JAF's Position on Anti-Poor Electricity Tariff Hike to the Adhoc Joint Committee of the National Assembly

THE POSITION OF THE JOINT ACTION FRONT (Partner with the NLC & TUC in the Labour and Civil Society Coalition LASCO) on the Anti-Working People and the Poor Hike in Electricity Tariff to the ADHOC JOINT COMMITTEE OF THE SENATE AND THE HOUSE OF REPRESENTATIVES, 23^rd February 2016

INTRODUCTION

1.     We should first recall that the Joint Action Front (JAF) – a symbiotic partner in the struggle of the working people with the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) under the broad platform of Labour and Civil Society Coalition (LASCO) – was part of the LABOUR TEAM that was represented at the Session of the Adhoc Joint Committee of the Senate and the House of Representatives held on February 15, 2016 in a Committee Room in the National Assembly.

2.     At the Session, JAF representative – Comrade Abiodun Aremu, Secretary of JAF, joined the President of the NLC – Comrade Ayuba Wabba and the President-General of the TUC –Comrade Bobboi Kaigama to demand for the suspension of the anti-working people and the poor hike in electricity tariff that was effective from Feb 1, 2016 based on the following reasons:

• Methodology used in the Tariff hike was not open and sound as required by law.
• Tariff increase should be every 5 years yet NERC has been imposing tariffs yearly since 2012.
• Metering of most Consumers is yet carried out hence Tariffs cannot be applied to un-metered consumers.
• Power Consumer Assistance Fund (PCAF), which the law provides should be properly constituted to mitigate high pricing, has not been done.
• Consultation with consumers and other stakeholders before the fixing of a new tariff regime, as required by the NERC Act, were not done.
• Subsisting court order restraining the NERC from increasing Tariffs should be respected.

3.     In addition, the JAF representative pointed out the following fundamental issues that define the interest of the generality of the Nigerian poor masses in addressing the issue of tariff, which JAF would be willing to fully articulate at subsequent hearings of the Adhoc Joint Committee.

• The fraudulent privatization of the PHCN and the need for its reversal;
• Emphasis on electricity as a security and development component that should not be driven by private interest for greed and profits;
• Electricity as a basic human need which every Nigerian must access, and which will not be possible, so long as “private operators”, rather than add value to building additional generating and transmission capacities, are contented as tariff collectors, using the manipulative law of demand and supply to impose tariff increases and exploit the poor consumers;
• The issue of affordability by an ordinary person whose wage or income is poor and why her-his utility allowance should be a factor in pricing; and
• The mountains of debts caused by crazy billing to the poor consumers, which are simply un-payable and should not be used by the private power operators to deny the poor the provision of meters.

4.     In this submission, JAF relies on the followings:

• Our interventions on the crisis in the electricity sector since 2010.
• Our study from the website of the Nigerian Electricity Regulatory Commission (NERC) of its Methodology of Tariff hike, which is not only Anti-Working people and the Poor but exploitative and anti-development.

·         Our Resistance to the Privatisation of the Major Sectors of the Nigerian Economy, which is consistent with the spirit and letters of Section 16 of the 1999 Constitution on the Economic Objectives of Government, and which underscore our demand for the Reversal of the privatization of the PHCN.

• Our Position on Public Ownership and Control of Electricity and the Alternative Management Measures to ensure Access and Affordability of Electricity to ALL.

WHAT ARE THE ISSUES?

1. From the current public stand (artisans, traders, workers, professionals, students, women, community groups, residential consumers in poor homes, etc), the issues are:

• Hike in tariffs without meter, and
• Irregular power supply and blackout compounded by indiscriminate issuance of Crazy bills.

2. From the standpoint of JAF, the starting point of our RESISTANCE against the current hike of Feb 1, 2016 in electricity tariffs should proceed from understanding the crisis of production, transmission and distribution of electricity.

·         This we have clearly articulated in several documents we issued since 2010, beginning with our partnership with the National Union of Electricity Employees (NUEE), with whom we organised joint-activities (Protests, Rallies and Handbills’ Campaign and Public Enlightenment) to RESIST the privatisation of the electricity sector.

