DisCos, NERC as merchants of bad news

Operators and regulator of Nigeria’s power industry are merchants of bad news.  They have a penchant for intimidating consumers with bad news.  Last week, they reeled out a catalogue of their unwanted wares as some parts of the country wallowed in darkness. Power generation tumbled below 2, 700 megawatts (mw).
Newspapers carried banner headlines screaming: “Total darkness imminent”.  Operators had warned that the  industry would soon collapse under the weight of debt contagion. As consumers  tried to figure out the reasons behind the imminent total darkness, Mrs. Funke Osibodu, a former managing director of Union Bank who now heads the Benin Electricity Distribution Company Plc (BEDC), dropped another bomb shell. She warned that it would take five years for Nigeria to attain regular power supply.

Many regarded Osibodu’s prediction as an intelligent guess work with the trappings of the fake prophesies of Temitope Balogun Joshua, the shrewd businessman who is founder of the Synagogue Church of All Nations.  Few took Osibodu’s predictions seriously. Pessimists believe that Nigeria has never had regular power supply, and may never have it with the caliber of firms in the industry now. There are fears that the privatization of the power sector was a recipe for eternal darkness.  On November, 2013, the federal government inadvertently handed the nation’s power sector to a bunch of inexperienced, impoverished firms to run.
If Osibodu’s prediction failed to conjure the expected earthquake among consumers, the bad news from Tony Aka, the acting chairman of Nigeria Electricity Regulatory Commission (NERC), sent shock waves down the spines of millions of consumers.
The Association of Nigerian Electricity Distributors (ANED), the umbrella body of the power distribution firms (DisCos), had for weeks treated consumers to claims and counter-claims over impending electricity tariff hike, the fourth in less than three years.

Azu Obiaya, ANED’s chief executive officer was the first to fly the tariff hike kite.  He told newsmen on the sidelines of an event that ANED has approached NERC with recommendations for tariff hike that would see the lowest residential tariff surging from an average of N22.8 to N75 per kilowatt hour.
A few days later, Sunday Odutan, ANED’s spokesman and executive director countered the claims of his boss with assertions that no one has approached NERC with recommendations for tariff hike. Consumers were at a loss as to who to believe.  Many were inclined to believe Obiaya rather than Odutan, the executive director.  A few days later, the Thomases who doubted Obiaya’s claims were shocked when the truth emerged.
Aka confirmed that tariff hike was on the cards.  He added a rather unsolicited assurance that the impending hike would not price electricity out of the reach of the average consumer.
Aka’s assurance was unnecessary. The DisCos would have learnt from the banks that loans recovery is easier and higher when lending rates are low.  The same thing applies to electricity tariff in a country where 60 per cent of consumers are not metered and are subject to fraudulent estimated bills from the DisCos.
That principle suggests that NERC may be reluctant to approve any tariff hike above N35 for the lowest rank of residential consumers.  Even that is bad news to consumers. At N35 per kilowatt hour, a low income home that consumes 200 kilowatt hours of electricity in a month would have to cough out N7, 000 from a minimum wage of N18, 000.

That probably explains Odutan’s sarcastic claim last week that if consumers want regular power supply, each household should be ready to pay an average monthly bill of N10, 000.
We are heading in that direction. Unfortunately, the escalating bills would not guarantee regular power supply.  The power industry is bogged down in an intricate web of debt contagion and no one knows how to free it from the merciless grip of financial asphyxiation.
The DisCos have been placing advertorials calling on federal ministries, departments and agencies (MDAs) to pay their debts. ANED, which has now constituted itself into an illegal debt collector for the DisCos, claims that the MDAs owe the DisCos an estimated N100 billion.
Some months ago the federal government challenged the DisCos to a test of integrity and transparency over the controversial debt.  Babatunde Fashola, the minister of power, works and housing gave the DisCos a November 4 deadline to furnish government with details of how much the MDAs owe each DisCo.
ANED could not meet the deadline and may never present a breakdown of the debt.    Besides, Fashola wants to deal with individual DisCos rather than ANED which is a pressure group.
Feelers from the industry suggest that the N100 billion debt flaunted by the DisCos is at best an exaggerated estimate which no one can verify. Even if the N100 billion is verified and paid, the industry’s debt profile hovers around N500 billion.  With the DisCos facing a monthly budget deficit of 55 per cent, the liquidity squeeze in the industry is calamitous.  And with it, Osibodu’s prediction that it would take five years to attain regular power supply may actually not fall within the realm of informed guess.  Darkness would remain for long.

Even that is bad news to consumers. At N35 per kilowatt hour, a low income home that consumes 200 kilowatt hours of electricity in a month would have to cough out N7, 000 from a minimum wage of N18, 000