How poor revenue impedes Discos’ performance 2

Continued from yesterday

Non-Technical losses in the power sector are almost non-existent or negligibly  small in developed countries, as most of the population can afford or willing to pay tariffs reflecting costs of supply (even if they are higher than those reflecting optimised performance of the service providers). In contrast, the situation tends to be significantly different in some developing countries. Many utilities in developing countries succeeded in reducing non-technical losses in a sustainable manner but other still continue to show high losses. The  existence of high non-technical losses jeopardise the financial sustainability of the power sector and harms well-behaving  electricity consumers, tax payers, socially disadvantaged segments and the country as a whole. Elimination of those losses should be a matter of high national priority for every country irrespective of ownership of the utilities.

In sub-Saharan Africa, the World Bank report of 2008 presents the utilities in the region as huge in efficiencies. Only 50% of the electricity generated is paid for, due to a combination of low percentage of amounts of electricity injected in distribution networks being billed and low rates of collection of the billed amounts. According to the report, inefficiency is highest in Nigeria where the utility is only capturing 25% of the revenues owed.

In 2000, the Indian Electricity Act 1910 was amended to make electricity theft a serious offence with stringent penalties. A separate law, unprecedented in India provided for mandatory imprisonment and penalties for  offenders, allowed constitution of special courts and tribunals for speedy trial and recognised collusion by utility staff as a criminal offence.

The successful implementation of the reform produced impressive results, transmission and distribution losses were reduced from about 38% in 1999 – 26% in 2003. In large part through theft control, with the utilities regularising over 2.25 million unauthorised connections. More importantly, the reduction in losses continued in the following year, improving performance of the utilities to the benefit of the public and the country at large.

Distribution Companies in Nigeria since takeover have been struggling with these problems as private operators, without government support despite the fact of its shareholding in the utilities. Even the regulator has not favourably supported the Discos in its regulations. Frequent statements of the past leadership of the commission urging consumers  not to pay for fixed charge if power outages is recorded for more than 15 days in a month, removal of collection losses from tariff though subsequently restored did not show consistency on the part of the regulator, the recent uproar over the new tariff is another issue of concern for the market, and government’s continued silence on the matter does not give confidence to the investors on the sustainability of the new tariff.

Government should be actively involved in  supporting the utilities in improving collections. Here government can introduce such measures practised in India to address revenue collections problem faced by the Discos , particularly to recover the huge accumulated bills  owed by the MDAs which is over N60 billion.  Some of these MDAs and security formations that cannot easily be discounted from services are owing huge bills. The recognition of these debts  and electricity theft by government and enacting a Law to try offenders through a tribunal will ensure speedy trial of defaulters including utility staff who collude with the public to perfect this criminal act. This will help the Discos in reducing collection losses.

The Discos have some many cases of meter bypass, vandalisation of electric cables in regular courts which usually takes time to prosecute, a  special tribunal will speedly prosecute and punish offenders to deter others from perpetrating the act. This will result in increased revenue for the Discos which will invest in metering to stop estimated billing and equipment to improve power supply even at reduced rate.

For Nigeria to achieve the benefits of privatisation of the power sector, both government and the private operators have to collaborate as partners. Government will provide enabling environment by coming up with policies that will support the private sector which has already invested in the sector.

The Government’s support in the revenue collections will reduce that effect of increased tariff on the public in addition to increase revenue that will be used to improve service provision by the private operators.

As the huge debt owed the Discos by MDAs is being paid by the public who are accurately paying their monthly bills, the same for those stealing power their bills are being paid by the public too.

•Concluded
• Tsavsar, a certified PPP specialist and consultant on Public-Private Partnerships, writes from Abuja