3.       JAF contends the hike in Tariffs and the pricing of electricity for consumers should be based on the following demands:

·         Reversal of the Privatisation of the electricity sector and other major sectors of the economy.

·         That electricity is a fundamental human right that ALL Nigerians should enjoy. Thus, Government has the responsibility to ensure affordable and adequate access to electricity supply to all homes, institutions, commercial and industrial establishments, infrastructure, recreational and spiritual locations.

RESOLVING THE ISSUE OF OWNERSHIP OF THE ELECTRICITY SECTOR IS CRITICAL TO ELECTRICITY PRICING!

We shall see from the below reproduced documents to lend credence to the consistent position of JAF.

At a press conference on November 23, 2011, the Joint Action Front (JAF) stated thus:

“On November 14, 2011 the Federal Government of Nigeria ordered the forceful take-over of PHCN facilities across the country in the guise of “security cover”. What Nigerians should know is that the massive military occupation of the PHCN facilities went beyond the routine security brief of armed personnel that have maintained security vigilance over the years on public properties beyond that of the PHCN. What actually happened was that the Jonathan Presidency in a fascist manner used the deployed troops to convey foreign profiteers and Bureau of Public Enterprises (BPE) officials to undertake the inventory of the facilities, in view of its plot to illegally transfer these undervalued public assets to their cronies of profiteers, so-called private investors.

JAF deplores this unwarranted military occupation, which has been characterized by the maltreatment of workers and security harassment of its leadership across the country, instead of Government implementing the payment of the 50 per cent salary increment due to the PHCN workers since June. We therefore demand the unconditional and immediate withdrawal of the military occupiers from the PHCN facilities…..!.

On 30th November 2011, JAF issued a 4-page Handbill captioned “WHAT NIGERIANS SHOULD KNOW ABOUT THE PRIVATISATION OF PHCN!” and circulated it across the country. Extracts from the Handbill read thus:

Power Sector reform from June 2009 was designed for the Federal Government to abdicate responsibility for the production, transmission and distribution of electricity in order to hand over these essential services to private interests and profiteers.

1.        JAF opposition to Privatisation stems from the fact that:

·         Electricity is a basic need of the people,

·         It is an essential ingredient of national security, and

·         Privatisation of electricity will amount to a handover of the national asset to private profiteers.

2.        The major argument FG advanced for the privatisation of the power sector was that the Power Holding Company of Nigeria (PHCN) was not able to manage the production, transmission and distribution of electricity production in Nigeria. But if we should ask:

·         What happened to the $16 billion dollars voted during Obasanjo regime? What has happened to over $10 billion dollars spent under President Jonathan on NIPP?

·         If the proffered solution by FG to corruption in the Power Sector is privatization, is it not the Presidency that should be held responsible for lacking the political will and patriotism necessary to prosecute past presidents and their cronies of portfolio contractors as a deterrent?

·         Should we advocate that the Presidency be privatized and deregulated for its failure to prosecute the corrupt and greedy FG officials who run the power ministry and the PHCN on the basis of their private selfish interests?

WHY IS PHCN NOT WORKING?

Our study revealed that the installed generating capacity of the 11 power stations (Egbin, Afam, Delta, Ijora, Sapele, Gerugu, Omotosho, Shiroro, Jebba, Kainji, and Olorunsogo) in Nigeria is about 6,900MW, out of which a generating capacity of about 3,500 MW is available. In other words, PHCN ought to deliver to Nigerians about 6,900MW if its potentials are properly harnessed and adequately funded.

Can we think about this situation: South Africa with a population of 49 million generates 42,000MW of electricity, while Nigeria with a population of 150 million generates 3,500MW? It will therefore be a miracle for PHCN workers to ensure adequate supply of electricity to Nigerians when the country’s energy requirement as at December 2010 ought to be 20,000MW as stipulated by the National Planning Commission.

