ELECTRICITY PRIVATISATION HAS FAILED
ELECTRICITY PRIVATISATION HAS FAILED
For Return of Power Sector to Public Ownership under Democratic Control
By Peluola Adewale
On October 25, 2010, electricity workers and activists under the auspices of the National Union of Electricity Employees (NUEE) and Joint Action Front (JAF) embarked on protest march from Yaba to Marina in Lagos to mobilise mass opposition to the then planned privatization of the PHCN. The public was asked to reject the power privatization as it would mean converting the public resources into private profit with monumental exploitation without meaningful improvement in power supply. The message was considered a bad product by a large section of masses.
The hostile attitude of the masses to the protest was understandable. The public electricity company PHCN was a byword for inefficiency and corruption of public enterprises in Nigeria. Besides, the protesting workers whom they saw regularly distributing estimated bill for power not consumed and disconnecting supply if the consumers refused to pay for service not provided were the most visible faces of this infamous public company. Many businesses have either closed shop or relocated out of the country because of the failure of NEPA/PHCN. Many houses and workshops are “power stations” with generating set run with expensive fuel. The situation was so bad that restoration of power after days or weeks of outage was usually welcome with chant of “Up Nepa!” as if it was a favour. NEPA is the acronym for National Electric Power Authority the former name for the utility but which has come to stay as its alias after the name change to PHCN and even after the privatization.
WHY NEPA/PHCN WAS INEFFICIENT
The socialists agreed that the service from NEPA/PHCN was poor. We however argued that the real reason why NEPA/PHCN and other public enterprises were not performing efficiently was the absence of democracy in the management of these enterprises and the brazen corruption of the top layers of the management who were political appointees of successive regimes. Besides, all the allocations on capital projects expected to improve electricity supply were looted and largely mismanaged by top government functionaries in connivance with the so-called private sector as revealed by power projects probe. In the last one decade over $20bn has officially been spent on electricity supply without anything fundamental to show for it.
We also argued strongly that the PHCN could be efficient if it was kept public and completely transformed. This would however require placing it under the democratic control and management of elected committees of workers, consumers and representatives of the government in order to ensure that public resources spent to improve the power sector are not mismanaged or looted. These arguments for public ownership of the power sector are still valid today especially given the failure of privatization.
TELECOMMUNICATION AND PRIVATE PARTICIPATION
The people were also swayed by the false propaganda of the government and its town criers that privatization would turn around the power sector as had obtained in the telecommunication sector. Truly, there was a fundamental improvement and qualitative development in telecommunications in Nigeria with the entrance of private mobile phone service providers. For instance, the number of telephone lines has greatly leaped from 405,000 in 2001 before the licensing of GSM and CDMA providers to 145.4 million active subscribers as of April 2015. Telephones are no longer an expensive status symbol of the rich which it used be.
However, it should be stressed that the coming into the sector by the private GSM and CDMA providers is liberalization of the telecommunication and not privatization. Indeed, the privatisation of NITEL on its own has proved to be a failure and an example of why privatisation does not guarantee efficient provision of utilities and social infrastructure. Also is the fact that the present GSM telecommunication technology is more advanced than the NITEL infrastructure in the 1970s and early 1980s, and in itself brings with it efficiency and cost effective means of providing telecommunication services. The Pentascope, a Dutch private firm, which managed the firm for a period during Obasanjo administration, left it much worse than it met it. NITEL was later bought by Transcorp, a Nigerian company. But the Yar’Adua government had to revoke the licence of the Transcorp just after two years over corrupt practices. Within this very short period of ownership, the Transcorp did not only burden the NITEL with billions in debt but also stripped off its properties. The Managing Director of Transcorp, Tom Iseghohi, along with two others, was charged in 2009 for looting $110 million from NITEL.
Besides, the attempt by government to compare telecommunication with electricity is misplaced and fraudulent. The mobile telecommunication requires much less capital than electricity. This explains why about 25 private firms that were issued licenses in 2005 long before the privatisation of PHCN could not add a single megawatt to the national grid. Indeed some did not even do the ground breaking at the supposed sites of the power plants. They only waited in the wing to buy off the PHCN assets cheaply in order to make huge profits at the expense of workers and ordinary people. Also, you can change provider if you are not satisfied with a service in the mobile telecommunication but it is extremely difficult with the electricity as the electricity distribution is largely natural monopoly. In other words, you cannot change from Ikeja Electricity Distribution Company to Eko Electricity Distribution Company as you can do between MTN and Glo, two of the GSM providers. In any case, electricity is too central and important to development and wellbeing to be left in the hand of private profiteers.
