Reduce tax payer’s subsidies or tariff paid by customers.
Achieve an average tariff allowing recovery of costs reflecting efficient sustainable performance (critical to assure service quality)
Subsidize consumption of selected categories of socially sensitive existing uses, like agriculture or street lights or.
To extend access to electricity supply to currently un-serviced population (in general the poorest and socially unprotected).
Non technical losses situation
Non – technical losses in the power sector are almost non – existent or negligibly small in developed countries, as most of the population can afford or willing to pay tariffs reflecting costs of supply (even if they are higher than those reflecting optimized performance of the service providers). In contrast, the situation tends to be significantly different in some developing countries. Many utilities in developing countries succeeded in reducing non – technical losses in a sustainable manner but other still continue to show high losses. The existence of high non technical losses jeopardize the financial sustainability of the power sector and harms well – behaving electricity consumers, tax payers, socially disadvantaged segments and the country as a whole , elimination of those losses should be a matter of high national priority for every country irrespective of ownership of the utilities.
Example of few selected countries would help guide in addressing the case in Nigeria as well. From Latin America, East Asia, South Asia, Soviet Union, all addressed these problems with well defined policy reforms in the sector that have overtime significantly reduced the non-technical losses that led to improve power supply in their countries.
In sub-Saharan Africa, the World Bank report of 2008 present the utilities in the region as huge inefficiencies. Only 50% of the electricity generated is paid for, due to a combination of low percentage of amounts of electricity injected in distribution networks being billed and low rates of collection of the billed amounts. According to the report, inefficiency is highest in Nigeria where the utility is only capturing 25% of the revenues owed.
The case of Distribution Companies in India on whose model Nigeria’s privatization is based on will be relevant in addressing the non technical losses or revenue collections by the Discos in Nigeria.
In 1998 the state government of Andhra Pradesh initiated a comprehensive phased reform program in the power sector to establish a new legal, regulatory and institutional framework; develop a new industry and market structure, and privatized distribution. It also established an independent regulatory commission responsible for licensing, setting tariffs and promoting efficiency and competition.
The new distribution companies inherited a weak system of accounting for electricity dispatched and consumed and rampant electricity theft that, together with revenue leaks and other factors, undermined their financial performance where only 42% of the electricity flowing into the distribution system was metered and billed. The balance was accounted as transmission and distribution losses and consumption by unmetered consumers .
The first step government did was to acknowledge theft of electricity as a major issue affecting revenue collection of the utilities, and lunch a comprehensive plan of controlling it and improving accountability based on four measures.
Enacting a new law to address electricity theft.
Strengthening enforcement mechanism
Reorganizing the anti corruption function of the utilities.
And reengineering business processes to improve management control and customer service.
In 2000, the Indian Electricity Act 1910 was amended to make electricity theft serious offence with stringent penalties. A separate law, unprecedented in India provided for mandatory imprisonment and penalties for offenders, allowed constitution of special courts and tribunals for speedy trial and recognized collusion by utility staff as a criminal offense.
The successful implementation of the reform produced impressive results, transmission and distribution losses were reduced from about 38% in 1999 – 26% in 2003. In large part through theft control, with the utilities regularizing over 2.25 million unauthorized connections. More importantly the reduction in losses continued in the following year, improving performance of the utilities to the benefit of the public and the country at large.
This also applied to North Delhi Power Limited (NDPL) founded in 2002 through Public-private partnership framework on 51:49 between Tata Power and Government of Delhi. Within six years of inceptions NDPL reduced its total losses from 53% upon takeover in 2002 to 18.5% in 2008 and 15% in 2009. All these were achieved through a combination of government policies on electricity theft and the utilities operational measures like
Deployment of advance metering infrastructure, (AMI)
Installation of medium voltage distribution (MVD) network in theft prone areas, with direct connection of each consumer to the low voltage terminal of the supply transformer.
Energy Audits up to distribution transformers
A public participation in controlling theft through the concept of “Social Audit”.
Collaboration with non-governmental organizations for creating awareness in slums.
Distribution Companies in Nigeria since takeover have been struggling with these problems as private operators, without government support despite the fact of its shareholding in the utilities, even the regulator has not favourably supported the Discos in its regulations. Frequent statements of the past leadership of the commission urging consumers not pay for fixed charge if power outages is recorded for more than 15 days in a month, removal of collection losses from tariff though subsequently restored did not show consistency on the part of the regulator, the recent uproar over the new tariff is another issue of concern for the market, and government continued silence on the matter does not give confidence to the investors on the sustainability of the new tariff.
As it was the case in other countries especially India where Nigeria copied its privatization, government should be actively involved in supporting the utilities in improving collections. Here government can introduce such measures practiced in India to address revenue collections problem faced by the Discos , particularly to recover the huge accumulated bills owed by the MDAs which is over N60 billion, some of these MDAs and security formations that cannot easily be discounted from services are owing huge bills. The recognition of these debts and electricity theft by government and enacting a Law to try offenders through a tribunal will ensure speedy trial of defaulters including utility staff who collude with the public to perfect this criminal act. This will help the Discos in reducing collection losses.
The Discos have many cases of meter bypass, vandalisation of electric cables in regular courts which usually takes time to prosecute; a special tribunal will speedily prosecute and punish offenders to deter others from perpetrating in the act. This will result in increased revenue for the Discos who will invest in metering to stop estimated billing and equipment to improve power supply even at reduced rate.
In conclusion, for Nigeria to achieve the benefits of privatization of the power sector, both government and the private operators have to collaborate as partners, government will provide enabling environment by coming up with policies that will support the private sector who has already invested in the sector.
The Government support in the revenue collections will reduce that effect of increased tariff on the public in addition to increase revenue that will be used to improve service provision by the private operators.
As the huge debt owed the Discos by MDAs is being paid by the public who are accurately paying their monthly bills, the same for those stealing power, their bills are been paid by the faithful customers who regularly pay their bills.
. Tsavsar, a certified PPP specialist Consultant on Public-Private Partnerships wrote from Abuja.