Perspectives On Power And Energy Transition

The recent increase in electric­ity tariffs, sanctioned by the Nigerian government, has drawn the ire of many Nige­rians, and rightly so. In an attempt to ward off criticism of the increase at a time of unprecedented hardship over the cost of living, the Nigerian gov­ernment and its strategists claim that the increase is basically for the elites, otherwise tagged ‘Band A’ consumers. The increase, about 300 percent, was therefore aimed at dividing consum­ers along income lines.

But this excuse immediately falls like a pack of cards when examined, even in its face value. The use of the band system as a way of supplying and surcharg­ing consumers is a form of eco­nomic apartheid. Giving a certain percentage of the population lon­ger hours of electricity supply be­cause of their ability to pay is not only illegitimate and unjust but also anti-development. It clearly gives the electricity companies (Discos and Gencos) an alibi to avoid improving facilities, pro­duction and supply since their profits are guaranteed by a cer­tain layer of consumers. That the government will back this policy shows whose interests the gov­ernment protects. It is one thing to give some priority to certain critical sectors, such as public institutions (health, education, security, etc.) and important eco­nomic sectors, at a time of limited production and supply; it is an­other thing to segregate consum­ers on the basis of their ability to pay more. Even such a policy of prioritizing critical sectors will only be a temporary and short-term one and not a permanent one, upon which all other policies will be based.

Secondly, the idea that the tariff increase is only meant for those who can afford it betrays the real intention of the policy. There is no demographic data to show that poor and working-class people do not live in areas desig­nated as ‘Band A’. Even if the in­crease will affect only the upper middle class and big businesses, simple economics made us under­stand that this will be transferred to other social and economic stra­ta, especially the working class and the poor. More than this, the increase is only a dress rehearsal for an increase across the board because the same argument used to justify the latest increase ap­plies to other categories of cus­tomers, only that the government wanted to test the water with ‘Band A’. It is not a new strategy.

But one of the major planks of this write-up is the argument for the increase: the need to end electricity subsidies and allow for cost- or market-reflective tar­iffs. This is flowing from the idea that subsidy is altogether bad and market fundamentals must not be interfered with. This is coming from the Structural Adjustment Programmes of the Bretton Woods institutions, which are actually in the service of global finance capital, the controlling arm of global capitalism. Yet, the most advanced economies and fast developing economies actual­ly implement huge subsidy pro­grammes across sectors to sus­tain the status of their economies or to move them forward. Even if a great part of these subsidies goes to the rich class, a large per­centage is still directed towards expanding their economies.

Developing countries, which mostly depend on primary prod­uct extraction, are told to avoid all subsidies, even when they are im­portant for spurring their econ­omies towards development and human development. Indeed, the best era of improvement in hu­man and economic development for developed economies hap­pened when the state directly in­tervened in the economy through essential subsidies, investment in important economic sectors, and human development, curtailing the excesses of the capitalist class and not excusing them as present­ly witnessed.

However, we need to probe this argument that there is an electricity subsidy. How do we even come about subsidy in the first place? The so-called cost-re­flective tariff is a fraud ab ini­tio. Most factors for electricity production and distribution are relatively constant: the installa­tions, transmission lines, landed properties and labour. The only variable is gas, whose price fluc­tuates at a relative price that can be accommodated within a stable tariff regime. Moreover, Nigeria, as a major gas producer, cannot sell gas at an international price for an economic-determinant sec­tor like the power sector. What a development-driven government would do is allocate a percentage of its gas resources to important sectors like power, which is sold at a discount rate to power com­panies, who in turn are compelled to reflect this in reduced tariffs and invest in modern equipment.

Rather, what you have is a con­tinuous increase in tariffs almost every year. Meanwhile, there is hardly any improvement in facili­ties, electricity infrastructure, or installations. All the distribution companies (Discos), generating companies (Gencos) and even government-owned Transmis­sion Company of Nigeria (TCN) are short-staffed such that it will sometimes take days to effect re­pairs in damaged facilities. There are no investments in modern equipment to limit electricity loss and theft. On the other hand, con­sumers are made to shoulder the responsibility of supposed pri­vate companies, including paying exorbitantly for prepaid meters, subsidizing the revenue shortfall of discos through outrageous es­timated bills and paying for the repair of electrical installations (e.g., transformers).

Worse still, the same govern­ment that was talking about end­ing subsidies on electricity has given tens of billions of naira in dole-outs and financial support to the Gencos and Discos. An in­teresting fact is that the Nigerian government still has a substan­tial share in the ownership of Discos and some of the Gencos. Yet, while the private majority shareholders are making profits and using government funds to pay off bank loans, the govern­ment, as a minority shareholder, cannot point to any gain or profit accrued to the public from these companies. Rather, the same gov­ernment is not only giving bil­lions of public funds to bail out private businesses, but it is also helping them to milk Nigerians dry through a continuous tariff hike. The Nigerian Electricity Regulatory Commission (NERC), which is supposed to defend pub­lic interests, serves more the in­terests of Gencos and Discos, who want to make huge profits with little or no investment.

Furthermore, the failure of the government to fund alternative power generation and supply, es­pecially through solar and wind energy, is part of the agenda to protect the profits of private busi­nesses in the power supply net­work. If the government embarks on a policy to power all public institutions with solar and wind power supply systems, this will reduce, in the medium and long term, government expenditure, reliance on crude oil and fossil fuels, and rapidly increase renew­able power supply uptake across the country. By directly funding production and installation fac­tories for renewable power and establishing research centres/ institutes for renewable energy, a new clean energy economy will be created that will have multipli­er effects on the economy.

A deliberate focus on invest­ment in stand-alone and non-grid renewable power for rural homes, low-income earners, and work­ers (whose income is fixed) who spend a significant share of their income on energy, will reduce the cost of living and poverty, and fur­ther spur the economy as more disposable income will be avail­able for other needs. This will also reduce pressure on existing traditional electricity capacity, and compel private electricity companies (Discos and Gencos) to be more responsible and com­petitive. But the Nigerian pro-cap­italist government will not do this because it is not in the handbook given to them by the masters in the Bretton Woods institutions.

Ultimately, guaranteeing con­stant and affordable electricity will require the Nigerian state to put the power sector under public ownership with democratic and accountable management. The current failure of the private-sec­tor-led power sector makes this more obvious than ever. But the biggest task is for the trade union movement to push genuine pro-people energy policies. It is in the interests of the working class to ensure that economic policies reduce the cost of living and in­crease living standards while narrowing the wealth gap and reducing inequality. This cannot be done through mere advocacy but as a cardinal aspect of trade union principles and agitations.

*Ibrahim, an author and Climate Jus­tice campaigner, writes from Ile-Ife, Osun State (08059399178, kmarx4life@ gmail.com)