The Nation Newspaper

Tag: PHCN

  • Shortage of pre-paid metres hits distribution firms

    The distribution companies (DISCos) unbundled from the Power Holding Company of Nigeria (PHCN) have been hit by shortage of prepaid meters.

    The privatisation of the successor companies, including the generation companies (GENCos), was done, among others, to improve electricity supply since their coming about a year ago,  this expectation has not been met.

    Officials of Ikeja and Eko Electricity Distribution Companies (IKEDC and EKEDC) told The Nation that  both firms do not have prepaid meters. Besides, there is a backlog of customers who have paid and have been awaiting collection months.

    “I will confirm to you as a friend that we do not have prepaid meters at the moment. But you cannot tell customers that we have exhausted our stock.The Federal Government has stopped importation and sale of prepaid meters presently. Therefore, we only make efforts to see if we can deliver to customers that have already paid but for customers that are making fresh purchase, we cannot guarantee that now. The fact is that sale of prepaid meters has been suspended until further notice,” the sources said.

    With the scarcity of prepaid meters, the application of estimated billing for electricity consumers, might likely increase. The prepaid metering system was introduced to reduce or eliminate estimated billing system because customers complain of being given outrageous bills. The prepaid metering enables a customer to plan his or her consumption according to affordability.

    Customers, who spoke to The Nation at Somolu, Ikorodu, Island Business Units, among others, said they had been at the offices for several times, though they had paid for the metres, they were unable get them. Others said they had money on them but couldn’t pay as the power firms said there were no meters.

    The new investors have been complaining about poor revenue collection from customers, which is below their projections on takeover of the assets in November, last year. To improve revenue generation, the DISCos are exploring alternative sources of power supply, especially through embedded and captive power generation.

  • Blackout in Kebbi

    Blackout in Kebbi

    Some parts of Birnin-Kebbi, the Kebbi State capital, have been in darkness for a week, owing to a fault at the Duku Injection Substation.

    Power Holding Company of Nigeria (PHCN) Business Manager Mukhtar Ibrahim apologised to residents for the inconvenience.

    He debunked a rumour that PHCN did not want to rectify the fault because the company had been privatised.

  • TEM: Delay in implementation stalls power sector agreements

    TEM: Delay in implementation stalls power sector agreements

    INVESTORS in the companies unbundled from the Power Holding Company of Nigeria (PHCN) are shunning some essential agreements that could lead to improved power supply owing to delay in the implementation of the Transitional Electricity Market (TEM).

    The agreements – Gas Supply and Purchase (GPSAs), Power Supply and Purchase and others cannot be signed because of delay in the implementation of TEM.

    The implementation of TEM, according to the Nigerian Electricity Regulatory Commission (NERC) will set in motion, the execution of  rules that would guide the Nigerian Electricity Supply Industry (NESI) as well as the enforcement of compliance and sanction of defaulting market participants in the electricity supply value chain.

    NERC explained that TEM would also ensure that the electricity market is operated in an orderly manner with all the participants (gas suppliers, power generation firms, distribution firms that buy the power, and the transmission firms that wheel the power to different parts of the country), expected to show commitment to sanctity of contract or be penalised.

    What guides the market is the interim market rules provided by the power sector regulator – the Nigerian Electricity Regulatory Commission (NERC). The interim rules will continue to guide the operation of all the market participants until the TEM is fully in place. The interim rules were issued before the takeover of the successor companies in November last year by new investors and modified in April this year to address the challenges observed in the sector between the time of handover and end of first quarter of this year.

    Speaking on the importance of implementation of the TEM as an instrument that will drive the electricity market, the Group Chief Executive Officer, Forte Oil Plc, owner of the privatised Geregu Power Plant, Mr. Akin Akinfemiwa, told The Nation that the company has not signed Gas Supply and Gas Purchase Agreements GPSAs  because it needed guarantee of an uninterrupted gas supply and the purchase of the power it will generate.

    Forte Oil has invested $90 million in the Geregu Power Plant to overhaul it and bring its output to the installed 414 megawatts (Mw) capacity from about 100Mw it  generates.

    Akinfemiwa said the necessary agreements will be signed when the company is sure that the power plant will get adequate gas supply and the power it generates also bought by distribution companies.

    He said: “Gas supply to the power plant is subject to the TEM.  We have not been able to sign the appropriate GPSAs for us to guarantee maximum supply to the plant. “Obviously, when we sell, we will not be able to sell everything we generate because of the existing market dynamics. So, once the TEM is introduced, we can now call for enough gas for us to be able to generate in line with the TEM.

    “The renovation work on the plant is expected to be completed in the next 18 months (first quarter of 2016) and will bring the plant’s generation to 414Mw at full capacity.”

