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Of late, prices
have dominated discussions amongst our talking heads. One price in
particular has been most knotty: electricity tariff. Before the
“clarification” by the Nigerian Electricity Regulatory Commission
(NERC) last Wednesday, the Presidential Task Force on Power (PTFP) had
complicated this major domestic worry.

According to the
PTFP statement, after a new tariff regime, which the NERC will announce
in April this year, “average cost-based tariff (for electric power)
will fall (to) between N21 and N23 per kilowatt-hour (kWh), that is,
about a third of what Nigerians actually pay for electricity”.

Now, for most of
us, the effective electricity tariff is the one we pay to NEPA (sorry,
PHCN). And this is currently between N6 and N8 per kilowatt-hour (kWh).
So, it is a tad disingenuous for the PTFP to have forecast a fall in
tariff later this year, if the new tariff is in multiples of the old
rate. However, when you recall that electricity supply from the mains
is more absent than “live and current”, then, the nominal rate we pay
for this cannot be the effective rate.

Other sources of
power there are aplenty in these parts: the kerosene-powered bush
lantern, fuel wood, candles, and assorted generating capacity. All of
these at some cost to the individuals using them. Add these costs to
the nominal rate we pay to the monopoly supplier, and it’s self-evident
that the effective electricity tariff in the country is a lot more than
the PHCN charges.

But is it in the
range indicated by the PTFP? For industry, the answer to this is a
straightforward “Yes”. For urban middle class households, an
“undoubtedly” will do just fine. We could bicker endlessly about what
the effective tariff is for the poor and the vulnerable in the rural
areas; and we could build a case around these burdens for first
improving the infrastructure for electricity supply before a tariff
hike.

This is what most
newspaper leader writers on this subject have done. But this misses
another important point; and this is where scepticism over the NERC’s
rebuttal of the PTFP’s statement must be admitted into the discourse.

As a monopoly
supplier of electricity, government could charge anything it liked. As
government, responsible for economic development and social progress,
it was likewise minded to charge below cost. However, this means that
over the investment horizon cost of maintenance and new investment
would have to come out of other sources.

These models are
needed for government to have been seen as very responsible: to have
assessed the growth drivers that required such subsidies, to have
estimated the net gain from these growth drivers in excess of the
opportunity cost of the income losses arising from non-commercial
tariffs, and to have been sure how long these growth drivers will need
the support from low input costs.

All of this is
history now. Instead, we are going through a business model transition
that would see government hand off the supply of electricity in the
country. Private suppliers are insisting on being paid at least N18 per
kilowatt-hour (kWh) if they are to cover their costs. Therefore,
despite the NERC’s claim, the nominal tariff for electricity supplied
from the mains must go up at some time. If this brings about regular
supply of electricity, it should make our current other supply sources
unnecessary. In which case, the average cost-based tariff and the
nominal tariff will become the same.

On the assumption
that this should lead to a lowering of the effective rate on power
consumed by the average urban household, one question remains. How do
we address the peculiar cases of the poor in our rural areas, and urban
households below the average? Definitely not by putting the horse
behind the cart.

Rather than
advocate a delay in the price hike until all necessary infrastructure
for supplying power properly are in place, we should aim to strengthen
the industry’s competitive dynamics, so that a price increase by any
supply type should lead to a migration of custom to alternative power
sources.

In other words, we should not, for instance, tolerate a ban on the
importation of generating sets as part of an argument that independent
power providers need this “moratorium” to start up. For the biggest
threat to the poor and the vulnerable amongst us is the creation of new
monopoly suppliers.