Eko Electricity Distribution Company (EKEDC) Director Mr George Etomi believes the power delivery chain – from gas supply to generation, transmission and distribution – is being starved of funds. Banks, he notes, are not giving loans to firms because of the mismatch between their investments and cash flow. He tells CHIKODI OKEREOCHA and TEMITAYO AYETOTO in this interview, that the 45 per cent increase in electricity tariff is necessary to inject liquidity in the system.
Two years after power sector privatisation, are you satisfied with the level of service delivery?
The starting point is to acknowledge the fact that the privatisation is the right direction to go, because it’s very clear that the government’s involvement in delivery of services like power will never work. We saw it in the telecoms sector; Nigerian Telecommunication Limited (NITEL) was a total failure. We’ve seen the difference between when government handed off and allowed the private sector to come in. Today, government makes so much money from the telecoms sector and they don’t have to provide anything in the budget for NITEL. So, that principle is what informed the move in the power sector. The reason why the dividend has been a lot slower to manifest in the power sector is simply because while in the case of the telecoms sector these companies started on what I call Greenfield operation, in the sense that they didn’t have to inherit anything government. The technology they came with at that time was very new, which was the GSM technology. And they didn’t have to partner with government. They simply just came in and from the word go they came with their employees, the right kind of employees. They were able to deploy; they didn’t have to deal with antiquated equipment. It was therefore, very quick for Nigerians to see the dividend in that area. The power sector is phenomenally different because government has done this thing even before independence, close to 100 years. I know since 40 years there has been very little investment in the sector.
What is your greatest challenge?
Do you know many meters are bypassed per second? Electricity theft is the singular greatest threat to the reform that we are talking about. Almost every cadre of consumers including the elite are involved. Many of them consider it cheaper to corrupt the workers, bypass their meters. You see the meters rolling but not recording. People consume and don’t pay. In some communities, our workers cannot even go there to present bills, they will kill them. And if you go there and disconnect, they will reconnect, and if you go back, they will molest you. So, electricity theft is one of the greatest threats and that is because people over the years have just been used to power being like a share of the national cake. So, it is not anything to them to steal. In fact it is the good people who are subsidising the bad people in this electricity business. So, the whole system is totally starved of fund. And it is a chain. It starts from the gas supply to generation, to transmission, then to distribution. The people at the distribution are just mere collectors of money. I feel sorry for distribution companies because they are the ones that relate with the customers. They are the ones consumers abuse all the time and the money is not there. Because when they collect it, they send it up to the market operators who then distribute it to all the people in the chain; from gas suppliers, to generating companies, to transmission so that you can maintain a balance. They keep just a tiny portion, less than 20 per cent for their own operation. So you can tell from day one that the system is starved of fund. When they are starved of funds it therefore, means there is not enough money to maintain the system. That is why you see transformers breakdown, sub-stations breakdown; you hardly have money to fix it. And what is the consequence on all of us? Generators. There is hardly any home, any office, and any business that does not have one kind of generator or the other. When you look at it you probably burn more diesel than you get power from the system. So, when there is a modest price increase and everybody is screaming, who are you punishing? Who are you really helping? Isn’t it better for that person to pay slightly more and get power and not get power and be burning diesel? So we are not helping ourselves. The argument has to change. We have to educate the people. Every time someone is not paying for power, someone else is paying for it. So it’s a combination of corrupt people in the system and crooks outside. So, we must all allow this reform to work. Two years is too early to judge anybody. We are not even talking about prepaid meters anymore; we are talking about smart meters because technology has gone way beyond the prepaid meter stage. Prepaid meters are bypassed all the time. But with the new smart meters, you consumers, me provider are not cheated. That means you have to re-meter everybody. It is not an easy task. There are close to 500, 000 consumers on our network. You think about people going house by house, consumer by consumer. Do your mathematics and see how long it will take. So, when people scream it is not working, it is working. It is just that we like quick fixes. It’s almost as if the reforms meant the next time you switch on your light there will be light. No. There were problems.
Shouldn’t there be marginal improvement in electricity supply before tariff increase?
