Adetayo Adegbemle is the executive director and convener of PowerUp Nigeria, an electricity consumer rights and power sector policy advocacy organisation. In this interview with PREMIUM TIMES’ Business, Energy and Economy Editor, Oladeinde Olawoyin, he spoke on the recent decision by the Enugu State Electricity Regulatory Commission (EERC) to reduce electricity tariffs, the decentralisation of the electricity industry, the metering gap in the sector, and how to address the power crisis.
PT: First off, what’s your take on the recent resolve of the Enugu Electricity Regulatory Commission (EERC) to reduce electricity tariffs for Band A customers in Enugu state?
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Mr Adegbemle: I think it is beyond EERC to set the tariff without proper consultation both with the Nigerian Electricity Regulatory Commission (NERC) and the market operators. They made a lot of assumptions that are uncalled for and of course we can all see the response from the federal government. Don’t assume that the federal government will pay a subsidy that they are already running away from.
That was the whole idea behind removing subsidy on ‘Band A’ and of course the plan was that, subsequently, all other bands will also be removed. So, it is not right for Enugu State to do that without proper consultation.
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PT: It appears the states are standing in solidarity with EERC, and by extension, Enugu. Given the reported stance of the power ministry that states would have to bear the cost of deficits, what does this mean in the broader sense of ongoing efforts to decentralise activities across the electricity value chain?
Mr Adegbemle: I expect the states to be in solidarity with Enugu State because it’s only natural that if Enugu State can get away with it, other states will also be able to. But, you know, this is the consequence of decentralisation, of regulation. We expect all this kind of upheaval here and there. But then, it’s clear from the beginning that even any state that wants to buy, will have to buy at wholesale price. So, unfortunately, we have a ministry of power that is not active or that is not proactive because at the very first instance, what we should be having is every state that has signed up on their regulatory autonomy, that a tariff order for such state should be given. So, any energy going to such states should be at wholesale price. We expect that by now, the federal government would have removed subsidies totally and that the consequences of such removal will include that any state buying, for example, Enugu State, would be buying at wholesale price. That is what is going to happen at the end of the day. We also have an example of this in places like South Africa where ESKOM sells to municipalities at wholesale prices and municipalities determine their prices.
So, to go back to Enugu State, I think, again, they didn’t think it through. You adopted the federal government’s banding system or the NERC banding system, but yet, you decided to remove subsidy on a band that federal government has already removed subsidy on. It doesn’t work like that. They will have to come up with their own tariff system totally and set their own tariff based on the wholesale price from the federal government. When Enugu state eventually starts to generate electricity from their own licenses, maybe they can set whatever tariff they want. But as it stands, they have to also go by the wholesale prices.
PT: Many people believe that the privatisation exercise of 2013 remains a foundational flaw that continues to plague the industry. With the benefit of hindsight and your vast experience in the sector, what exactly do you think is wrong?
Mr Adegbemle: Well, I am not one of those that subscribes to the conclusion that the 2013 privatisation was fundamentally wrong. We must take into consideration the fact that this experience is unique to Nigeria. Different markets have their unique experiences and you don’t expect to get the same results. We have different players, we have different actors, we have different markets, so you don’t expect to have the same results.
Let’s take examples of countries like India. India started their power sector reform since 1953 and they are still on it to date. So, what we are passing through is a power sector reform. We have experimented with regional franchises and we have seen that the result is not as perfect as we wanted.
Now, we’ve seen the electricity act giving powers, devolving also powers of regulatory authority to states. We’re still going to experiment with this and see where it gets us. So, it’s a reform. The only thing I do not agree with is the rate of response to the reform. The ministry has been given the responsibility of coming up with policies that have not been proactive enough. Unfortunately, apart from Professor Barth Nnaji, we’ve not had any minister of power that has significantly impacted the power sector.
It was only Fashola that did try a little, but of course, there are other considerations that affected the result that we got from him. So, I am one of those that subscribe to that assumption or conclusion that the power sector reform has not been a success. It’s a natural order of things.
We’ll continue to have ups and downs. It’s our response to it that matters. That’s what I expected from the regulators… from the government to be able to also work on. Don’t forget that we’ve also had changes in governments, changes in policies, reversals of some decisions here and there that impacted significantly on the results that we’re also getting.
PT: With the liquidity challenge in the sector, cost-reflective tariff remains a knotty, sensitive issue. What are the dynamics, and how do you think the government, investors, and stakeholders can navigate it within the bigger context of Nigeria’s economic reality?
Mr Adegbemle: Liquidity challenge: interestingly, this is a particular topic that I’ve made a lot of contributions over the years on in the power sector. I think one of the biggest problems, challenges, we have in the power sector has to do with the Naira and Kobo problem. It’s an economic problem. Many people have probably thought, yeah, engineering will solve the problem, but no.
If we are not able to rightly price what we are selling, we’ll continue to make losses and the problem will continue to stay with us. Now, this is where the problem lies again. One would have expected that many of the issues that we’re having, a policy approach would have been able to resolve them, but the policies are not coming fast enough or early enough to significantly, you know, resolve the issues. Cost-reflective tariff remains a topical issue. There is formula, there is standard, there is a framework to achieve this, but there are a number of other considerations that are also at play. For instance, the government is considering the welfare of the people. I mean, we have welfarism as an active participant in decision making.
PT: The metering rate in areas covered by some Discos is as low as below 30 per cent with attendant impact on efficient collection rate. Some have suggested more radical approaches to enforcing the metering process. What do you think are the issues, and what’s the way out?
Mr Adegbemle: On metering, I granted an interview recently where I publicly spoke about meter franchising. One of the reasons why we remain in this situation is because government intervention has never, never and is never going to be the solution to the problem. I mean we’ve been talking about the privatised power sector. So on what ground is the government intervening? I’ve said it. We’ve had a Meter Asset Provider (MAP), we’ve had a National Mass Metering Programme (NMMP), we’ve had Credited Advance Payment for Metering Implementation (CAPMI).
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We also have a recent one called the Presidential Metering Initiative (PMI), which you know till today, like I keep saying, there is no document that you can hold governments against. To even know whether this is a successful project or not. There is no policy document that speaks to what PMI is, what are their targets. All the targets the public come out to see have failed. So I will continue to insist that government intervention is not the way to go with metering.
What we should do right now is what I call meter-franchising. I mean, if you have a Feeder A and it is on Band A for instance, give it to a “Tayo and Tayo and Co”. Right? But guarantee my payback or my cashback from the tariff.
I mean if you say you’ve metered ten thousand customers but for every kilowatt hour that they’re recharging, you will be getting N5, N30, you’ll be getting N50. I can easily draft up a chart and see how my funds will come back in. But unfortunately, we don’t have serious businessmen and the people that are supposed to do the policy are people that are already gaining from the issues and challenges we have in the system. That’s why it’s not easy for them to take it up and just run with it. Well yes, we need a radical approach. The metering gap keeps increasing every year and it will continue to increase because unfortunately we don’t even know the total number of customers we have connected to our national grid. So, we need to have a radical approach. We need to change our method. Stop the government intervention. Throwing money at it will never ever solve the problem. Make it investor-friendly.
Let’s go with the policy that is investor-friendly. Yes, I mean if the government is ready, we can let them work on it. If they are truly ready to make that thing work. It’s going to be tied to the tariff and everybody takes their money from source. It’s not a big deal. Then you now see a radical change. People that have funds can now bring in and guarantee that their funds will come back.