    An official of Transcorp Ughelli Power Limited, one of the privatised assets, told The Nation in confidence that the company is eager to see the commencement of the TEM because besides creating standard rules of operation, it will  increase the potential revenue for the company and its shareholders.

    Currently, the interim market rules (IMR) that guide the electricity market pending when the TEMwill be fully in force, according to NERC, “seeks to enforce, maintain and ensure adherence by licensees  and other participants in the electricity market to the provision of the Act and other instruments for the purpose of achieving; the creation, promotion and preservation of an efficient electricity industry and market and the fostering of a culture of regulatory compliance; the facilitation of the swift investigation and resolution of incidences of regulatory non-compliance and the  fair and transparent determination of rights and obligations.”

    The IMR, which was signed by NERC Chairman and Chief Executive, Dr. Sam Amadi provides for regulation, which shall apply to energy produced and delivered as well as associated services during the interim period.

    “The rules are in exercise of the powers conferred on the Commission by section 96 of the Electric Power Sector Reform Act (2005). “The interim rules are intended to cover all electricity taken from the transmission system by the distribution companies with adjustment made to account for any bilateral arrangements between generation companies (Gencos) and distribution companies (Discos).

    “The existing arrangements shall be maintained save to the extent that they are modified by the order of the Commission. The objectives of the rules are to establish a framework to govern trading arrangements during the Interim period when Power Purchase Agreements (PPAs) between the privatised Power Holding Company of Nigeria (PHCN) successor generation companies and Nigerian Bulk Electricity Trading Plc (NBET) and Vesting Contracts between NBET and the privatised PHCN successor distribution companies will not be effective.”

    TEM is expected to commence in November, this year after earlier dates of commencements in March and September this year failed.

  • Electricity coy spends N100m to train retrenched workers

    Electricity coy spends N100m to train retrenched workers

    Kano Electricity Distribution Company (KEDCO) began yesterday the training of 400 retrenched workers of the defunct Power Holding Company of Nigeria (PHCN).

    It will cost N100 million.

    The workers are undergoing a two-day training by FITC Consulting on lifestyle in retirement, investment opportunities, skills acquisition and general business initiatives, at the Tahir Guest Palace, Kano.

    KEDCO’s Managing Director, Dr. Jamil Gwamnna, said the company was training the workers “because we feel their pains and believe they are part of the society.”

    He said after the formal takeover of PHCN by KEDCO, Federal Government engaged the retrenched workers on a six-month contract with the company, “after which we extended the contract to two months, which means they have stayed eight months with us on a contract basis.

    “We are concerned about the people’s future and their families’ welfare. The essence of the training is to ensure that we don’t throw them into the society without a plan for them. We intend to impart skills to them, which will be useful in future.”

    Jamil said before the retrenchment, the workers were given a level playing-field.

  • Heirs Holdings to increase power supply to 1000mw

    The Tony Elumelu’s pan-African investment vehicle, Heirs Holdings, one of the investors that bought the privatised successor companies unbundled from the defunct Power Holding Company of Nigeria (PHCN), has said it will generate  a quarter of Nigeria’s power consumption needs in the next five years.

    Heirs Holdings’ interests in the power sector include the Transcorp Ughelli Power, a thermal power  plant, which it acquired last year under the privatisation programme of the Federal Government.

    A senior official of the company, who told The Nation about Heirs Holdings’ plan to embark on mass power generation through the expansion of the Transcorp Ughelli Power, said the industry is a catalytic sector, and the development of the country and that the continent cannot happen without fixing it.

    He described the United States’ Power Africa Initiative as an amazing opportunity to democratise access to power for Africans, adding that Heirs Holdings’ $2.5 billion investment and commitment to the initiative reflects how excited the management of the company is about it.

    The administration, he noted, made a bold decision when it decided to effect changes envisaged by the Power Sector Reform Act that had been on the books since 2005.

    The source noted that the government’s bold step was reinforced during President Barack Obama’s last visit to Africa. We felt more strongly than ever, the need to help power Africa, the official added.

    The source said: “Our experience so far at Ughelli power plant is a testimony to the size of the opportunity. Our team has taken that plant from 150MW capacity, when we took over in November 2013, to 450MW today; we expect it to increase to 700MW by October and to achieve 1000MW by the second quarter of 2015. At that rate, we’ll be contributing 20 per cent of Nigeria’s total power generation.”

    Furthermore, he said, the firm was working on a Greenfield project that would expand the capacity of Ughelli by 1000MW in the next five years and that they had signed a memorandum of understanding (MoU) with the General Electric (GE) and Symbion Power to facilitate the deal.

