Dr. Sam Amadi, the chairman of the Nigerian Electricity Regulatory Commission (NERC), in this interview with JULIET ALOHAN, speaks on the age-long corruption that has bedeviled the electricity industry and the findings of the probe committee set up by the commission to conduct public hearing into the activities of electricity distribution companies (Discos). He also spoke on the upcoming Multi Year Tariff Order (MYTO 2) taking place June, and expected to usher in a hike in electricity tariff.
What is your reaction to the huge metering fraud which has been uncovered by the probe committee?
The reason why we set up the public hearing was because we knew that there was a lot of fraud in the sector. It is a sector that has not been regulated in the past, a sector which people have constituted into private business ventures.
The reason for privatising the Discos is the lack of efficiency in revenue collection. It’s not just technical; there are cases of human inefficiency and corruption, and accounting has resulted in loss of revenue, while there is so much exploitation of customers.
So, the idea of the committee was to establish a baseline and put a face to this issue about exploitative billing and extortion. We organised the committee in order to have first-hand information and to give the consumers the opportunity to come and say it as it is, because we know that even if we ask the Discos to give us the complaints so we know how we can manage them, they are not going to give us.
I wasn’t surprised at the revelations; I expected it. These revelations inform how we will regulate the sector, even if we do not redress this now, the minimum expectation is that, going forward, we will sanitise the sector and ensure it does not continue like this.
There are fears that the committee’s report may suffer same fate as other reports whose recommendations were never implemented.
I don’t get angry at Nigerians if they express deep cynicism about the work of government because we have seen several committees’ report suffer bad fate. I spoke at the Abuja public hearing, saying that the committee members had sacrificed a lot, and NERC has sacrificed a lot.
We have very low federal budget and out of this very low budget we are providing financial support for the committee and Nigerians are also sacrificing a lot by coming out everyday to complain.
Even the former Chief Justice of Nigeria, someone as high as that, sent a representative and complained bitterly against Power Holding Company of Nigeria (PHCN). I don’t think we will just keep that report down. I have said that everything they recommend as long as it is lawful and within the acceptable best practice of a regulator will be implemented.
How soon should we expect the implementation of the report?
When the committee wraps up its work. They have finished public hearing and by next week they will start the deliberation and report writing. So, hopefully, by the end of May the report will be ready. Don’t forget that this is part of preparing for the MYTO 2, so the report should come before it, and we have already put a condition for the new tariff that is going to come out.
There is the issue of metering of customers and sanitisation of billing which we will use the recommendation of the committee to further make a case for the tariff order. The minimum we can give to customers is to end exploitation. Even if we can’t guarantee them longer hours of electricity supply, we should be able to guarantee that they pay for what they consume and that they are not exploited by very corrupt PHCN officials
During the public hearing customers with evidence of payment for meters were asked to come for their meters after years of payment. Does this indicate that the meters have been available and were being hoarded?
When I heard that people came to the public hearing and the Chief Executive Officers (CEOs) guaranteed them that in a week they will get their meters, then you do not need further arguments to establish that the CEOs are the ones who do not want efficiency and accountability in the system. For the past many years, metering has been an issue, and for a CEO to pledge meter within a week, that shows that meters are not as unavailable as the CEOs make it look.
We have lived with a very corrupt structure of the Nigerian electricity market; and we have not seriously decided to change the corrupt processes of the market. Since 2001 when this reform became very serious, if government has expressed sincere commitment to metering, we would have fully metered this industry.
With proper metering, the industry would have been attractive today. We are hoping that there would be serious bids for all the successor companies because they are not in good shape. In other parts of the world, you sell public enterprises with some degree of efficiency and value; we are selling when the sector is in very bad shape and that has affected the attraction of our investors. What NERC may achieve from this is that if we use this MYTO to force serious action on metering, customers will be delighted, because if there are no strong commitments to metering, the natural thing by an investor is to minimise cost.
They will not come and dump money on metering. That a CEO will promise everybody meters within one week shows two things; either they don’t like metering their customers or there is huge inefficiency which nobody cares about. So this kind of human inefficiency that can be overcome.
This is not rocket science; we don’t have to wait until private sector takes over. Today we can solve what we can solve, and when the private sector comes in, hopefully in October, they will bring in more efficiency. It is imperative that with tariff hike, no matter how small, you have to show increase in service. It is elementary rule everywhere in the world that tariff increase goes with increase in service and efficiency.
