The Nigerian Society of Engineers (NSE) has stated that it is faulty and illogical for energy distribution firms (DisCo) to use a 30% inflation rate as justification for raising electricity rates.
Tasiu Sa’ad Gidari-Wudil, the president of the society, said this yesterday in Abuja. He added that while it is standard practice in the industry to base tariff adjustments on data from the Central Bank of Nigeria (CBN) and the Nigeria Bureau of Statistics (NBS), the majority of DisCos use data that is out of step with the state of affairs at the time.
A high weighted average cost of capital (WACC) could result from the assumptions, according to the National Umbrella Association of Nigerian Engineers, who also claimed that most DisCos use consultancy firms as their sources.
“While citing changes in operating cost (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 increase in their circuit length, transformer numbers, increase in their staff salaries, increase in metering and customer numbers.”
“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,” the author noted.
The Nigerian Electricity Regulatory Commission (NERC) is being urged to ensure that licensees are only permitted prudent and justifiable cost escalation, but the NSE pointed out that none of the DisCos has provided verifiable proof of their contracted feeder supply availability index to support or justify the proposed upgrades to the feeders and/or customer reclassification.
According to Gidari-Wudil, DisCos should have a smooth, automatic system in place in their vending server to allow refunds to all customers who bought meters under the MAP or another arrangement.
The NSE President stated that the organization has not yet been contacted for comments regarding the government’s initiative to promote the use of compressed natural gas (CNG) as a fuel alternative.
He pointed out that using CNG as a practical alternative fuel has many benefits, including cleaner burning and reduced levels of dangerous emissions.
“Incidentally, the NSE has four divisions under its fold that have relevance to the subject matter of conversion from PMS to CNG. Therefore, We have mandated the leadership of the Automotive/Locomotive Engineers Institute of Nigeria (AutoEI), the Nigerian Institution of Mechanical Engineers (NIMechE), the Nigerian Society of Chemical Engineers (NSChemE) and the Nigerian Institution of Petroleum Engineers (NIPetE) to tackle this challenge by developing practical solutions for effective conversion from PMS to CNG,” Gidari-Wudil said.