    The official identified unreliable transmission infrastructure, access to uninterrupted gas supply and timely settlement of invoiced payments as three main challenges to the power sector.

    He said: “In Nigeria, one of the biggest challenges to power generation is transmission and in fact, while Ughelli Power Plant generated at full capacity for the first time in July, we’ve been asked to scale down generation because of the outdated transmission system; for every 100MW generated and sent to transmission company, 40 per cent is lost, partly due to this infrastructure issue.”

    While regulation is not a key challenge, the official said it was an issue in the sector that if addressed, could speed up growth.

    “We need pragmatic regulation that recognises that in Nigeria, the sector is nascent and so policies must be designed to encourage growth. In fairness, the Federal Government is confronting these challenges head on,” he added.

  • Power firms explore technology to tackle power theft, others

    Power firms explore technology to tackle power theft, others

    Successor firms from the privatised Power Holding Company of Nigeria (PHCN) are exploring the application of technology to address both technical and commercial challenges besetting the industry.

    No fewer than seven of the 11 distribution companies (DISCOs) are in talks with Polish software giant, Asseco Group to deploy its range of solutions to address the teething problems of the industry, The Nation gathered at the weekend.

    Chief Executive Officer, Asseco Nigeria, Simon Melchior said the tech firm’s solutions could drive down technical and commercial losses to as low as less than five per cent from 30 per cent.

    Melchior, who is also its West African representative, said there was similarity in terms of the experience of Poland and other countries in Eastern Europe where it has successfully deployed its solutions to that of Nigeria, adding that the power stations too went through the same problem before stabilising.

    He said: “We are at various stages of discussion with almost all the DISCOs. Already, seven out of the 11 are already looking at deploying our utility management solutions for power distribution in terms of billing application, meter data acquisition, revenue collection management, customer relation management (CRM) and other modules around the core applications.

    “There is the Asseco Utility Management Solution (AUS) which deals with inventory management, in terms of workflow management and outage management. These applications will perform when there is power and when there are outages.”

    He lamented that the DISCOs that had invested substantially to acquire the power firms are not only confronted with the problem of getting power to distribute, they are also bogged down by challenges such as high loss due to energy theft, wild ‘connection’ and duplicated duplication of customer billings.

    “The tools will reduce their technical and commercial losses on distribution from above 30 per cent to less than five per cent. They DISCOs are challenged with the problems of high energy theft, wild connection, duplicated customer billings and estimated billings. These issues are also present in Eastern Europe,” he said, adding that in Poland, there are five DISCOs and a total of about 5.3million customers while in Nigeria, there are only about 600,000 customers.

    He said the firm had grown its global footprints rapidly over the past decade and is now operating in over 40 countries with 17,000 employees worldwide.

    Its Managing Director, Adefolu Majekodunmi, said the focus of the Nigerian entity will be to build a strong local expertise in four primary sectors – financial services (banking, insurance, capital markets), fast moving consumer goods (FMCG), utilities (power, water, gas) and public sector (health, defense, and social services).

    He said: “The Asseco Group has significant experience developing solutions in the sectors we focus on. It has developed complex software solutions for major public and private sector institutions throughout Europe and the Middle East.

    “Our unique strategy for Nigeria is to combine local software development in addition to providing our established know-how. We are here for the long term and plan to be at the forefront of technology automation in the public sector and emerging private sector.

    “We will build our growth on local added value in the form of local software development.”

  • BPE: Shifting the goal post

    BPE: Shifting the goal post

    •The fate of power consumers is in the hands of an ill-prepared player

    For a process that ought to have been home and dry by simple adherence to rules and guidelines, it is unfortunate that the sale of the Kaduna Electricity Distribution Company (DISCO), one of the 17 Power Holding Company of Nigeria (PHCN) successor companies put up for sale in December 2010, is still embroiled in controversy.

    Northwest Power Limited had emerged top bidder for the DISCO at the conclusion of the exercise. December 23, 2013, it executed the Share Purchase Agreement with the Bureau for Public Enterprise (BPE) which gave it until June 23, to make the 75 per cent balance payment.

    Unable to beat the June 23 deadline, BPE allegedly extended the deadline to August 6, to ensure that the company did not lose the mandatory 25 per cent initial down payment made for the acquisition of the assets of the power distribution company. By August 6, the company could still not pay. Instead, it wrote to the National Council on Privatisation requesting for further extension by two months.

    It is unfortunate that the guidelines which not only appear so straight-forward, but designed to give credibility to the process are being flouted by the BPE in favour of Northwest Power Limited.

