Insolvency of Seven Power Companies and Poor Performance of Power Sector in General Underscore Failure of Electricity Privatisation

For Return of Power to Public Ownership Under Democratic Management and Control

The current abysmal state of the power sector vis-à-vis the poor state of transmission, distribution and low generation capacity after 65 years of independence is a product of mismanagement, corruption, underfunding of the power sector and implementation of neo-liberal policies. It speaks badly of the capitalist ruling elite that 65 years after Independence, Nigeria still generates about 5,500 MW for an estimated population of 220 million people with installed capacity of about 14,000 MW. The transmission and distribution networks and infrastructure are in a poor state and does not look like any significant improvement is going to happen soon and in future considering the weak state of the private power companies and the refusal of the capitalist ruling elite to reverse the privatisation programme and judiciously invest public funds.

By Chinedu Bosah

The power sector has always been under siege of self-serving top public officials and now in collaboration with private profiteers who prioritize private interest above public interest. After over 12 years of privatisation, over 6.5 million households are yet to be metered which allows for unfair and outrageous billing; about 90 million Nigerians are not connected to the national grid; power supply continues to be epileptic and many communities are usually thrown into darkness; tariff and billing are continuously hiked and working people find it difficult to afford it; bailout from government cannot be accounted for and usually siphoned through different avenues.

The mismanagement and underfunding were made possible because of the implementation of neoliberal policies. This has led to poor and epileptic power supply. The self-serving ruling elite lied to the public that privatisation of the power sector was the only way to resolve the power crises, stating that it would attract injection of massive private investment and increase capacity. But today the reality is that privatisation has obviously failed to attract significant private investment or resolve any of the problems bedevilling the sector. Rather, it has worsened an already bad situation. Currently, seven electricity companies (Abuja Distribution, Kaduna Distribution, Benin Distribution, Kano Distribution, Kano Distribution, Ikeja Electric Distribution and KEPCO companies) are insolvent, could not meet their loan repayment obligation and are under different forms of receivership. The rest are struggling despite government financial support and high tariff rates.

At the outset after privatisation, private companies had no capital to invest, took loans from banks to purchase the public corporation (NEPA/PHCN) which were sold at rock bottom prices of about N500 billion. Hence, they have failed to invest in the sector to expand capacity and meet the electricity needs of the people and currently could not repay the loans.  What this means is that the solution to the power sector does not lie in privatisation and neo-liberal policies because they lack the capacity to develop the power sector. The second reason and more fundamental is the fact that profit maximisation and electricity needs of all in an underdeveloped and chaotic power sector are diametrically opposite and only public investment can resolve this contradiction.

Besides, regulating the private power companies amounts to pampering wherein Nigerian Electricity Regulatory Commission (NERC) is usually in cosy relationship with the Power distribution and generating companies but are quick to meet tariff hike demands of the power companies. NERC and the federal government on the request of the power companies have increased electricity tariff from about N13 to N225 for Band A customers, amounting to 1630% with no significant improvement in service delivery making tariff hikes their only preoccupation.

The little complaint mechanism by which consumers could get some limited relief over the exploitative tendency of the power sector has been transferred to different state governments through the recent amendment of Electric Power Sector Reform Act. But many states have failed to do anything in this regard.  For instance, Lagos State Electricity Regulatory Commission (LASERC) has not set up its own regulatory framework that takes care of consumers’ complaints whereas NERC Forums (NERC Ikeja Forum, NERC Eko Forum etc) have been scrabbed, leaving electricity consumers vulnerable to exploitative attacks. Many electricity consumers who have complaints are stranded because NERC has closed shop while LASERC is not properly organised more than 7 months after regulatory power and authority was transferred to it. It appears this reform is a deliberate action to put electricity consumers in a disadvantaged position while the DISCOs ramp-up attacks and extortionist policies. We call for NERC forums and complaints/dispute mechanism to be re-established until the state regulatory bodies have properly set up viable complaints and dispute mechanism.

There is no other way out for an effective power sector other than adequate public massive investment. The private sector companies and their owners are too weak to develop the power sector because they do not have the capacity (technical and financial) and their greed undermines the aspiration to meet the energy needs of all at affordable rates. Continuing on this ruinous path of privatisation is unproductive. We acknowledge the debacle and inefficiency of old NEPA and PHCN. But experience has proved that privatisation is no solution. Therefore, there is need to end the privatisation programme, renationalise the power sector and invest massively in the sector. However, this time around to avert the experience of NEPA and PHCN, the sector has to be subjected to democratic management and control of workers, experts and consumers’ representatives in order to tackle corruption, enable judicious use of resources and ensure efficiency. With these measures, it is possible to guarantee affordable and regular electricity for all Nigerians.