STRUGGLES BREAK OUT IN COMMUNITIES
Despite alternative arguments, the plan to privatise electricity enjoyed mass support as the people had become so frustrated with the PHCN that they concluded that nothing could be worse. However, they have now been brutally proved wrong. The electricity privatization has proved to be a monumental failure and fraud. The promise of better deal for the consumers under private ownership has proved to be false. Indeed, the situation has gone much worse than what obtained before the privatisation. Experience, they say, is the best teacher. The ordinary people who dismissed anti-privatization protesters as doom-sayers have now hit the streets. Struggles have broken out in many communities against poor electricity service and brazen exploitation called estimated or crazy billing whereby consumers are asked to pay for the power not consumed.
While the crazy billing did not start with private owners called DISCO (Distribution Companies) it was however introduced after the NEPA was transformed to PHCN in the preparation for its sale. Along with high tariff and fixed charge it was one of the deliberate policies introduced to make the PHCN attractive to the private owners as it would raise the revenue profile of the PHCN. Indeed, targets for revenue raising were given to the workers of the PHCN called marketers. The quest for super profit by the private firms means that this extortionate practice has been intensified. No serious efforts have been made to provide pre-paid meters to all consumers. This is apparently because pre-paid meters make estimated billing impossible. It is not only unmetered consumers that are exploited. The consumers with post-paid meters, which are expected to have been phased out, are also victims as these meters are hardly read. About 50% of workers have been sacked. Therefore, there are no adequate workers who could go round to the read the meters. In any case, the DISCOs do not consider it an obligation to read meters in the first instance. Inadequate staff also partly accounts for the worsening of power service after the privatization.
NO IMPROVEMENT IN ELECTRICITY UNDER PRIVATE OWNERSHIP
From all indications things are going to get much worse if the power sector remains under the private profiteers. In an interview shortly before the May 29 inauguration of the current government, the immediate past Minister of Power, Chinedu Nebo revealed that only one or two Discos are doing well (Guardian, June 2, 2015). Given the excruciating experience of Nigerians across the country this is a very modest assessment. Nevertheless, the admittance that only one or two out of 11 Discos are doing well underscores the monumental failure of privatization.
The fact is that the private electricity firms (both distribution companies and generation companies) do not have adequate investable capital to turn around the power sector. This explains why the government had to grant a bail-out in form of soft loan to the private firms, which had bought the PHCN at giveaway price, merely a year after the ownership transfer. The government spent about N850bn alone on the liabilities of PHCN including debt and workers settlements yet it sold the company for N530bn. Yet, the government has set aside another N231bn loan facility from which private power firms have been borrowing at the rate of 10% and pay up in 10 years. The reality is that this accumulated debt may not be paid back. As of February 11, 2015 N57.72bn out of the facility has been disbursed. It is instructive to stress that the government itself borrowed at the bond market at the rate of 14%. Indeed, the government has spent much more on the sector than the consolidated expenditures of all the private firms since the privatization. This has rubbished the argument that the private investors would bring more money needed for the improvement in the sector.
Nebo himself had lamented the sorry situation in December 2013 just three months after the power sector was handed over to private firms. According to Nebo, “Some of the companies borrowed much of the money they used for the purchase of the unbundled PHCNâ€¦ What we did not foresee is that there would be a huge debt profile hanging on the necks of the distribution companies.” (Channels Television, December 21, 2013).
In other words, the pre-occupation of the private electricity companies is to service debt while at the same time make super profit. This can only be possible by poor service delivery and super exploitation of the consumers. Already, apparently in reaction to the resistance of the consumers to outrageous, arbitrary tariff, some discos have declared force majure. This was disclosed by Alex Okoh, the Head of Public Communications of the Bureau of Public Enterprises, the agency of government that midwifes the privatization of public assets (Punch, May 27, 2015).
In other words, these private firms are prepared to return the ownership of distribution companies to the government ostensibly because of their inability to increase the already outrageous tariff. This apparently explains why the National Electricity Regulatory Commission (NERC) has given the nod to Discos to increase tariff as they wish as from July 2015. This must be resisted by the labour movement and community people.
The fact is that the increase in tariff will not translate into a better power supply as it does not guarantee more power on the grid for distribution. According to the Managing Director of the Ikeja DISCO the company requires 1250MW to satisfy its consumers but at the best of time it gets mere 400MW. This situation cannot improve as the Gencos are producing less megawatt of electricity than they inherited. Besides, the power plants that are still under the government’s National Integrated Power Projects (NIPP) are starved of gas. This is scandalous as Nigeria is one of the top 10 gas producers in the world.
