Power sector: Held down by old habits

• Excuses, Liquidity Challenges Threaten Power Sector Projections
• We Have Addressed Bottlenecks, DISCOs Must Now Perform — NERC

Despite assurances from government and industry operators, electricity supply has taken a consistent dip amid attacks on gas installations from resurgent militants, threatening President Muhammadu Buhari administration’s resolve to provide reliable energy to the populace.

President Buhari recently made a pledge to add extra 10,000mw to the national grid by 2019. While stakeholders applaud government’s resolve, the reality on ground casts doubts on the feasibility of the plan.

At the heart of the concerns are the many excuses of the generation, distribution companies and the Transmission Company of Nigeria (TCN) over their inability to deliver efficient and reliable electricity supply to Nigeria’s residential, industrial and commercial consumers.

Amid this, consumers, who contend with poor power supply, are daily harassed with estimated bills, a system sustained partly by the inability of distribution companies to provide prepaid meters.

On the February 2, Nigeria attained the highest ever level of electricity generation of 5074 MW, in what was seen as a giant leap in the right direction, signaling the beginning of the march to reaping the fruits of privatising the sector.

However, since then, and as if to put a lie to Nigeria’s ability to break the jinx of ‘darkness,’ power supply has dwindled constantly.

And the old excuses have resurfaced, along with the onslaught on gas installations in the Niger Delta, a development that renders much of the gas-fired power stations without fuel for operations in the last few weeks.

Minister of Power, Works and Housing, Babatunde Raji Fashola, echoes industry-wide explanations, noting that the sharp, steady decline in supply is traceable to “deliberate vandalisation of oil production platforms and pipelines and gas supply lines.”

In a recent speech, Fashola noted that “I must emphasise that everybody, who cares about our prosperity, must get involved in this conversation and act positively to help to bring an end to the unpatriotic actions of those who attack our oil platforms and gas lines.”

The Minister spoke of efforts to reduce the risk of vandalised pipelines to power supply, noting, “We are working hard to stimulate the use of solar, and we are accelerating plans to complete Zungeru Hydro power plant, the kashimbilla hydro plant, the Gurara hydro plant and conclude the procurement plan to start the construction of the Mambilla hydro plant

“At a time when the world is in dire pursuit of clean energy to mitigate the impact of climate change and global warming, gas fired plants provide a useful source of quick, large capacity electricity plants, which can take us faster to our roadmap of incremental power.”

It is not immediately clear how soon these initiatives would add to achieving government’s 10, 000 megawatts target, especially considering that hydro power plants take years to construct.

However, on their part, the nation’s 11 distribution companies lament how government’s delay in approving a cost reflective tariff contributed to the downtime in the sector.

Liquidity challenge and difficulties in procurement, they argue, need to be addressed for expansion, adding that Nigeria would have to generate, transmit and distribute 20,000mw of electricity in the medium time to have stable electricity supply in many parts of the country.

To achieve this, they say a whopping sum of $40b would be required to boost investment and strengthen the networks across the three level value-chains and have sought government’s approval to enable them approach global lenders to secure the facility.

Concerned about the plight of operators, the Federal Ministry of Power, Works and Housing initiated moves to raise a Federal Government-secured bond of N309b using the Nigeria Bulk Electricity Trading Company (NBET), allegedly to cover the market shortfall made up of N187b accrued in 2015 and N122b projected shortfall for 2016.

But the House of Representatives has frowned at the moves and called for it to be stopped.

The DISCOs also point to how debts — put at about N78.6b as at April — owed by Ministries, Departments and Agencies (MDAs) of government, including the military and paramilitary organisations, negatively affect their operations.

Worried over this, distribution companies have called on the National Assembly not to cancel the N309b proposed bond to the sector.

Speaking under the umbrella of the Association of Nigeria Electricity Distributors (ANED), the DISCOs said the fund was needed to support the sector to come out of its liquidity challenges, as well as, ultimately help government in realising the dream of improved capacity utilisation in the industry.

The Director of Research and Advocacy for the group, Barrister Sunday Olurotimi Oduntan, said the bond was a legitimate request and should not be stopped, noting that the challenges with power supply are not unconnected with the vandalisation of gas installations.

