect the area in order to avoid consumers constantly connecting and tapping into energy they won’t pay for. Where does this leave the other 30% who can afford and actually do pay their bills?
Also consider a community A, with 70% high-end customers who are willing to and able to pay to electricity. If the DisCos’ attempt to electrify Community A, they have to run power lines through Community B, C and D, with about 80% consumers who are not able or willing to pay for electricity. Seeing that there is more loss to be accrued than profit by providing electricity for Community A, the DisCos will most likely pull back on such investment.
The DisCos’ debt comes back again to hunt the electricity consumers indirectly. The DisCos cannot afford to meter their customers which results in estimated billing and in most cases over-billing. DisCos can’t afford to pay for power generated and sometimes reject power.
From the above illustration, we can point out a number of issues with the system but the most basic fault is in the economy. Why can’t the average Nigerian afford electricity? Why is the average Nigerian still living below a dollar a day? How is the average Nigerian expected to catch up to bill payments with constantly rising tariff without policy support on economic growth and best practises?
The Economy affects the power sector and the Power sector affects the economy. To enable concurrent development of both the economy and the power sector, there must be a stakeholder driven policy thrust with a clear view on improvements towards improved standards of living and funding for the power sector as it is the bedrock of industrialisation and development. Regulators must look to assess current economic realities and position power sector policies to reflect our economic state. We would suggest that while the DISCOs grapple with sourcing forex to purchase meters to improve metering, willing customers should be allowed to pay for meters to hasten the metering process. The DISCO may even refund the customer through credit vending on the value of the amount paid by the customer for the meter.
BRING BACK OUR CAPMI.