We have told the CEOs that if they want to take this tariff they must make the necessary investments to deserve it, otherwise we wait for the foreign investors to come, make the investment and take the tariff. We cannot allow a windfall profit in a society that is totally corrupt.
Are customers legally supposed to pay for meters?
Essentially, meters are not supposed to be paid for by customers; they are supposed to be part of what we pay through tariff. Everyone pays tariff and part of that tariff is to meter everybody. That’s why when you leave your house, you leave your meter. But I have seen customers say that they will take their meters because they bought it - that’s an anomaly. Ideally, the meter is the property of the service provider; you only pay for the meter through your tariff.
There is a historic reason for people paying for meters in this country. Don’t forget that this sector has not been regulated before 2006. The practice has been to collect money from people. What is allowed by the regulation is the connection fee which is supposed to be approved by the regulator.
But going forward, in the new MYTO we have calculated metering as part of the tariff. Even though I understand, from my staff who was involved in the 2008 MYTO, that metering was part of the tariff calculation, but they were collecting the tariff and also collecting money from applicants who want meters, even though some of them were not given meters.
But going forward, customers are no longer going to be paying for meters, because it will be part of the tariff, but they will continue to pay for connection fee which are not part of the tariff.
What kind of sanctions await erring Discos?
In dealing with general inefficiency, there are two ways; one is to penalise an inefficient operator. If you are inefficient, you cannot get the right tariff. The other way is through corporate governance, if you are inefficient your board can sack you.
But one of the problems we have is that the distribution companies should have been having their boards that manage them as single entity and not being managed by the ministry of power.
If you have a board, the regulator can ask your board to sack you for inefficiency or the regulator penalises your board for inefficiency, but if it is crime or exploitation, you will be handed over to the EFCC (Economic and Financial Crimes Commission) to be prosecuted, and that’s what we have resolved to do.
Henceforth, we will ask customers to give us receipt of their payment, and where they are charged more than what is in the tariff, it’s a crime. The ideal is that when some people see themselves in jail, the corruption or stealing will abate. We are putting incentive into our methology to encourage efficiency, and if you are inefficient you will lose out of those incentives.
How prepared is NERC for the commencement of MYTO 2.
We have been strategising; I don’t know whether our strategy will work. We have taken some time to study the landscape. We have continued to revise due to feed back and responses. We expect that there is going to be a long drawn battle, so we have taken time to put our house in order and drawn up a comprehensive document which I am sending to the president and a copy the minister.
The idea is not just to communicate the tariff, but to give people some chewable - it’s not just about PR ( public relations). People are smart; if you think you can just do some fancy PR then you are in trouble. But first, let there be substance and commitment from the regulator. That’s why the public hearing on metering has been on for the past three months.
It’s aimed at restoring trust. We are employing tools that are grounded to ensure improved service. We will be forthright to ensure that there are some quick wins for the customers before June.
In the past weeks, power supply has gone down drastically; don’t you envisage strong resistance if you increase tariff now?
I will be very careful to draw a line between power supply and quality. Supply will not drastically increase between now and December. But it will increase when some capacity is recovered from the PHCN plants with the gas issue being fixed and NIPP (National Integrated Power Projects) coming up.
But our hope is not built on the fact that power will go up in the next three months. We know that Nigerians are reasonable people; if they understand the complexity they will go ahead with the reform. When people complain to me, they don’t say I have only six hours of power supply because they know that the crisis is deep. But what they complain is ‘I don’t have power and I just got a bill of N14, 000.
Or I have paid for meter and nobody has given me meter’; these are the things that Nigerians complain about because they know it will take some time to fix the power supply issue. But in six months to one year, we can have a sanitised electricity management system; that is what we are focusing. We can have a fully metered industry in one year.
The CEOs can go to the bank and raise money for metering. They say we need 15,000 to 20,000mw to have stable electricity, there’s no magic that can increase supply to 20,000mw between now and June, and Nigerians know that. But they can know when government is making effort, when there is sincerity and when government policies are properly aligned.
They are not asking for magic, they know that the road map is there and that government is committed to it, and they also know that the distribution companies are behaving criminally at times.