- Tariff increase without service improvement, dangerous says Amadi
- Urges for an improvement in service delivery to the consumers
In an interview with the local Television station, TVC Business News, the Former Chairman of the Nigeria Electricity Regulatory Commission (NERC), Dr Sam Amadi, has stated that a tariff increase without a corresponding increase in service delivery is a dangerous precedent.
When asked about what a cost-reflective tariff meant, Amadi said, ”…a cost-reflective tariff in my view is both an art and a science. The problem of this industry is not primarily tariff; even if you increase it by 200 per cent, the discos will not significantly improve their revenue because, the incentive to bypass to save costs will be high because the people will not get commensurate service.”
”You have to incentivise consumers to pay more, and the discos to supply more service. What we are seeing today is that so much focus is on the pricing and not on the quality improvement side. I want to see the two of them together. Allow investors to come in and allow the ones that are there to perform; we should have a tariff structure that encourages consumers to stay on the grid and not to want to steal power or move out of the grid or even sabotage the grid.” Amadi explained further.
”I think if we keep inflating prices without taking cognisance of the quality of service delivery, electricity will be very high and people may start opting out of the grid, which will lead to grid collapse, so we have to be careful. The regulator must set up a tariff in a manner that allows power and customer value, and at the same time allows investors to recover the cost in an increasing manner,” he said.
On his projections for the Nigerian electricity sector, Amadi said, ”I think it will get better, but we have to do a couple of things. I think the leadership of the sector is weak. At this point, we need to have strong leadership that is also communicating. Gradually we will move to a real market that drives a huge level of policy leap that we want to see. We will make progress, but we will need intelligent leadership. The regulator is doing nearly fairly well.”
The chicken and the egg dilemma where NESI has been spinning for years with yes 1) no service improvement; 2) private DisCos broken due to the lack of a cost reflective tariff; and 3) a regulator complacent about the NESI´s poor performance and whom in week in the enforcement of the existing regulation.
NESI needs more generation plants, a bigger transmission system and professional DisCos that must recover the cost of the service for all the stakeholders. The quality of the service applies to the three stakeholders, while the collection of the cost of the service only applies to DisCos… if the tariff is not cost reflective, very difficult that the DisCos can collect the cost of the services and if not, then the liquidity crisis gets bigger and bigger.
Thank you for your comment. Your analysis is spot on.