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This study examines the responses of consumers to power supply in Akwa-Ibom state, case study Uyo and their preferences of billing methods of electricity consumption. Specifically, this study: Measures the level of satisfaction consumers derives from power consumption; identifies the factors that prompt the preference of billing medium among electricity consumers; identifies the factors that discourage potential consumers from using prepaid meters; and identifies the factors that discourage potential consumers from using estimated bills using households in Akwa Ibom state as a case study. To achieve the specific objectives, this study employs descriptive analysis; Chi Square test and Multiple Regression. The study found that the majority of electricity consumers are dissatisfied with the quality and quantity of services provided; the major factors that prompt the preference of billing medium among electricity consumers include: default condition; what consumers see other people do; comparative advantage over other mediums; and recommendations that they get from similar people; Amongst others, the factors that discourage prepaid meter users are: low value of power units; the problem of limited number of power phases; high cost of maintenance; malfunctioning of the system; and high cost of installation; and amongst others, the factors that discourage estimated bill system users are: high cost of bills which they tag as inflated bills; inflexibility in electricity consumption and bill payment; and payment for poor services (not pay as you use).
1.1 Background to the Study
Energy in its different forms is a very useful and valuable commodity. It is one of the common needs which aid the carrying out of man’s daily activities. Just as every other commodity, energy is a consumable product whose demand is very high and in some cases as in developing countries, the demand for energy outweighs the supply. This however depends on the source, and the technology adopted to produce and transform it to a consumable state because energy in its raw from is useless to the final consumer. This makes the energy sector one of the most important sectors in any economy in the world. This is also due to the fact that every other sector directly or indirectly depends on the energy sector for operation and efficiency. By extension, a vibrant and effective energy sector is necessary for any country that wants to be highly industrialized carrying out large scale of manufacturing activities which will lead to sustainable increase in economic growth and development in the country.
Energy production and transformation depends on the level of technology adopted for production, which is why countries that have a high level of technology encounter minimal issues in their energy sector which also boosts production and supply of energy. Consequently, when the demand for energy products is higher than the supply, the price of energy is bound to increase unless in a situation whereby this sector is monopolized by the government and treated as a welfare commodity such that it is subsidized. For the purpose of this study, the focus is on electricity as a commodity whose preference of consumption has been quite skeptical due to the manner of service delivery accompanied by the cost of consumption.
Electricity production and distribution in Nigeria from inception had been treated as a public good, hence it was owned and controlled totally by the government under the regulatory body called National Electricity Power Authority (NEPA). They were responsible for production and distribution of electricity to the consumers. Electricity generation started in Nigeria in 1896 but the first electric utility company, known as the Nigerian Electricity Supply Company, was established in 1929. The National Electric Power Authority (NEPA) was a Nigerian government corporation that acted as the virtual sole provider of electricity in the country for a long time. The company's dominance of the power system in Nigeria started in 1972 with the merger of the Electricity Corporation of Nigeria and the Niger Dam Authority. However, towards the mid-1990s, licenses were given to private power generating companies. The Federal Electric Power Reform Act of 2005 further deregulated the sector splitting NEPA and leading to the change of name from NEPA to the Power Holding Corporation of Nigeria.
It operated as a vertical integrated utility company and had a total generation capacity of about 6, 200 MW from 2 hydro and 4 thermal power plants. This resulted in an unstable and unreliable electric power supply situation in the country with customers exposed to frequent power cuts and long period of power outages and an industry characterized by lack of maintenance of power infrastructure, outdated power plants, low revenues, high losses, power theft and non-cost reflective tariffs. In the year 2001, the reform of the electricity sector began with the promulgation of the National Electric Power Policy which had as its goal the establishment of an efficient electricity market in Nigeria. It had the overall objective of transferring the ownership and management of the infrastructure and assets of the electricity industry to the private sector with the consequent creation of all the necessary structures required to forming and sustain an electricity market in Nigeria.
In 2005 the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises of the 18 successor companies (6 generation companies, 11 distribution companies and 1 transmission company) created from NEPA.