Between 1999 and 2007, about N431.9bn ($3.64bn) was allocated to the power sector, which were handled directly by the Ministry of Power with the supervision of the Presidency and not by the PHCN workers. Besides the budgetary allocation, about N1.5trillion ($12.6bn) out of the excess crude account was also sunk into the power sector; in addition to the $16billion questionably expended by the Obasanjo regime on building power plants. This ought to have produced an additional 16,000MW generated capacity. Yet, nothing tangible came out but scandals of sharp corrupt practices and looting. Therefore, the lack of expansion and state of disrepair of PHCN facilities that were induced by corruption in the high places is the true explanation why it was difficult for PHCN to work.

HAS PRIVATISATION WORKED IN OTHER COUNTRIES?

Developing countries that privatized their power sectors in the past 30 years have experienced disappointing performance, astronomic hike in tariffs, millions of people being cut off from power supply as well as massive job losses.

In Latin America, privatization has been characterized by heavy job losses, failure to deliver promised new investment, absence of competition, performance failure and high cost to government and consumers.

Enron used its political influence with US embassies and the CIA to win a $3 billion contract to build the Dhabol Power Plant, South of Bombay, India, in 1992. This was the largest foreign investment in India. Enron charged so much for electricity that the state government ended its agreement to buy the electricity in June 2001 and the plant was forced to shut down.

However, Nigerians should know that most developing countries such as Brazil, India, Mexico, South Korea, Venezuela, South Africa and Thailand have suspended or reversed plans for the privatization of electricity sector. For example, the Power Generation in Iran and Nigeria twenty (20) years ago were at par. However, Iran has moved to over 60,000 MW. The electricity system in Iran is entirely publicly owned. Even though, there is provision for private power generation in Iran, only 2% of electricity is generated privately.

In the African experience, Cameroon is the only country in sub-Sahara Africa that fully privatized its power utility with one company in charge of generation, transmission and distribution. The company has only raised generation from 817 MW in 2001 to 933MW at present. The euphoria that greeted the takeover has dissipated as the service has been characterized by frequent blackout, low voltage output, job losses and high tariffs. About 10 years into the takeover, the company provides services only to urban areas, and just for about 588,000 customers, about 15 percent of the population. And the promise to connect millions of Cameroonians has become a mirage. 

South Africa, which is Africa’s biggest economy abandoned its plan for unbundling and privatization of electricity industry in 2004 and retained ESKOM as an integrated state owned Electricity Company. The only privatized power station KELVIN was abandoned twice by its multinational owners; first by AES then by GLOBELEQ. South Africa generates about 42,000MW of Electricity.

Ghana allowed private participation in the electricity sector in the form of independent power producer, but did not sell the publicly owned Volta River Authority, which generates most of the country’s electricity, as well as the Electric Company of Ghana and Northern Electrification Department responsible for distribution at different regions of the country.

WHAT WILL HAPPEN IF PHCN IS PRIVATISED?

·  PHCN tariff/charges will be increased astronomically and a vast number of people will be disconnected because they will not be able to afford electricity!

·  Most of the PHCN properties/equipments will be sold in order to make quick money or will be dashed to private investors. Such was the case in the Aviation industry where Arik Airline inherited all the property of the Nigerian Airways worth billions of Naira without paying a kobo till date.

·  Corruption will still be on the high side, if not higher.

·  Private investors will make huge profit at the expense of the energy needs of Nigerians.

·  Many Workers will lose their jobs thereby increasing the unemployment rate.

·  National security will be in jeopardy.

·  The looters of our national wealth will be emboldened to accomplish more looting.

From the above documents, it should be clear to all that DISCOs and GENCOs presently being paraded as owned by private power operators were gifted out public assets, which every patriotic Nigerian should struggle to recover.

NERC & GENCO-DISCO and TARIFF

In the Electric Power Sector Reform Act of 2005, supported by the AMENDED MULTI YEAR TARIFF ORDER (MYTO) – 2.1 FOR THE PERIOD APRIL 1ST, 2015 TO DECEMBER 2018 (reference www.nercng.org), tariff is being calculated by a methodology that is skewed in favour of a private profiteers’ market mechanism and which uses the US inflation rates, whereas the average income of workers in Nigeria is not paid in US Dollar.

