I have read some piece of news suggesting that Dr. Goodluck Jonathan ordered the reversal of electricity tariff during his tenure as president. Since I left office I have avoided issues concerning electricity regulation in Nigeria, to give our successors the best opportunity to do better than we did. My understanding of public office that the best a former public officer should do is to truly step aside and be willing to provide advice if and when it is needed. In the best tradition of public service, you don’t obstruct the new administration.
But I am constrained to restate the truth of what happened for the purpose of ensuring proper information to enable the present administration do its best in fixing the electricity crisis. Throughout our five years as commissioners of the Nigerian Electricity Regulatory Commission (NERC), there was no single day that President Jonathan ever dictated or instructed on policy to the Commission, in relation to any issue on electricity regulation. I am bold to state that President Jonathan was a great leader to the electricity sector for fully supporting the independence of the regulator. My colleagues and I were determined to maintain the independence of the regulator and we found a very understanding person in the former president.
As expected, we made mistakes or took decisions which in retrospect may not have been optimal. This is expected in human society, hence development and transformation are iterative, adaptive and path-dependent.
On the matter of the tariff, the facts are straightforward and borne out by records. NERC as a regulator has a comprehensive methodology and business rules for managing tariff. The NERC Act, methodology and business rules put the responsibility on NERC commissioners, who vote democratically for every such decision made, just like the Board of Governors of the Central Bank of Nigeria does on monetary policy. Every tariff we have issued from 2010 to 2015 did not receive or require the approval of the president; only NERC Commissioners decided on these.
Before issuing MYTO 2.0, we debated on what to do with the collection losses of DisCos from consumers. Two schools of thought then emerged among the commissioners: One, supported by most Commissioners, wanted the collection losses to be reduced to zero or to the low level of the pre-privatisation DisCos. The other school wanted us to keep it as contracted by DisCos and the Bureau of Public Enterprise, even as it skyrockets the tariffs. After much debate, the overwhelming position was to reduce the collection losses. When the draft of the tariff was issued, the DisCos protested and the commissioners had a rethink, revised the model and issued MYTO 2.0 that saw more than a 180 percent tariff increase for a number of customers in some DisCos.
…let’s not be under any illusion that fixing tariff would fix the electricity crisis in Nigeria. This is a falsehood. In fact, privatisation, as desirable as it, does not solve the problem. Obviously, there was a design problem with the reform of the electricity industry.
Manufacturers and other customer groups protested this astronomical hike in prices and sent in a formal petition. NERC’s business rules require it to reconsider a tariff when an aggrieved customer petitions it within 60 days of the issuance of a tariff order. On the basis of the petition, NERC held a public hearing at Sheraton Hotel with all DisCo heads and some consumers groups, where the details of the tariff were presented and criticised. After the public hearing, the Commission set up a technical committee to review the allegations and conduct jurisdictional research on how other electricity markets treat collection losses.
The NERC technical team recommended that the collection losses should be set at zero and that any DisCo wanting to have collection losses above zero should apply, with evidence of its diligent efforts to control losses. This recommendation was presented to the industry meeting where the DisCos totally rejected it, expectedly. The NERC commissioners nevertheless approved it through the usual process of decision-making and consequently reduced the revenue requirement of the DisCos, which then resulted in lower tariffs for most customers.
This was a controversial but principled decision based on contestable evidence and value-based analysis. I am prepared to take flacks for any intended or unintended consequences of that decision as the chairman and chief executive of NERC. I still strongly believe that my reading of effective regulation confirms that it was a good decision to internalise efficiency in the distribution segment of the electricity industry. But President Jonathan played no role at all in that decision. His ministers did not play any role. It was a bona fide regulatory decision that may be termed wise or unwise, after the facts. But should not be used to denigrate President Jonathan or the ministers of Power.
The electricity industry is difficult to manage and regulate anywhere. It is a difficult job for anyone. So, we should support this government and its officials as they work hard to improve the situation. But let’s not be under any illusion that fixing tariff would fix the electricity crisis in Nigeria. This is a falsehood. In fact, privatisation, as desirable as it, does not solve the problem. Obviously, there was a design problem with the reform of the electricity industry. This is the focus of my book in the making on reform policy in Africa. But for now, take it from the horse’s mouth: Jonathan did not reverse any tariff. Sam Amadi and his colleagues changed the tariff through the normal due process and as part of effective regulation of the sector.