Though the price of gas to power plants has been increased from $1 per 1000 scf to $2.5 per 1000 scf and pipeline transportation charge from $0.3 per 1000 scf to $0.8 per 1000 scf, the producers prefer to export the gas or supply the industries that can pay higher price. Incidentally, it is a government agency, Nigerian Gas Company (NGC), a subsidiary of the NNPC, that markets the gas while many of the gas producers are oil companies with whom the NNPC have joint venture operation. The fact is that while NGC is publicly owned it is run for private interest such as its parent NNPC which was indicted in the recent audit report by PWC over the habitual non-remittance to the government coffers the revenue it generates.
Nebo lamented, “I think it is scandalous that we produce over 5 billion scf of gas every day, sell 4 billion and retain only 1 billion scf for local use. The one for local use is preferentially given to industries and not to power, starving the power sector of the needed gas to industrialise this country and I think that is a shame.”
It is truly a shame that the country cannot use its wealth for its development and well-being of its citizens. This is because the country is run on a capitalist basis. This is worsened by the primitive character of its capitalist ruling elite who can hardly create wealth but constitute parasites on the collective wealth of the country. This is one of the reasons that struggle against power privatization must be linked with a demand for public ownership and democratic control of the commanding heights of the economy like oil sector. Nebo himself advised the new Buhari government to, “Wield the big stick and ensure there is gas to power if power generation is to improve.”
FOR PUBLIC OWNERSHIP
By and large, the said interview of Nebo further shows why the power sector must be under public ownership. For instance, he revealed that ”the NIPP projects are contributing more power than the legacy Power Holding Company of Nigeria (PHCN) power plants to the national grid today”. While the NIPP projects are under the government, the legacy PHCN power plants are the ones that have been sold to the private generation companies (genco’s). At the best of time, Nigeria currently generates about 4000 megawatts. Nebo also talked about the improved performance of transmission which has not been privatized. He said, “Thankfully, a lot of funding has been injected into the transmission infrastructure. The grid is being strengthened, and for the first time, we were able to hit a peak of over 100,000 megawatts hours”.
All this shows why the community people must link the struggle against poor service and exploitation to a demand for the return of the power sector to public ownership, i.e. the re-nationalisation of the power. This demand for renationalization as well as struggle against exploitation must also be supported by electricity workers who were originally against privatization before they were apparently forced to capitulate because of lack of serious support from the national leadership of the Nigeria Labour Congress and the public. We also call on the entire labour movement to support the demand for the re-nationalisation and prepare to struggle to actualize it.
However, as the debacle of NEPA/PHCN showed it is not enough to put electricity under public ownership. To guarantee stable and affordable electricity there must be allocation of adequate public resources to the power sector with democratic management and control by the working people. What this means is that instead of a few bureaucrats appointed by the government dictating the workings of public enterprises like NEPA/PHCN, decisions must be taken among rank-and-file workers and consumers elected into management committees at local government, state and national levels with the mandate to oversee the affairs of the power sector in compliance with the needs of the people. This will ensure judicious spending of resources and thereby prevent looting and profiteering.
There is no technical reason why Nigerians should not have electricity (or fuel, water, roads, etc). The reason we have shortages are because of the rotten capitalist system that runs everything for the profits and greed of the few. We can demand improvement now, but fundamentally we also need to build a mass based working peoples’ party run on socialist programme that can really transform every aspect of our lives.
WE SUPPORT THE DEMANDS FOR:
- â€¢ NO LIGHT; NO PAYMENT!
- â€¢ NO TO INCREMENT IN TARIFF
- FOR 24 HOURS LIGHT SUPPLY AT AFFORDABLE RATE.
- NO TO ESTIMATED/CRAZY BILLING. CANCEL ALL DEBTS FROM ESTIMATED/ CRAZY BILLS.
- ALLOCATION OF PRE-PAID METERS TO ALL CONSUMERS!
- CANCELLATION OF COMPULSORY N750 FIXED CHARGE.
- PROMPT REPAIR OF ALL FAULTY TRANSFORMERS AND UPGRADE OF ALL FACILITIES AT NO COST TO CONSUMERS.
- IMPROVED PAY AND WORKING CONDITIONS FOR ELECTRICITY WORKERS. NO TO CASUALISATION OF STAFF. RIGHT OF WORKERS TO BELONG TO TRADE UNION.
- FOR EMERGENCY ELECTRIFICATION PLAN TO END LOAD SHEDDING AND PROVIDE ELECTRICITY THROUGHOUT THE COUNTRY.
- FOR MASSIVE INVESTMENT IN ENVIRONMENT-FRIENDLY RENEWABLE SOURCES OF ENERGY.
- RENATIONALISATION OF THE POWER SECTOR AND MASSIVE INVESTMENT UNDER DEMOCRATIC CONTROL OF WORKERS AND CONSUMERS