I have read some piece of news suggesting that President Jonathan ordered the reversal of electricity tariff during his tenure as President. Since I have left office I have avoided issues about 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 their best to fix the electricity crisis. Throughout our five years as Commissioners of NERC there was no single day that President Jonathan ever dictated or instructed policy to the commission concerning any issue on electricity regulation. I am bold to state that President Jonathan was a great president 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 President in President Goodluck Jonathan
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 regulation has comprehensive methodology and business rules for regulating tariff. The Act, methodology and business rules put the responsibility on NERC commissioners who vote democratically for every such decisions, just like the Board of Governors of the CBN does for monetary policies. Every tariff we have issued from 2010 to 2015 did not receive or require the approval of the President. Only NERC Commissioners approved them
Before we issued MYTO 2.0 we debated on what to do with collection losses that discos collect from consumers. Two schools of thought emerged amongst the commissioners. One school, supported by most Commissioners, wanted the collection losses to be reduced to zero or to the low level of pre-privatization discos. The other school wanted us to keep it as contracted by discos and BPE 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 180% increase in some discos for some customers.
The manufacturers and other customer groups protested this astronomical hike in tariff and sent formal petition. NERC business rules require NERC to reconsider the tariff at the petition of an aggrieved customer who petitions within 60 days of issuance of tariff order. Based on the petition, NERC held a public hearing at Sheraton with all disco heads and some consumers groups where the details of the tariff were presented and criticized. After the public hearing NERC 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 any disco that wants to have collection losses above zero should apply with evidence of its diligent effort to control losses. This recommendation was presented to the industry meeting where the discos expectedly totally rejected it. 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 tariff for most customers.
This was a controversial but principled decision based on contestable evidence and value-based analysis. I am prepared to take slacks 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 internalize 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 no be under any illusion that fixing tariff fixes the electricity crisis in Nigeria. This is a falsehood. In fact, privatization, 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.
Dr. Sam Amadi, former Executive Chairman/CEO National Electricity Regulatory Commission, December 2010-December 2015.[button color=”” size=”” type=”square” target=”” link=””][/button]