Allow cost reflective tariff in states with financial capability – Lagos

Olawale Oluwo, the Lagos state commissioner for energy and mineral resources, has called on the government to rethink the current uniform electricity pricing nationally and allow states with financial capability to pay for the appropriate price for electricity to improve sector liquidity.

Delivering the keynote address at the 8th edition of 8th PwC Nigeria annual power and utilities roundtable held in Lagos on Thursday, Oluwo said that, investments can only happen in the sector when there is a sustainable value proposition.

“The electricity sector as it is currently cannot attract investments because of challenges of transmission, distribution and generation. To solve the problems, let us start with cost reflective tariff. The government should focus on decentralising the power sector and group states together in embedded generation allowing those who can to pay a cost reflective tariff,” said Oluwo.

A panel discussion elaborated on the difficulty operating in an environment where the cost of producing power is lower than the cost of selling it. The government cannot afford to treat electricity as a social service or allow other considerations beyond market prices guide electricity tariff.

Panelists at the roundtable include Funke Osibodu, managing director of Benin DisCo, Amaechi Aloka, a deputy director at BPE, Femi Akinrebiyo, a principal investment officer at International Finance Corporation, Mohammed Gur, managing director of Transmission Company of Nigeria, Dafe Akpeneye, commissioner, legal and compliance at the Nigerian Electricity Regulatory Commission and George Oluwande, CEO of Sahara Power Group. PwC’s Pedro Omontuemhen moderated the session

“When Rockefeller started his electricity business, he started with industries that could pay and the 10 top richest families in New York. If he had started with the poor, then the business could have gone bankrupt. This is what we forget here in Nigeria, when we try to create a market. You need to start with somebody who can pay,” said Akinrebiyo.

Dafe Akpeneye countered this position by saying that electricity has become a key component of modern living and a government cannot deny a segment of the citizens. He rather called for investments in offgrid projects.

Speaking on the issue, Funke Osibodu said: “Pricing and the way the pricing is being regulated is an issue: the pricing that ensures that the people that are in that chain have sustainable process.”

Osibudo cited examples of some embedded projects in the states that failed to take off due to pricing issues. “So there is a need to change certain parameters that will force the system to work and the parameter is simply pricing in a way that looks at the end user and develops a pricing that can work.”

ISAAC ANYAOGU