Why PHCN Is Inefficient

Fri, Mar 29, 2013

By publisher

9 MIN READ

Eyo Ekpo, commissioner in charge of marketing, Nigeria Electricity Reform Commission, NERC, in an answer to a questionnaire sent to him by Realnews, speaks on the inefficiency of Power Holding Company of Nigeria despite efforts to make the company more effective. He also spoke on the pre-paid meter fraud and what the commission is doing to curb the situation and the role consumers can play. Excerpts. 

Realnews: Despite attempts to reform and make PHCN operations efficient, nothing has changed. Why?

Ekpo: Several reasons account for the inefficient operations of the PHCN. One of the main reasons is that the company has, over the years, been run based on weak corporate governance practices resulting in inadequate attention to operating and maintenance of facilities, corruption, poor customer services, etc. It is difficult to reverse this untoward culture within the company, especially when it is still run under public sector management with little or no incentive/disincentive to reform.

The ongoing privatisation programme is expected to change the inefficient culture within the company due to the private sector expertise engendered by the need to be efficient in order to be profitable.

In the interim, the Commission has issued regulations that are expected to improve the operations of the PHCN successor companies particularly its customer complaints handling processes. Some of these regulations include: customer complaints handling standards and procedures, customer service standards, connection and disconnection procedures, estimated billing methodology, health and safety manual, etc. These regulations have helped improve the way customers are attended to by the distribution companies, DISCOS. For instance, all DISCOS have been compelled to open a functional and well-furnished customer complaints unit, CCU, and forum offices where complaints that are not resolved at the CCU level are decided by an independent panel composed of respected people in the community.

However, until the power supply significantly improves, it is difficult for most electricity consumers to notice the gains achieved. That is why all efforts must be geared towards successfully completing the ongoing privatisation of the successor companies to ensure improved quality of supply in the Nigerian electricity supply industry, NESI.

Realnews: We learnt that there was a design error that is affecting the new tariff regime which is making some pay higher while others pay less where it ought to be vice versa. Why is it so?

Ekpo: The multi-year tariff order-2 was released in June 2012 following due consultations with several stakeholders including the distribution companies, consumer associations, industrial users, etc. There is no error in the computation of the tariff as each customer class pays a different tariff based on the characteristics of each class, e.g. consumption level/pattern, numbers, effect on the network, etc. Some of the DISCOS had complained of the merger of the previous Residential R2 and R3 customer classes to form the new Residential R2 class. As the commission was reviewing the DISCOS’ complaints, one the DISCOS actually wrote the commission to withdraw its complaint as it was satisfied that the tariff design was correct.

Realnews: How soon will this design error problem be rectified?

Ekpo: There is no tariff design error to be rectified. The main problem affecting the DISCOS is not tariff design but the failure of most of the DISCOS to collect the revenues from their customers and reduce the high level of operating cost and inefficiency in their operations. As stated above, this issue will be addressed when the ongoing privatisation of the successor companies is concluded and efficiency improvements are attained under private sector management.

Realnews: The problem of estimated bills otherwise known as crazy bills is still afflicting many Nigerians especially those using analogue and those without meters. What is your commission doing to resolve this problem?

Ekpo: The commission has designed the estimated billing methodology which is supposed to be utilised by the DISCOs in estimating the electricity bills for unmetered customers or customers with damaged meters. An example of how the methodology works is as follows: Say there are two households living on the same street, one has a prepaid meter and the other doesn’t have meter, when estimating the bill of the unmetered household, the bill should be similar or close to the bill of the metered customer. This is assuming the two households operate around the same number of electrical appliances.

The commission has also officially stated that customers who are willing and able to pay for a prepaid meter should do so and the DISCOs are required to deploy the meters within 4Sdays. Customers should be vigilant when making payments and should take down all the necessary details and evidence of payments and should report any dubious deals.

We encourage customers to always pay their bills on time. Where there are incidences of outrageous bills based on estimation, the customer should raise a complaint at the CCU of the relevant DISCO. If unresolved, the matter should go to the Forum Office within the DISCO or the Commission for resolution.

