The Nigerian Society of Engineers (NSE) has strongly opposed the planned increase in electricity tariff. The NSE reviewed the situation and concluded that the proposed price hike lacks justification.
As a stakeholder invited by the National Electricity Regulatory Commission (NERC) to present its views, the NSE pointed out that none of the advocates for the tariff hike could provide solid reasons for such an increase.
During a hearing in late July, NSE President Tasiu Gidari-Wudil, who spoke to journalists in Abuja about national matters, highlighted that none of the Distribution Companies (Discos) provided verifiable evidence to support their calls for feeder upgrades or customer reclassification.
Gidari-Wudil explained that the Discos defended their applications by citing changes in economic indices, but the figures they used were not in line with the current reality. Some Discos even used figures as high as 30% inflation, quoting a consultancy firm as their source. This approach would lead to a high Weighted Average Cost of Capital (WACC).
In response to the Discos’ claims of increased Operating Expenditure (OPEX), the NSE found that most licensees failed to substantiate their requests. They couldn’t show evidence of increased circuit lengths, transformer numbers, staff salaries, and numbers, or customer and meter numbers.
The NSE recommended that NERC should allow only justifiable cost escalation, focusing on ‘pass-through’ costs. Discos should minimize expenses on operational items like technical partners, consultants, vending services, billing, collections, and payroll. They should also address excessive management and board expenses.
The NSE further urged that the WACC be calculated prudently for the industry. Licensees should not be granted new CAPEX reviews without demonstrating a firm capacity and commitment to execute earlier approved CAPEX. Unused CAPEX should be reclaimed for provisional use only.
The NSE also emphasized that Discos must compensate customers for any network investments without excuses. They should ensure power evacuation, grow customer numbers and metering to survive as businesses and refund customers for non-adherence to service level provisions.
On the removal of fuel subsidies, the NSE supported its removal but stressed that mitigation measures should have been implemented prior. The society criticized the announcement of palliatives while Nigerians are already facing financial hardship.
Additionally, the NSE highlighted the potential of Compressed Natural Gas (CNG) as an alternative fuel with environmental advantages. The society is working on solutions for the transition from petrol to CNG.
While acknowledging no authority to dictate cabinet appointments, the NSE noted the limited representation of engineers among the new ministers.
The NSE also urged the government to enforce flood preparedness and revealed plans for a SMART office project, which is at a significant stage of development.