There is no gainsaying that as time passes by, the hopes for a better power system may have eroded off the minds of the average Nigerian, as he is forced to go for the cheapest and affordable alternative, the little Tiger brand generator popularly called ‘I better pass my neighbour’.
Since the new administration, little or no meaningful development has been recorded in the power supply network. More troublesome is the ongoing blame game among major investors or operators, especially the distribution companies (DISCOs), that link their failure to meet up demand to power debt, currently put at over N93 billion.
This debt ranges from unpaid electricity bills over the years from the Ministries, Departments and Agencies (MDAs) alone.
However, there may be cause for celebration as the Power Ministry has promised to offset about N78.7 billion of the MDAs’ debt before the end of the year. The Minister of Power, Works and Housing, Mr Babatunde Fashola announced that the Federal Government plans to pay off legacy electricity debts owed to the 11 DISCOs by its MDAs, before the end of the year.
In a document obtained by our source, the Minister was quoted as saying that government must live by example if it expects its citizens to do the right thing. A breakdown of the debt profile shows that the Nigerian Army is the largest debtor with about N38 billion as at April ending, followed by the Police with N4.66 billion, Navy N3.3 billion, Airforce N3.09, Prisons N895.6 million and Customs 528.78 million.
By default, the country’s power supply has over the years lost more than it has gained by not operating on alternative or embedded power generation, such as solar, coal, wind, as well as other generations, away from current systemic structure of ‘gas to power’ and the national grid.
Going by current realities, there are arguments that investors currently operating in the country’s power sector, like the DISCOs, generation companies (GENCOs) and the Nigerian Gas Company (NGC) may struggle more with the log of debts owed them by the MDAs.
Investigations carried out by our source showed that as business entities, there are negative returns of investment, as they are currently exploring other investors outside the chores of the country where viability and profitability will emerge.
On the contrary, operators had a breather recently, when the Ministry of Power announced plans to offset its debt to about 90 percent before the end of 2016. While the failure of government to pay its electricity debt shows that the nation has been pursuing power sector reform the wrong way, this has offered the DISCOs a ready-made excuse for their inadequate capital base, “crazy” and estimated billing and refusal to meet deadlines on pre-paid meter installation.
The implication of this trend means that it is the general electricity consumers that are subsidising the power firms’ inefficiency and the MDAs’ chronic indebtedness. Contrary to their claims, regular power supply continues to go to these debtors, as the military alone enjoys between eight and 15 hours of electricity daily, leaving the ‘loyal’ electricity consumers to continuously pay for service not rendered.
It is obvious that the business environment for private-sector driven electricity market is still far-fetched. With an installed generating capacity of about 7,500MW and operating capacity of 4,000MW, according to PricewaterhouseCoopers, electricity power in Nigeria has been a major hindrance to economic diversification and growth. The hope that a market-oriented reform will turn the sector around is fast disappearing.
Nigerians are being persuaded to believe that these debts hold greater hunch to why power supply is left in a state of comatose. But, going by current realities of what business environment is defined and the rules that guide its operations (and how such are being played to the Nigeria electricity customers through bills that are both estimated and pre-paid), the truth may be far-fetched from what it seems to be.
Ironically, Nigerians are constantly drawn to the notable debts owed the sector, without critical evaluation of how such funds are hindering the operators from achieving a robust and fortune-based power sector, away from its downturn currently experienced.
Other parts of the report raised (but don’t necessarily answer) important questions. By default, the people are meant to believe that the Federal Government is to be blamed and held accountable without the watchdog of these operators, who having come into the industry, should have evaluated these excesses and planned a strategic means of cutting or minimising these risk.
Investigations carried out by our source showed that minimal investment has been made in the development of the power sector without the push from the regulators. It was also uncovered that investment made in the power sector by the DISCOs averaged 35 percent. This was captured on projects ranging from cables, transformers, poles, metering, infrastructural development, employment, etc.
Further investigations revealed that improved power supply stands at five percent which is continually blamed on supply from the Transmission Company of Nigeria (TCN), that is vastly distorted by eruptions from the pipelines supplying gas to the power plants.
Despite these low investment output from the DISCOs against expectations from the consumers, the Eko Electricity Distributon Company (EKEDC) for example, has stood at the peak of an average of 10 percent worth over N50 billion investment.
