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Darkness returns as Discos’ honeymoon ends

By News Express on 05/11/2015

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The relative stability in power supply that greeted the emergence of the Buhari administration can now be seen as an illusory appetizer.

The supply was so deceptively regular that everyone thought the long-awaited end to Nigeria’s eternal darkness had finally arrived. The honeymoon with the power distribution companies (Discos) has ended.

Darkness has since returned to Africa’s largest economy. In some communities power supply is worst than what happened in the dark days of the Power Holding Company of Nigeria (PHCN).

No one is offering any explanations for the return of darkness. Pipeline vandalisation that used to truncate the supply of gas to the power stations has reduced drastically. The droughts that used to be blamed for the low output from the hydro power plants have given way to torrential downpours that have flooded some cities in northern Nigeria.

From all indications, the darkness might have been conjured to compel consumers to believe that the power stability of the last three months could only be sustained by high tariff.

The Discos are financially bankrupt. The cash flow problem of the Yola Distribution Company was so critical that its management had to be replaced. Others are just a bit better than Yola Disco.

Many of the Discos were floated by those who knew next to nothing about the power industry.  They rushed into the business before they realised its capital-intensive nature.

Nigerian governments have notoriety for selling public assets at give-away prices in the name of privatisation. The power privatisation programme followed the same pattern.

The generating plants and distribution facilities were sold at give-away prices. However, the cheap assets had to be rehabilitated with huge cash investments for the business to churn out money.

The cash to invest and widen customer base that would enable the Discos leverage on the economy of scale is just not there. The Discos are now battling their cash flow problems by squeezing consumers.

The Discos are merciless operators. Consumers fund the installation and repair of transformers.

They fund the repair of distribution lines when they snap. At the end of the day, the Discos determine the power tariff.

The Discos have conspired with the Nigerian Electricity Regulatory Commission (NERC) to raise power tariff by 40 per cent. A 40 per cent tariff hike could take the cost of a kilowatt hour of electricity perilously close to N18. Under that circumstance, a consumer in the low income bracket using 100 kilowatts hours of electricity in a month might have to cough out N2,500 for light bills alone when the extortionists’ fix charge of N750 is factored into.

In a country where some of the state governments still maintain casual workers who collect an indecent monthly pay of N10,000, the tariff hike is not only inhuman but apathetically outrageous.

The rate of tariff hike is determined by the financial health of the Discos. Consumers living in areas serviced by bankrupt Discos like the Yola Distribution Company have committed an unpardonable geographical crime.

Their crime is that they live in the wrong place. The Yola Distribution Company submitted the highest request for tariff hike. It demanded a tariff hike of 83 per cent. Yola’s obnoxious demand was followed by the Jos Distribution Company which demanded a tariff hike of 63 per cent.

The lowest request for tariff hike was submitted by the Eko Distribution Company which covers the posh area of Lagos. The company submitted a modest five per cent tariff hike request.

That probably is a reflection of its financial health. Ikeja Disco demanded a 39 per tariff hike.  After a kangaroo consultation with consumers, NERC is willing to grant a 40 per cent tariff hike with effect from November 15.

The tariff hike is principally blamed on the tumbling value of the naira. The naira has depreciated from N160 to the dollar in July 2014 to the current artificially fixed official rate of N197. The parallel market presents a clearer picture of the purchasing power of the naira. As at the close of business last week, the naira was trading in the parallel market at N227 to the dollar.

The Discos contend that they import most of their distribution equipment; so the fortune of their business is inextricably tied to the performance of the naira in the forex market.

The simple logic from that premise is that the current tariff hike might be a tip of the iceberg, given the precarious nose-dive of Nigeria’s foreign reserves in the face of dwindling oil prices.

The irony of the tariff hike is that the Nigerian electricity consumer is defenceless.

The ease with which the Discos ram a 40 per cent tariff hike down the throat of electricity consumers suggests that the regulator has approved tariff hike as the only means of easing the financial asphyxiation choking the Discos.

The labour unions are the only line of defence left for the consumers. Right now labour’s approach is simply lethargic. The Trade Union Congress (TUC) has resorted to an odd combination of livid utterances with tepid action. Someone has to tell the Discos that they would end up killing their own business if they choke up consumers with atrociously high tariffs.

•Sourced from Blueprint. Photo shows NERC Chairman Sam Amadi.

Source News Express

Posted 05/11/2015 5:06:15 PM

 

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