In 2010, the Nigerian Bulk Electricity Trading Plc (NBET) was established as a credible off-taker of electric power from generation companies. By November 2013, the privatisation of all generation and 10 distribution companies was completed with the Federal Government retaining the ownership of the transmission company. The privatization of the 11th distribution company was completed in November 2014. (NERC, 2015)
The instability of power supply in Nigeria is major problem that have lingered in the country for quite a very long time. Despite the amount of investment in this sector, most regions in the country barely consume power for at least 1 hour in a day, while others may be deprived of power for at least totally 2 weeks in a month. This has caused dissatisfaction between the consumers and the producers and resolved to the consideration of alternatives for power production which is evident in the amount of generating plants that are being imported into Nigeria. In the year 2015, Nigeria imported a total of 28,678 power generating units worth over $185.5 million (about 40.8 billion). Besides, importation of generator sets in Nigeria is forecast to see growth rates of 8.7% driving up market volume from $450 million in 2011 to reach $950.7 million (N209 billion) by 2020. (NBS 2015)
Despite the fact that Coal, oil, gas and hydro power which are good sources of electricity are abundant in Nigeria, Nigeria mostly employs gas-fired and hydroelectric turbines for bulk generation, with oil being too expensive and coal-fired stations having gone moribund. This has a negative effect on the production of electricity in the country. The three chains of electricity generation, transmission and distribution have always posed serious challenges from the outset. Long before the privatisation of the sector by the government, the challenges have lingered from the era of power managements under the defunct Electricity Corporation of Nigeria (ECN), the National Electricity Power Authority (NEPA) and Power Holding Company of Nigeria (PHCN) Plc. For many years, especially towards the end of the Nigerian second republic, the company was plagued by frequent collapses in its transmission lines leading to instability in its grid system and power outages, it also had to battle with inefficiency in planning, management and maintenance and losses due to government debt and lack of proper pricing. The inability of the firm to guarantee constant power supply has been a bottleneck in the manufacturing sector where many firms resorted to providing for their own power infrastructures. (1) These problems also earned the company aliases such as Never Electric Power Again and No Electric Power Anytime.
By the end of the 1980s, the company, the company was only transmitting about half of its total installed capacity. NEPA had statutory obligations sometimes contradictory and were rarely met before its extinction. Originally designed to be a self-financing company remitting dividends to its owner and to provide constant electricity to consumers and expand electricity provision to all local governments in Nigeria. Most of the financial and developmental goals were not met
The preference of power service delivery in Nigeria is supposed to be fully determined by the consumer in question but this seems no to be the case. An average consumer of any commodity would not in any way want to either pay for what he or she has not consumed at all or pay more than the value of electricity consumed. Therefore, some consumers prefer to pay as they consume while some consumers prefer to get an estimated monthly bill because they tend to consume even more than what they pay and they also stand a chance of informally reducing the cost of their bills. Altogether, the challenges encountered in this sector are the major causes of dissatisfaction among the consumers and this has led to most of them hoping that there had been an alternative to the current service providers that they would switch to. Ideally, the market for power supply is purely monopolized in the country and being an essential commodity, this has led to severe exploitation of their customers. Power suppliers know for sure that there is no other alternative that the consumer has, therefore no matter the ill-treatment that the consumers receive; they have no other place to run to other than the same providers of the commodity. Thus, a form of poor service delivery, consumers are being issued over estimated bills and for those who prefer using digital meter, they system is regularly adjusted in the direction of reducing the real value of units consumed. Thus, in both ways, the consumer is still being disadvantaged. Many argue that the level of exploitation in the power sector is not just a one party affair rather; it comes from both the producer and the consumers as some of them that use prepaid meters by-pass power production from the meter. In this way, they get to consume power but not pay for as much as what they consume. Also, the customers that prefer estimated bills have a way of informally negotiating with the power production and distribution staff to reduce their estimated electricity bills to a minimal level therefore, evading full payment of electricity bills.
However on a plain field, what method of service delivery that a customer prefers depends on so many factors which could include, the number of hours of electricity supply in the consumer’s environment, the home appliances owned by the consumer and the amount of time that the consumer spends to consume power. These are all assumed factors on a rational basis. There are several other factors that determine the preference of a consumer on service delivery which can be determined by carrying out an investigation into this issue.