When you don’t do it (increase electricity tariff) and you burn diesel, which is more expensive to you? That is why you have to look at your energy profile as a total before you start arguing, because each time that system is deprived of funds, you are burning diesel and it’s costing you much more. In my house, we pay N250, 000 a month for diesel. PHCN brings us bill of N50, 000. So, if you ask me to pay more, why should I complain? We are just burning money and we are all victims of a cartel. It’s a cartel we are dealing with here. Just like petroleum subsidy, it’s a cartel. Many people building this argument are supporting the cartel that own generator companies abroad and are flooding Nigeria with generators. Nigeria has the highest number of generators in the world. We are not talking about the environmental pollution. That’s what we have all come to live with that we are not talking about anymore. Lung cancer and all those cancers that have to do with pollution are on the increase in Nigeria. So, why do we keep looking at a narrow spectrum? This latest increase they are talking about, do you think it’s for the DisCos? It is because the government has finally recognised that we do not price gas correctly, because that is the real problem. The source of the power, the feed is gas and your gas isn’t priced at international level. So, the owners of the gas have no incentive to produce for domestic consumption; they will rather produce, liquefy it and sell it abroad. It’s business. What is the degree of patriotism that will make you do that? So for all these years, government has been trying to subsidise the price of gas. Now we are broke as a country, we are beginning to realise what many of us told them that subsidy is not sustainable. Let the gas price float, let competition come in. We saw it in telecoms.
You talked about the need for more liquidity in the system. What is the level of investment by DisCos?
We can’t even talk about the size of investment because it’s an evolving thing. For instance, when we came in, we didn’t see meters. Now every DisCo is having a metering programme again. Do you know how much that costs? It is a function of economics. As a DisCo or any electricity company, you put in some of the money and you go and borrow the rest. The first thing a bank does is to look at your cash flow. If the money you are receiving does not match with the investment, nobody will give you credit. And that is the argument we have been making. This increase would have happened long ago. We told them from the beginning when the thing was privatised. I think the drop in oil prices has finally opened our eyes in Nigeria that we have to think as a nation now before we go under. Power is one of the things we can do that can take us out of this mess. If we get power right, the multiplier effects will be enormous. We will forget depending on oil.
Didn’t you do feasibility study before taking over these power assets?
Have you worked with the government before? When you work with the government, you will know that it is not a negotiation of equals. They just showed us data room, we looked and based on that we bid. They even requested for what they call a six-month shadow management period before taking over, where we would be sending our men to understudy the people there. The same unions in the same sector blocked us. So, the first time most of us took over was when we took over. And as you are taking over, you now begin to see magic. But we are in there and we will make it work. So, it’s patience. Give it time to work. Those who are screaming and shouting know why they are screaming and shouting.
But many people argue that the investors are not investing in the sector?
First of all do you know how much it costs for each of those bids? Many of them were in excess of $100 million. That is money that came from people’s pockets. Then you now had a commitment over a five-year period to spend another $250 million. Those were all the conditions for taking over. We are talking about $250 million for five years. But when we got in there, as I told you, the metering programme was faulty. So, we are doing a completely new programme. In fact, that metering programme alone swallowed that $250 million. It’s like being lured into something but you have to make it work. It is patience that we need.
How much has EKEDC invested in its network?
I don’t have the figures, but I can tell you they have invested a lot of money. This is so especially for Lagos, where like I told you, was originally designed for underground cabling. When that girl was electrocuted in UNILAG, it was a wake-up call so we gave instructions immediately to install all the underground cables and that exercise is going on. The honey moon is over because in those days, you don’t even know who to go and ask for compensation. But now they can sue you. So, we don’t even wait for them to sue; we quickly made an offer.
How serious is the problem of energy theft?
That’s why I said the singular greatest threat to this reform is electricity theft, because we lose up to 70 per cent of our estimated revenue. And this is across the board; I am not even excusing the elites. There are people whose consumption is tied to other people’s meters. There are some people whose meters you see rolling but are not registering anywhere. There are some people whose meters we don’t even have access to. The prepaid meter is one of the most by-passable meters. That is why we said we should now start the smart metering, which is a totally different system. We are therefore re-metering everybody. So, even those with prepaid meters today will eventually get smart meters.
How long will it take for consumers to get smart meters?
At least two years. Even if we install 10,000 a month and you are looking at 500,000 consumers, that is about two years. But I would rather undertake that journey. It’s like building an express way; I’ll rather take my time one kilometre by one kilometre and build a solid road than to say quickly grade it, put laterite, in three months let everybody be passing. You and I know that come the next rainy season, it is going. That’s the way we are looking at the metering. We are coming grade by grade.