In the Act, as defined in paragraph 2.1 the Multi Year Tariff Order (MYTO) used what it calls three standard building blocks:

• The allowed return on capital - being the return necessary to achieve a fair rate of return on the necessary assets invested in the business.
• The allowed return of capital - associated with recouping the capital over the useful lives of the assets.
• Efficient operating costs & overheads

However, the NERC by law has two key functions to the consumers:

·         Ensuring adequate, safe, reliable and affordable supply of electricity to all Consumers; and

·         Protecting consumers and public interest.

Instead, the NERC operates as a front of GENCOs and DISCOs, thereby, under the guise of one of its statutory functions of “Providing incentives to invest in sector” induces the private operators, who lack the resources, despite their claims to independent capital, to depend on  credit financing and intervention fund from public sources, and at the same time, operating as tariff collectors, to exploit the consumers for profits through outrageous billing, with which to cover their bloated losses.

Also, to NOTE is the Vision 2020 Report published in the website of the National Planning Commission, which indicates that the power generation capacity requirement for Nigeria by 2020 should be “in the range of between 25,000MW to 40,000MW”. This has implication for electricity pricing because the higher the electricity generation capacity, the higher the access to electricity supply and the lower the costs in pricing. Therefore, it profits the GENCO-DISCO to keep operating at the present level of inadequate power generation capacity, which with the higher the demand with nothing additional to supply, the greater the propensity to hike tariff based on the use of market forces mechanism.

Several Questions to Ask:

·         What is the state of electricity today, after 4 years of the fraudulent privatisation? It is the same old story of crazy and estimated bills, hike in tariffs and inadequacy and lack of supply of electricity.

·         Is there any difference from reasons used to sabotage PHCN preparatory to their handover to local looters and their foreign puppeteers and what is happening now under the GENCO-DISCO?

·         What value has the GENCO-DISCO added to enhancing the capacity of the generation, transmission and distribution networks because this informed why it has been impossible to utilise the maximum installed electricity capacity of 6,90MW?

·         Why has the DISCOs been unable to meter all the consumers despite setting the target of 18-months to meter all consumers?

WAY FORWARD: OUR ALTERNATIVE TO PRIVATISATION

Section 16 of the 1999 Constitution defines the Economic Objectives of Government. Government shall:

•          Section 16 (1) (c) – “manage and operate major sectors of the economy”.

•          Section 16 (2) (c) – direct its policy towards ensuring that “the economic system is not operated in such manner as to permit the concentration of wealth; or means of production; and exchange in the hands of few individuals or of a group”.

By the Provision of the 1999 Constitution, the electricity sector is a major sector of the economy and to that extent, the privatisation of such a sector amount to FRAUD.

Thus, JAF is sustained in its position that:

“Power sector is capital intensive and public investment is the best method to deliver uninterrupted and affordable supply of electricity to the people. Hence, we hold strongly that if the privatisation of the PHCN is REVERSED and kept public, it can be made efficient if it is placed 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 as has happened in the previous regimes.”

What this means is that instead of few bureaucrats appointed by the government dictating the workings of public enterprises, decisions must be taken by workers, consumers and technical experts elected into management committees at communities, state and national levels with the mandate to oversee the affairs of the power sector in compliance with the needs of the people.

Our Demands are:

1.    Cancellation of the new hike in Tariff, removal of fixed charge and a stop to further pricing of electricity based on MYTO template.

2.    Need for a new Template of electricity pricing based on affordability using the Utility allowance paid to the average workers as BASELINE.

3.    Unconditional Metering of all Consumers.

4.    Reversal of the Privatisation of the PHCN.

5.    Prosecution of looters and Recovery of the appropriated fund ($16bn, $10bn, $12.6bn, etc) for electricity generation capacity.

6.    Private power operators should handover the public assets and should build theirs’ power plants with their private capital.

7.    Investment of recovered fund to build additional power generation and transmission capacity.

8.    Make electricity accessible and affordable to ALL.

DR. DIPO FASHINA                      Comrade ABIODUN AREMU

JAF Chairperson                          JAF Secretary