The Nigerian Society of Engineers (NSE) has raised concerns regarding the justifications presented by electricity distribution companies (DisCos) for proposed tariff increases. NSE President, Engr. Tasiu Gidari-Wudil, expressed doubts about the accuracy of figures provided by the DisCos, arguing that these figures did not align with the actual situation.
Engr. Gidari-Wudil advised that instead of seeking tariff hikes, utilities should focus on reducing expenses related to consultants and other operational costs. He cited data from recent public hearings conducted by the Nigerian Electricity Regulatory Commission (NERC) that indicated insufficient grounds for tariff adjustments.
The NSE President pointed out that while DisCos referenced changes in economic indicators to support their applications, their use of figures deviated from current realities. Some companies employed figures such as a 30% inflation rate, citing a consultancy firm as the source. This approach, he warned, could lead to a higher Weighted Average Cost of Capital (WACC).
Regarding requests for tariff increases based on changes in operational expenditures (OPEX), Engr. Gidari-Wudil stated that many license holders failed to substantiate these requests with evidence of increased infrastructure or operational improvements. He also highlighted that a significant portion of approved OPEX funds were being allocated to consultancy services and technical partnerships that did not translate to improved operational efficiency.
In the context of presentations made by DisCos, it was noted that none of them provided verifiable evidence of contracted feeder Supply Availability Index (SAI) to support proposed feeder upgrades or customer reclassification.
The NSE called upon NERC to ensure that cost escalation was justified and prudent. Licensees were encouraged to internally curtail their expenses on operational items like technical partners, consultants, vending services, payroll, and management expenses. Additionally, the NSE President emphasized that the calculation of WACC should be prudent, and new CAPEX reviews should not be granted to licensees lacking demonstrated commitment to previously approved CAPEX projects.
Engr. Gidari-Wudil also addressed other matters, such as the removal of subsidies on petrol by the Federal Government. While the NSE supported the decision, he suggested that mitigating measures should have been established prior to the subsidy removal to alleviate the burden on Nigerians.
Regarding Cameroon’s decision to open the floodgates at Lado Dam, the NSE acknowledged that floods could not be prevented but emphasized the importance of managing and minimizing their adverse impacts.