Our source, however, gathered that these deficiencies to meet targets affected some of the DISCOs from being short-listed to receiving credit loans from the Central Bank of Nigeria (CBN).
It is on record that CBN, not intending to be a whistle blower, had initiated a N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF) as a follow up to commitments it reached with other stakeholders to address debts owed by the GENCOs to gas suppliers. The loan was given at an interest rate of 10 per cent, with a repayment period of 10 years.
So far, CBN has disbursed a total of N120.2 billion to different DISCOs, GENCOs, service providers and gas companies. The 4th tranche of the disbursement, which is under the N213 billion NEMSF, was made in Lagos recently. The latest disbursement totaling N55.5 billion went to 24 industry participants including three DISCOs, 14 GENCOs, one service provider and six gas companies.
Notably, the GENCOs revealed that there was execution of capacity recovery programmes in three hydro power stations including under water repair project, overhaul of Unit 4 and compliant metering and supplementary protection at Shiroro Dam; overhaul of 2G6 at Jebba Hydro and rehabilitation of three units at Kainji Dam under permitted utilisations of the facility.
This, according to them, transcended to an increase of 300MW capacity. This was as a result of fund utilisation towards rehabilitation of both plants.
Going further, the intervention has enabled the DISCOs to provide bank guarantees to the Nigerian Electricity Bulk Trader (NEBT); purchase of over 171,071 units of meters comprising both maximum demand and single phase meters; rehabilitation of over 332kms of 11kv lines and 130km of 0.45kv lines; 70,310kva transformers procurement; and construction of 34 new distribution substations and acquisition of one mobile injection substation.
Regrettably, the privatisation of the DISCOs in 2013 has not achieved the intended objectives so far. The much needed improvements and investments have not seen the light and may not happen anytime soon. This is also despite an adjustment of electricity tariffs three times since the conclusion of the privatisation process in 2013, with the latest adjustment being a 45 percent tariff increase, specifically in February 2016.
It will be recalled that the power assets were sold to core investors based on their proposal to reduce Aggregate Technical, Commercial and Collection (ATC&C) losses. Two years after and still counting, ATC&C losses seem to be increasing, rather than reducing.
Further investigations indicated that monthly revenue shortfalls in the power sector have increased from an average of N9 billion in 2015 to more than N20 billion every month.
This is being revealed by the total energy invoice to the market for the month of February 2016, which stood at N30.5 billion. The total amount received from the DISCOs was only about N10 billion, leaving a revenue shortfall of more than N20 billion owed to the GENCOs and other market participants.
While the privatisation of the Power Holding Company of Nigeria (PHCN), predecessor to the GENCOs has been relatively successful when compared to the DISCOs, the fact that the GENCOs are owed billions in energy sold to DISCOs threatens their ability to recover more generation capacity, their credit worthiness and their continued existence as going concerns.
Going by propositions set out by the Federal Government through the Minister of Power, Works and Housing, as a mechanism to cleanse the industry off its deficiencies, experts have argued that if only working on the clock of just power sector alone, the country could be confident and assured on the workable delivery plan of his office.
Moreover, it is of a great priority that the nation constantly emphasises continued sectorial reforms in the power sector, particularly the power sector privatisation, and build on the little achievements of the privatisation so far recorded.
The Minister articulates his roadmap for change as
*Achieving incremental power
*And uninterrupted power.
Let’s look at each of the stages of the Minister’s roadmap for change to properly assess their practicability in addressing Nigeria’s electricity challenges.
Following this structural repositioning or scheme through which the sector can function to its peak and produce a drive to power stability, it is in perspective that the regulatory arm of the power industry, the Nigerian Electricity Regulatory Commission (NERC), and others should buckle their seat belt and ensure that operators are monitored as well as activities scrutinized by the book.
Going by the document obtained by our source from the Ministry, in achieving incremental power, Mr. Fashola’s main goal is to look at solving the problems of the past and in addition, addressing the hitherto “small things” done poorly in the past, in a different way such that “every megawatt of power must be harnessed and made available to our people.”
These small things include poor electrical installations, poor workmanship and use of sub-standard electrical materials, poor service delivery, theft and vandalisation of electrical equipment and installations, electricity theft by electricity customers, court disputes and protests against the efficiency of the power sector in order to resolve grievances.