Realnews:  PHCN is an energy vendor just like operators of filling stations, which is supposed to provide all the tools it needs for its business. Why is it throwing the responsibility on the consumer? For instance, consumers pay for all services rendered by PHCN including purchase of meter, paying for maintenance of meter and that of transformer whenever it breaks down. Consumers also pay for replaced parts and repair and even transportation of the poles. The bill is always on the consumer. As the regulator, is there anything you can do to lift the burden off the consumer? And how soon will this happen?

Ekpo: It is rather unfortunate the situations mentioned happen at all. As you said, the distribution company is responsible for providing the infrastructures necessary for power supply in a particular area. It is not the customers’ responsibility at all and we want customers to report to the commission with evidence if they find themselves in situations where they are asked to pay for such equipment or service.

The power sector is poorly funded because of the high level of inefficiency in the system and we expect the distribution companies post privatisation to be more efficient and responsible in serving their customers. The commission will not hesitate to impose necessary fines and penalties on any DISCO that is found wanting.

Realnews: The regulatory agency said initially that consumers are not to pay for pre-paid meter. Recently, it has eaten its words and said consumers have to pay for prepaid meters. Why the change of policy?

Ekpo: The Commission has not changed its position but has simply given another option for willing consumers to obtain meters due to the current challenges the DISCOS are having in procuring these meters. The DISCOS’ current inability to aggressively meter their customers is as a result of the huge inefficiencies in the system particularly the high operating cost. The DISCOS are still responsible to provide meters to their customers and customers will notice the difference when the private sector operators takeover the companies. Each of the preferred bidders for the successor distribution companies has to provide a comprehensive metering plan during the bidding process based on which of their bids were evaluated.

It should also be noted that the alternative metering scheme named credited advance payment for metering implementation, CAPMI, is voluntary and customers who opt to advance funds for meters will be repaid through reduction in the fixed charge component of their monthly electricity bills over time. It is thus not a reversal of policy but an alternative scheme offered to customers who do not want to wait for the conventional method of getting their premises metered.

Realnews: Recently, consumers have complained that what they pay for energy is not what is loaded in their prepaid card. For instance, a consumer who reported to our office confronted the operators at the PHCN vending office in Magodu, they denied it. When it happened a second time and the consumer threatened to expose them, they quickly re-loaded the card. Are you aware of this computer fraud in the pre-paid electricity bill?

Ekpo: It would be difficult to answer this question without access to more information of the case. Customers’ bills consist of various components aside from just the energy charge as there is also a fixed charge (monthly) and VAT that is applied on each bill. Therefore getting to the root of this complaint will only be possible with copies of the customers bills and he/she would have to go through the appropriate channel in lodging a formal complaint at the Customer Complaint Unit (CCU) of his/her respective distribution company. Only when the customer does not get the adequate redress can he/she approach the Commission with the complaint. We assure you that most complaints are resolved at the CCU level but we will definitely deal with it at the Commission if it remains unsolved at the CCU.

Realnews: The crazy bills benefit PHCN officials because when they go to disconnect, the consumers tip them and they reconnect and the money goes into their pockets. How soon are we going to see the practice stopped?

Ekpo: The commission has issued several regulations to protect customers. However, it is the responsibility of customers to report complaints whenever they are not satisfied with any service. Customers can help themselves, the commission and the country at large by not tipping the PHCN officials. Tipping only encourages the officials to continue with this practice even though it is illegal. The commission carries awareness campaigns periodically (through Power Consumer Assemblies across the states and radio/television programmes) to enlighten customers on their rights and responsibilities. Customers are always enjoined to report cases of request for gratification to the CCUs and the Commission.

Realnews: It is said that they have privatised distribution of electricity. When will it take effect in the Lagos business district?

Ekpo: The privatisation process is progressing well. As at February 21, 2013, the Bureau of Public Enterprises, BPE, and all the 14 preferred bidders for the PHCN successor generation and distribution companies have signed the share sale agreements as well as concession agreements. Also, all the bidders, including NEDC/KEPC for Ikeja DISCO and West Power & Gas for Eko DISCO, have made the mandatory 25 percent payment of the bid value of the respective successor companies they are acquiring. With the 25 payment percent completed, the bidders are expected to pay the remaining 75 percent within 90days to complete the payment transactions. After the final payments have been made, the core investors are expected to take over the companies at the end of June 2013.

— Apr. 8, 2013 @ 01:00 GMT