As letters in the public domain have recently taken a dramatic dimension in Nigeria, it may not be out of place to spice up this trend by adding mine – For the consumption of the typical Nigerian. The Nigerian electricity consumers are the intended recipients of my open letter, as epitomized by Citizen Buba, who is presently suspicious (along with millions of his type) of unfavourable pricing of electric power in Nigeria’s post-privatisation era.
This piece is aimed at dousing likely unfavourable reaction around, and to remove the huge scales from Citizen Buba’s eyes.
I am compelled to apply the descriptive title, “Citizen”, to your name due to the realisation that your expectations of what happens to pricing or rates of electricity supply is a pure reflection of those being harboured by millions of other electricity consumers in Nigeria. In other words, you symbolize the typical Nigerian citizen, with raised eyebrows depicting clear anticipation of what is to happen about the rates to be paid for electricity, now that privately run ventures have taken over the assets for generation and distribution of electric power, due to the recently concluded privatisation of the power sector.
It is not out of place to expect public retort to any official increase in rates of electricity to consumers. This is why this letter is directed at you, as more information on goings-on will surely make for public understanding, and subsequently douse any unfavourable public reaction. Being a Nigerian consumer myself, I am quite mindful of likely questions taking shape in your mind as you go through this correspondence.
One does not have to be clairvoyant to make out that you have these questions in mind: (a) Will the recently concluded privatisation result in rate increase? (b) If yes, what is the rationale for such? (c) What can be done about mitigating the impact on ratepayers, if rate increases occur? Before addressing these questions, I like to point out what the Nigerian customer is presently complaining about (hence any indication of price increase causing revulsion), through throwing lots of light on what obtains presently with respect to what this new order holds for us, consumers.
Buba, I hope you realise that it is a bit difficult asking people to pay for a product that is under-supplied, as electric power is right now? It is no longer news that most Nigerian households and business establishments are starved of electricity. The typical Nigerian customer in the electric power market, like those in other climes, has two basic concerns which are quite fundamental, and are given in order of priority – Security of supply, and price. We are faced with the latter here, as an earlier title in this series has addressed the issue of supply while expatiating on distribution network power quality.
Before delving into what holds presently as part of the new order, please do not hold it against me if I nudge you to remember that, “to every question, there is a surface answer and a deeper one”. The deeper answer to your question on pricing is what really constitutes those rates or charges that feature in your monthly electricity billing. Buba, don’t forget this – Your monthly bill (which is a bill for the consumption of electric energy or electricity) is comprised of two sections:
(a) Charges (often tagged energy charge) based on the electrical energy (in kilowatt-hour or kWh) consumed by the household or business during the month. It includes charge associated with the production of electricity (generating the electricity); the charge for operating and maintaining the electric transmission system (transmitting it through the grid); charge for moving electricity over the distribution lines to your home or business (distributing it in your area); and sales administration process (costs involved in the administration of selling it to you).
(b) A small electricity levy (often referred to as fixed monthly charge, service charge or service fee). This partially caters for billing, meter reading, service call response, service line maintenance and new equipment installation.
Citizen Buba, note that in a situation where you decide not to even consume one kWh in your home or business premises during the month, (a) above reads zero, while (b), the service charge for that month, as ascribed to your category of customers, remains billed against your account. Nigerians must always bear in mind that the concept of Service Charge in the billing process is not applicable only here (not a ‘Nigerian thing’), but obtains in other parts of the world. Please free to verify this. Going by our local parlance, service charge is a “sure banker”.
On whether the privatisation of the power sector caused any rate increase or otherwise, the answer is ‘Yes’. It did, but marginally. The privatisation called for the introduction of a pricing regime tagged Multi Year Tariff Order (MYTO), put in place by the Nigerian Electricity Regulatory Commission or NERC. It is intended to prompt determination of cost of electricity sold by distribution (and retail) companies from June 1, 2012 to May 31, 2017. In a nutshell, without MYTO investors would have given a wide berth to investment in this sector, and the privatisation exercise would have been a flop, as low pricing would not have yielded cost recovery for investors. For more, Buba, I urge you to visit NERC’s web site. (To be continued)