1.2 Statement of the Problem
The problem of power shortage in Nigeria has been lingering for a very long time and it seems as though every effort to remedy this situation seems futile. The production and distribution of electricity in Nigeria has been ineffective and inefficient over the years, this is traceable from the manner at which the process of supply and payment is organized. Previously and usually, the problem of market failure is always triggered by Welfarism and the free riding nature of consumption of public goods. Undoubtedly, when electricity production and distribution was fully owned and controlled by the government, the cost of bills was not as high as it has been after the privatization. This was so because as a public good, the government deemed it fit to control price of electricity based on an average consumer’s minimum wage and other factors. Just as most of the public enterprises, there was no efficiency and stability in the production and supply of electricity in Nigeria and the effect of this was highly registered on the consumers of electricity in Nigeria. However, so many of the consumers capitalized on the disorganization of this enterprise and resulted to exploiting the producers of electricity, since it was a public good.
The privatization of power production and distribution in Nigeria was a bold step that needed to be taken towards instilling efficiency in the power sector in Nigeria, the main aim of the privatization was for a proper organization of the energy sector to monitor and ensure the efficiency in production, distribution, and consumption of electricity in the country. Indeed to a certain extent, this has been achieved; however, there are some factors that are militating against the full achievement of efficiency in this sector. One of these stems from the fact that as a public-private partnership setting, some of the government power field workers were retained and some of them are still party to the inability of electricity producers and distributors to fully achieve efficiency in this sector. Having gotten to a system whereby nobody cares for efficiency rather, self-interest, most of the retained field workers still carry out some dubious activities within this sector regarding supply and billing of electricity to the consumers. By issuing a token of bribe, some customers enjoy very low bills whose deficit now becomes a surplus to another consumer or sometimes not even settled and the company ends up at a loss.
On the other hand, just as any other private enterprise, the main aim is profit maximization and cost minimization and this is done devising various means such as issuing inflated electricity bills to the customers, not supplying sufficient power to the consumers, and threats of disconnection if the customer refuses to pay the issued bills. With no particular method of billing, the issuance of estimated bills has been an issue of controversy between the power producers and consumers in Nigeria and this have led to many consumers weighing their options of either using a prepaid meter or accepting estimated bills. Many nationals who do not primarily live in the country at all times have laid many complains concerning the amount of bills issued on a house whose household rarely live there to consume their services. Therefore, it is clear that estimated bill is not based on consumption of electricity rather on an estimation that has to do with the power capacity of a particular location. This is not fair because of the inequality in the income of the residents there.
Vandalism is another issue that is regularly faced in this sector. at most times, this is commonly done by the same workers in the power production and distribution sector or maybe by people clued by the internal staff of power distribution. The effect of this is commonly felt more by the consumers of electricity as the level of discomfort caused by the vandalism will prompt the consumers to pay for damages that they to a certain extent know nothing about. This is another form of exploitation of electricity consumers in Nigeria.
1.3 Objectives of the Study
The major objective of this study is to examine the responses of consumers to power supply in Nigeria and their preferences of billing methods of electricity consumption. Specifically, this study seeks to:
1. Measure the level of satisfaction consumers derive from power consumption;
2. identify the factors that prompt the preference of billing medium among electricity consumers;
3. identify the factors that discourage potential consumers from using prepaid meters; and
4. identify the factors that discourage potential consumers from using estimated bills
1.4 Research Hypotheses
Based on the objectives of this study, the following research hypotheses have been formulated and presented in its null form
H01: electricity consumers are dissatisfied with the electricity service provision;
H02: there are no factors that prompt the preference of billing medium among electricity consumers;
H03: There are no factors that discourage potential consumers from using prepaid meters
H05: There are no factors that discourage potential consumers from using estimated bills?
1.5 Scope of the Study
This study is on the Nigerian society. Specifically, it focuses on households and businesses in Akwa Ibom state, Uyo metropolis. This study will cover major issues facing the power sector in terms of production and distribution of electricity to the consumers as highlighted in the objectives of the study.
1.6 Significance of the Study
This study will be very useful to both the producers and consumers of electricity in Akwa Ibom state and beyond because it will provide vital information that will guide the daily activities of the producers, distributors, and consumers of electricity. Also, it will guide the preferences of the consumers regarding their choice of service delivery which has to do with the billing process. This study will be of immense benefit to the National Electricity Regulatory Commission (NERC) as it will guide them on how to resolve some certain issues affecting the production and consumption of electricity in Akwa Ibom state and Nigeria at large. This study will also serve as a reference material to students and other researchers in the field of economics and other areas of specialization that is related to the subject of this study.
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