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‘We can’t price electricity less than cost of production and expect miracle’

Adesina

Adesina

Chairman of Egbin Power PLC, Kola Adesina, spoke on the challenges in the power sector and the way forward.

Why are Nigerians still witnessing frequent power outage after the privatization of the sector?

Access to electricity is predicated on gas availability, generation capacity and the capacity to transmit the electricity and ultimately to deploy meters and transformers for seamless distribution and transparent determination of what the customer pays.

Anybody that wants to get gas knows the processes. It is universal. Anybody that wants to buy turbine knows how much it costs. Every stakeholder also knows what it would cost to get transmission lines. The same applies for sub-stations, transformers and meters. They are universal global products with known price tags. Considering the universality of pricing, the distinguishing factors of what it costs to generate, transmit and distribute power would be resources that are within your control.

All that you need to factor in is the true cost of production of electricity. Once you have been able to determine the true cost of production of electricity, it is easier for people to understand the pricing of such a product. You can’t price electricity less than the cost of production and expect a miracle. It is not going to happen.

The current tariff that was recently approved by the Nigerian Electricity Regulatory Commission (NERC) is relatively okay to motivate investment. What you are talking about here is investment, the capacity to invest. You can only invest if the price is right. The ten-year tariff model that the NERC has formulated is relatively and comparatively okay for investors to invest. That is the essence of what NERC has done to get the price right so that they can unlock investment that is required to make the type of change that we desire as a nation.

Once we get the price right, the investors and all the companies will put in motion plans to rehabilitate, repair and invest in procuring new materials that are needed to make power available to the people.

Having said that, one must note that tariffs have historically been low in Nigeria because government’s involvement provided some form of subsidy. However, if we must compare Nigeria with its peers and neighbouring countries, you will discover that Nigeria actually pays less for electricity than Zambia, Ghana, Zimbabwe and South Africa. In fact, by the time you do a comparative analysis of what they are paying to that of Nigeria, the difference is clear. Power is a universal product. It is not a local product.

Is the slow installation of the pre-paid meters not a deliberate attempt to continue to exploit Nigerians?

Pre-paid meters and the entire infrastructure required to enhance power supply in Nigeria are not items one buys off the shelf. They have to be manufactured. No investors will just go and manufacture meters running into millions and put into shelves. There must be demand for it. The demand for meter is predicated on the fact that the price is right and people are ready and willing to pay. Once that is sorted out then every other thing will follow.

Meters are going to come step by step. Remember that we only inherited these assets recently after they have been managed by government for over 50 years.

The private sector needs the right price to secure investment that will transform the sector. This will not happen overnight. There is this misconception that makes people view meters as mobile phones that one can buy off the rack. There are huge financial and technical considerations that have to be considered to ensure reliability, security and sustainability. Already some companies are deploying these smart meters and one can only call on Nigerians to patiently support the ongoing reform in the power sector through the payment of the new tariff and ensuring that people who steal energy and vandalise electricity equipment and installations are exposed.

Eventually, we will all be paying only for what we use and we will also have more power available as all the investments across the power sector value chain continue to crystallize. Yes, one can understand the frustration of Nigerians, but we cannot lose hope now. I believe we will get it right this time.

Vandalism has been an excuse for recent decline in power supply, why has it become difficult for successive governments to tackle vandalism?
Our value system is weak. When people are greedy, it is because of the lack of value. The value system in Nigeria used to encourage very strong communal living. We lived for others. Today this appears to be missing as we find people stealing energy through illegal connections without being reprimanded by their neighbours. Their actions like the chicken always comes home to roost as more often than not these activities end up destroying the power infrastructure that should serve the entire community. We should have more involvement of the people in ensuring that the activities of a handful of people do not jeopardise our quest for getting things right in the power sector.

In addition, we have embraced a culture of waste in the power sector that makes people leave their light bulbs and electricity appliances on when not required. People just don’t care because we have become used to a system where tariffs were hitherto not based on consumption. You can never imagine how much of pressure this puts on the entire power infrastructure. So now when people get their bills they complain, in spite of the fact that within the period under review, they left appliances like air conditioners running because they want to come back to a very cool house.

We need to have a cultural re-orientation that would help us embrace energy conservation. In other climes, the practice is to turn off lights and other appliances when not in use. This will help free up power for more people and also reduce what we pay for electricity.

Nigeria also needs strong institutions. We have been hearing about stolen and misappropriated public funds at different levels of governance.



5 Comments
  • bobo

    And what’s the service charge for?

    • Babagordy

      For pitched darkness

  • John

    Sir with due respect, you are a criminal, and a smooth one at that? You cunningly and technically dodged some of the questions thrown at you, but just have it in mind we are no fools, and our silence to this broad day robbery isn’t a sign of weakness, but a calculated attempt to strike when the time comes. Subjecting people to paying for darkness, and services never rendered is a way of determining the right pricing, correct? Tell that to the marines, and it’s only in Nigeria would such a joke happen, nowhere else in the world. Nigerians have always recharged their phones and use accordingly, without minding what the tariffs are like, provided the services were rendered, and no one complains. We only complain when we notice fraud, for example deducting from your account without rendering the services, and it mustn’t be that way. don’t jubilate yet, thinking we have been decieved, no, you haven’t, because we know all your gimmicks.

  • Gbogboade

    Again, as in virtually everything Jonathan Goodluck did, the massive sale of our public power asset to so called private investors must be tainted with abuse and fraud. And at the appropriate time, we may have to review the sale and invite genuine international companies who have capacity to add value and deliver our long range power needs as a country.
    *The questions to this chairman: When you bought into the bit of Nepa, what were your short to long term objectives to give us improved power supply? Has that plan, in hard numbers been delivered? If not, why not?
    *We/ You knew what you bought into because of adequate due diligence done – in all ramifications. This should deal with many of your current complaints on disruption to input supply. As a private company in search of value creation, delivery and profit, what alternative plans did you have to run your companies successfully – in the face of challenges we knew we had? Or were you going to rely on our government which does not share in your profit to also provide seamless inputs for you to run your companies? How much operational experience of running energy companies successfully across the world did your company bring into Nigeria as a basis for success?
    *Your answer to the questions on meters – for your customers – beg the issue. Must anybody tell/beg you to provide this operating necessity ? You are selling energy less than you are producing it! Why? How?
    *Let’s hope that Jonathan Goodluck took Nigerian long term interests serious in the transfer of our Nepa assets.

  • amador kester

    You have made some spurious and elaborate statements in defence of stakeholders presently in the power sector. Yet listen . The soul of modern free market business is healthy competition. It brings about efficiency in every ramification of business. But the power sector in nigeria is like a cartel without antitrust laws as usa put in place. Thus an investor with better technologies will generate power cheaper, and the price will fall for the consumer downstream! Get this clear… We need to license more gencos and discos,,we need to enact antitrust laws to spur competition!

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