THE Nigerian Society of Engineers, NSE, Monday, faulted the reasons put forward by electricity distribution companies to justify bids for tariff increase, saying most figures presented by the DisCos were far from reality.
NSE President, Engr. Tasiu Gidari-Wudil who spoke to journalists in Abuja explained that rather than seek for tariff increase that utilities should reduce their payments to consultants and other operating expenses.
Engr. Gidari-Wudil noted that the figures presented during public hearings held by the Nigerian Electricity Regulatory Commission, NERC, last month showed that there was no real justification for tariff increase.
According to him, “In defending their applications, the DisCos cited changes in economic indices. Although it is the industry norm to use the CBN/NBS figures, most of the DisCos brought figures that are at variance with the current reality. Figures as high as 30% inflation was used by a leading Disco while quoting a consultancy outfit as their source. These assumptions will definitely give rise to a high WACC (Weighted Average Cost of Capital).
“While citing changes in OPEX expenditure as the basis for their request for review, most of the licensees failed to justify the request since they did not show evidence of any increase in their circuit length, transformer numbers, increase in their staff salaries and numbers, increase in their metering and customer numbers, etc.
“It was also observed that the DisCos spend a substantial amount of their approved OPEX for payment of consultancy services and technical partnership payments that do not translate to any operational efficiency.
In all the presentations by the DisCos, none of them came with verifiable evidence of their contracted feeder Supply Availability Index to warrant or justify the feeders upgrade and or customer reclassification proposed”.
NSE therefore urged NERC to ensure that “licensees are only allowed prudent and justifiable cost escalation, as the pass-through costs only. Licensees should be made to look inwards and reduce their expenses on operational line items such as: payment for technical partners, payment for consultants, payment for vending services/ billing and collections, an over-bloated payroll, payment for concession services that the staff can provide, and heavy management and board expenses”.
The NSE President stated that the WACC should be prudently calculated for the industry “and even at that, no licensee should be allowed a new CAPEX review now as they have not demonstrated any firm capacity and commitment in the execution of the earlier approved CAPEX”.
Engr. Gidari-Wudil said while group backs the decision of the Federal Government to remove subsidies on petrol, the government should have put the mitigating mechanisms in place before the removal of subsidy from the budget.
“The announcement of plans for palliatives at this point that Nigerians are already in penury is ill-conceived”, he declared.
