The Nigerian Society of Engineers (NSE) on Monday kicked against the planned hike in electricity tariffs, stressing that after a careful review of the situation, it came to the conclusion that the call to raise power prices was unjustifiable.
Being one of the stakeholders invited to make a presentation by the National Electricity Regulatory Commission (NERC) on the issue, the NSE stated that in all their arguments, none of the proponents was able to make an iron-clad case for tariff increase.
For instance, during the hearing held in late July, the NSE President, Tasiu Gidari-Wudil, who briefed journalists in Abuja on salient national issues, said that none of the Distribution Companies (Discos) came up with verifiable evidence of their contracted feeder supply availability index to warrant feeders upgrade or customer reclassification proposed.
Noting that its position on the tariff review debate was based on unassailable available evidence, Gidari-Wudil noted that in defending their applications, the Discos cited changes in economic indices.
However, he explained that although it is the industry norm to use the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) figures, most of the Discos brought figures that were at variance with the current reality.
In fact, the NSE president stated that figures as high as 30 per cent inflation were used by a leading Disco while quoting a consultancy outfit as their source. “These assumptions will definitely give rise to a high Weighted Average Cost of Capital (WACC),” the engineers stated.
While citing changes in Operating Expenditure (OPEX) expenditure as the basis for their request for review, the NSE stated that most of the licensees failed to justify the request since they did not show evidence of any increase in their circuit length, transformer numbers, increase in their staff salaries and numbers, increase in their metering and customer numbers.
“It was also observed that the Discos spend a substantial amount of their approved OPEX for payment of consultancy services and technical partnership payments that do not translate to any operational efficiency,” it added.
NSE recommended that the NERC should ensure that licensees are only allowed prudent and justifiable cost escalation, as the ‘pass-through’ costs only, noting that they should be made to look inwards and reduce their expenses on operational line items.
The NSE listed the items as: Payment for technical partners, payment for consultants, payment for vending services/ billing and collections as well as looking into its over-bloated payroll.
It also accused the Discos of making payment for concession services that the staff can provide as well as making heavy management and board expenses.
“WACC should be prudently calculated for the industry and even at that, no licensee should be allowed a new CAPEX review now as they have not demonstrated any firm capacity and commitment in the execution of the earlier approved CAPEX.
“ All unutilised allowed CAPEX can be clawed back for them to execute as a provisional sum only, and to be claimed in the tariff only when executed. Discos must adequately compensate their customers for any investment made in their network without any excuses.
“Licensees must be made to evacuate power, grow their customer number and metering as a sine qua non for their survival as a business. Discos should bear the consequences of not adhering to the service level provisions in the Service Based Tariff regime on feeders supply availability, by adequately refunding the customers for non-adherence,” the NSE said.
In addition, it recommended that the Discos should have an automatic and seamless arrangement in their vending server that will enable refund to all customers that purchased meters under any of its arrangements.
On fuel subsidy removal, the NSE stated that as much as it is in support of its removal, since it had become a criminal conduit for syphoning scarce resources, it explained that the government should have put the mitigating mechanisms in place before the removal of subsidy from the budget.
“The announcement of plans for palliatives at this point that Nigerians are already in penury is ill-conceived,” the society stated.
However, it pointed out that the utilisation of alternative fuels like Compressed Natural Gas (CNG) holds immense potential and a viable alternative fuel that has significant advantages since it is a cleaner burning fuel, emitting lower levels of harmful pollutants and greenhouse gases compared to conventional fossil fuels.
Incidentally, the NSE said it had directed its relevant arms to tackle the challenge by developing practical solutions for effective conversion from petrol to CNG.
Even though it admitted not having any authority to dictate to President Bola Tinubu, who to appoint into his cabinet, it highlighted the fact that only three engineers are among the new ministers.
Urging government to enforce its presentation on the expected flooding, the NSE also said it was envisioning to have a SMART office project which has reached an appreciable stage .
Emmanuel Addeh
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