Raising electricity tariff was the last major decision of the Nigerian Electricity Regulatory Commission,NERC, in 2015. The immediate past Chairman of the Commission, Sam Amadi, in the concluding part of his interview with PREMIUM TIMES’ Business/Economy Editor, BASSEY UDO, says the hike was in the interest of energy consumers.
PT: On the day your tenure ended, you gave Nigerians an unexpected parting gift, a new tariff regime that abolished fixed charge on one hand, yet raised electricity charge, on the other. Nigerians describe this as a Greek gift. Why did NERC leave the decision till you were at the door and on the eve of Christmas?
AMADI: Well, the timing, to me, was good. We are all aware of the process. Nigerians have been asking for a new tariff for months. The tariffs have been out about two months ago. But, we needed to appraise government on the policy implications of the tariff on fiscal and monetary policies, economy, investment, consumption, household income and livelihood as well as agencies and institutions with responsibility for the power sector and the market.
Those consultations kept going back and forth, before we went back to the DISCOs. The participatory processes in decision making are what make NERC an effective regulator. We are benchmarked by transparency, credibility and participation.
The new tariff could have been announced a week earlier, but another meeting was called to sort out an issue with the DISCOs. Everything was ready a day before the end of our tenure. As the chairman of NERC, I still had the mandate and powers till the last day to sign off the tariff.
It would have been irresponsible to have left that to the new commissioners, because nobody knows how long it would take them to come.
For me, the announcement of the new tariff was timely. Tariff is an important tool the market uses in investment decisions. We also needed to bring a new tariff for the good of the consumer who needs quick improvement in the level of electricity supply, which depends on a credible tariff regime.
PT: How was tariff hike for the good of the consumer?
AMADI: Yes, we gave everything to the consumer. Unfortunately, the price increase was not like increment in gas, water or electricity price. Increase in tariff flows from benchmark of investments and their costs. That means there will be more investments coming to the sector in terms of metering, generation and transmission.
If the tariff is to help TCN deliver better services, by building capacity to wheel the power and ensure adequacy and reliability, it is the consumer that would benefit.
Fixed charge has now been removed. So, the consumer will win in a double way. If the GENCOs and DISCOs do not provide the service, consumers will not pay, unlike the past when they would have to pay fixed charge, whether electricity was generated and supplied or not. The price increase is to benchmark improvement in services to consumers.
PT: But, it appears this is putting the cart before the horse, since more investments and improvement in services is supposed to come before the hike in tariffs?
AMADI: Sure! Today that we have increased the tariff, it is not all the costs that the consumer is paying. In that tariff, there are prices for 2017 till 2024.
When we say tariff is to cover investment, it means the investor is bringing the money, maybe through bank loans, because he has seen a recovery plan that spans 10 years. But, NERC is putting the horse before the cart, because if the banks provide the money, they would want to see a plan for the recovery of their investment.
That means they would not put in their money if they do not see the prospects and plan for the recovery of their investment. And a tariff is not what the consumer is paying, but what he should pay.
PT: That explanation sounds like a confirmation of the accusation by Nigerians that NERC always tilts more to the DISCOs and GENCOs than the consumers it is supposed to protect?
AMADI: Since the tariff was announced, I have received several text messages, both from consumers and operators. Consumers are thanking NERC for removing fixed charge from the pricing template. No operator is saying the same thing for the tariff increase.
Rather, they accuse NERC of all sorts of things, including their business plan were ruined. But, it is an accusation that is not completely senseless. The responsibility of a consumer is to pay for a service. But, except the consumer has adequate service through stable supply, they cannot accept they have full value for what they are paying for.
But, the truth is that NERC is working hard to give the consumers a fair deal. That is what we are committed to do.
PT: But, the tariff hike appears to be against a directive by the National Assembly for NERC not to go ahead?
AMADI: I don’t know about any directive. If there was any, the National Assembly has a way to communicate such resolutions to NERC. I don’t want to go into any controversy. I will rather leave that to political leaders, including the Vice President. The National Assembly gave NERC the mandate to do what it did.
That mandate did not include that tariff reviews should be stopped by any other arm of government. If anybody has any problem with the tariff, the person can go to court and challenge its legality and reasonableness of the decision. Otherwise, by law NERC, and NERC alone, can carry out that function.
PT: Looking back now, is there any decision you think you would have handled differently given another chance?
AMADI: Many! But, I have taken time to reflect on what I call: “Road not taken: Pitfalls in electricity reform project.”
There are many things we should have done better, like what we are doing now – benchmarking tariffs against investment; removing fixed charge in the pricing template, which could have been done earlier; removal of collection loses by operators, which was wrongly timed. We could have done it earlier before elections, so that people would not read political meanings to the exercise that have degenerated into political blackmail.
What we did was to incentivize production. We felt that it was wrong for DISCOs to totally transfer their inefficiencies to consumers by saying their collection losses was as a result of consumers not paying their bills.
But, latest decision is a mid-way out that would discount public and government debts from private debts.
Again, we believe there should have been a lot more communication to avoid political blackmail. Maybe when we look back, we can see poor timing, poor communication and in some cases, wrong-headed strategies.
That’s perhaps why countries with long leadership do better. People know they can learn from their mistakes in office. I made my mistakes and I have learnt from them. If I have the opportunity of coming back there, with hindsight, I will do a better job from my experience.
PT: So, what kind of electricity industry are you bequeathing?
AMADI: We are leaving behind a credible, strong and effective industry. For instance, early this week, we gave out eight more licenses worth 1,000 MW. That’s a massive vote of confidence that despite the ones we have given earlier, more players are still willing to come in.
Also, a few days ago we received a report of a strong technical team of the Manufacturers’ Association of Nigeria, MAN outlining very lucid framework for micro-grid.
So, without a doubt, the industry is strong. NERC as an institution is strong, although not as we would have wished. But, credibility is very high. We are very good; better than the best. But, we are not where we want to be.
PT: How would posterity remember you and the service you rendered to Nigerians and the industry?
AMADI: It was Winston Churchill that said: “History will be kind to me, because I intend to write it.” So, I will like to be part of writing that history of Nigeria’s electricity industry regulation.
But, I will like posterity to remember me as a guy who meant very well; had the right kind of intentions, without any iota of deceit to leverage public decisions for private gains; as a person who likes to apply intelligence in solving public problems. But, I like to leave the final judgment to posterity itself.
PT: But, where are you going from here? What next?
AMADI: Well, I have no business to retire to, neither a farm to return to. I am here hoping to be re-engaged in public service. I am a private sector lawyer. At my private level, I’ll go back to do what I know how to do best – think, write, advocate, and in between that, ensure that there is commercial value.
PT: Thank you for your time. Congratulations again.
AMADI: Thank you.