Noting that the industry suffers from government’s reneging on funding agreements, Oduntan noted: “Recently, the National Assembly called for the stoppage of the N309billion fund for the sector. The fund is legal and the National Assembly should not cancel it. The current MYTO (Multi Year Tariff Order) for the privatized industry is modeled after that of New Delhi in India. Government ought to have provided some funds to close the gap in the first two years after handing over. But it was not done.”

On the poor state of power supply in the country, Oduntan said: “DISCOs can only distribute what they get from the system operator. Vandalism has caused so much harm to the power sector. I apologize to Nigerians who are paying their bills on this.

“Until we get to 20,000mw, power may not be enough for the current population. 5,000mw can never be enough for over 160million Nigerians especially for those who are connected to the national grid now.”

Highlighting problems associated with transmission, he said some of the equipment were obsolete and needed revamping, noting, “Kano has not been getting its full 8 per cent load allocation from the grid. A transformer belonging to the Transmission Company of Nigeria (TCN) has been out for about two years now, but I am glad it has been put into the budget.”

He said though metering gap persists, many more DISCOs were rolling out plans to correct the situation, adding: “Some people say we deliberately inflate bills, but electricity bills are not just generated. They are done using the estimated billing methodology approved by the Nigerian Electricity Regulatory Commission (NERC).”

The DISCOs, he said, are the most willing party to meter customers so they can cut down the cost they bear on energy theft, adding that there was need for enumeration to determine customer strength, an exercise that needs funding.

Noting that a DISCO would need N2b for customer enumeration in just one state, he said, “We have been publishing notice to customers for disconnection. We are targeting historical debtors to cut them off from power supply after we must have given them 10-day notice. This is because such debts have accumulated and there are no signs that they are coming to clear them off.”

On challenge of debtors, he said: “Abuja DISCO is recording the highest of N18.6b debt; Yola DISCO is owed the lowest debt of N2.4b. While the DISCOs were owed N39.150b before privatisation, another debt of N39.525b has been accumulated since November 2013.

“Military and paramilitary formations were identified as the highest debtors amounting to N45.146b for the 11 DISCOs. Of this figure, the Nigerian Army alone owes N38.755b as at April, 2016. The Air Force has the lowest debt of N3.092bn. The Police owe an electricity debt of N4.660b while other paramilitary agencies owe N241.757million, the record shows.”

A bulk of the $40b required to guarantee at least 20,000mw in the medium term indicates that the amount would be needed for generation and capital expenditure; reconditioning generation equipment, reconditioning of NIPP equipment; new power plants construction; new gas pipelines and buyout of NIPP capital.

He absolved the distribution companies of blame in the current drop in power supply, noting that the development was largely because of vandalisation of gas facilities in the Niger Delta. He called security agencies to rise to their duty and arrest the situation.

On how the DISCOs are designed to work and ensure that Nigerians have the luxury of choice in the near future, he said, “The current state of power supply is not our fault as DISCOs. The reform process is a very long journey. We are just on step two of a five-step journey. By the time we get to the final step of that journey, there will be a total revolution of the power sector.

“For instance, in other climes, you can stay in Abuja and choose to have your power supplied from Ikeja DISCO. You can change your service provider if you wished. It is like being on Etisalat and wanting to change to MTN and you just remove the SIM and change to the other. But that is a long way off for us in Nigeria.”

Acting Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Anthony Akah, insists that DISCOs have no excuse not to perform.

On excuses by DISCOs, he stressed: “The initial problem was that they said they did not have a cost reflective tariff and their performance agreements were predicated on having that tariff. Those things are no longer excuses for us, as far as we are concerned.  We have done a critical analysis of the metering so far done since they took over and it was glaring that they have not done anything significant.  As regulators, we have, to a great extent, provided the necessary environment for distribution companies and operators in the sector. We have a reasonable tariff now. We have also gone beyond our regulatory purview to trigger a CBN intervention fund that came in, working with other stakeholders.

“We have gone to the point of also helping DISCOs, hopefully, to be able to have their MDAs debts taken care of. We are hopeful that with the scheme that we are working with alongside the permission of the Minister of Power, the Minister of Finance and the Office of the Vice President, we are hopeful that the framework would help address the MDAs debts.”