    The rules, as spelt out in Section 15 (140) is clear: “Within six (6) months after signing of the Share Sale Agreement, or at a mutually agreed upon time, the Bidder will be required to pay the outstanding seventy-five per cent (75%) of the share purchase price to complete the transaction. Failure to complete the transaction within a mutually agreed timeframe will result in the forfeiture of the down payment as per the terms of the Share Sale Agreement.”

    The issue would seem one of fidelity to the process. Having extended the June 23 deadline in clear disregard of the guidelines, it then became a matter of how far the law could be bent to accommodate the interests behind them. In this particular instance, it appears the BPE would rather prefer to act as if the niceties of the law and process do not matter.

    It is hard to imagine that the BPE, a creation of statute, would cynically jettison the rule for reason(s) unsupported by the law. We are certainly not persuaded of the factor of an exigency as to warrant the setting aside of the regulations, which, in any case, would amount to endorsing the rule of the thumb, and arbitrariness.

    We must say that the development is a telling commentary on the privatisation exercise as a whole. Had the Federal Government not gone into the frenzy of premature self-congratulation soon after the bids were announced, it would have afforded itself the opportunity to reflect on what the emergence of unknown quantities in the global power scene, with neither the financial muscle nor the technical savvy to bring on board, forebode for the sector. Now, if Northwest Power Limited cannot raise the funds to consummate its bid, how then would the company be able to bring the necessary funds to upgrade the erstwhile PHCN systems?

    As it is, one can only imagine that the fate of electricity consumers under Kaduna Electricity Distribution Company is in the hands of an ill-prepared player.

    The situation is however not beyond salvage. Under the guidelines, the reserve bidder ought to have been called in; time now for the BPE to do the right thing – which means engaging the reserve bidder without further delay.

  • How they bleed Nigeria

    How they bleed Nigeria

    248 power containers abandoned for 11 years!

    Perhaps nothing better exemplifies the shambolic manner this country is run than the reported abandonment of 248 containers of power equipment at the various bonded terminals in Lagos for as long as between seven to 11 years. The equipment were ordered by the defunct Power Holding Company of Nigeria (PHCN) for various power projects in the country. An obviously elated power minister Chinedu Nebo who eventually took delivery of the items on July 24 said: “It is a day of joy and gladness as we flag off this very critical event of release of 248 containers of electrical equipment and power installations. The equipment had been abandoned at various bonded terminals in Lagos since 2003 and 2007, which is between 11 and seven years ago”. Mind you, if they dare tell us how much is involved, many of us (like that former boss of the Federal Electoral Commission (FEDECO), Ovie Whiskey of blessed memory once said) would simply faint. So, they are keeping the figure to their chests.

    We should weep for this country when we realise that this is not the first time such cargoes would be abandoned.  On November 1, 2011, the Nigeria Customs Service (NCS) said about 500 containers belonging to various federal and state government agencies had been abandoned at the ports. Customs spokesman, Mr. Wale Adeniyi, told the News Agency of Nigeria (NAN) then that about 250 of the containers were laden with PHCN power generation equipment. One hundred and forty of the power equipment containers were abandoned at the Ports and Cargo Terminal in Tin Can Island port, while the remaining 110 containers were moved to Ikorodu Terminal as overtime cargoes.

    The Federal Ministry of Agriculture and Water Resources similarly abandoned 59 containers while the Central Bank of Nigeria (CBN) had 25 containers of imports. Delta Steel Company abandoned six containers, Federal Ministry of Power and Steel (15 containers); Federal Ministry of Works (10 containers). Other abandoned containers belonged to the governments of Lagos, Rivers, Ondo and Delta states. Adeniyi added that some of the containers arrived the country as far back as 2006. It is not clear whether the power equipment containers that Adeniyi mentioned were the ones that Nebo took delivery of last month.

    It is the height of man’s inhumanity to man to have abandoned  such vital power equipment for years. It is even worse that no one has been asking questions ever since, about the abandoned equipment. And that is in a country where everyone is groaning under the darkness that has refused to yield way to light despite the billions already sunk into the power sector. So, what are the auditors doing? Where is the Presidential Monitoring Team in all of these? It means the National Executive Council just approves money for projects; no one bothers about whether such are delivered or not. Indeed, I was told that it is only foolish contractors that bother to deliver here; the wise ones know how to circumvent the system (if any) by seeing those necessary, with whom they share the contract money.

    So far, President Goodluck Jonathan has not made any comment on the unfortunate incident. It is even doubtful if he is in any way bothered about it. What matters to him now is ‘capturing’ more states (in spite of his poor performance), to buoy his chances in the 2015 election. And to achieve that near impossible task, he has unleashed soldiers on states where elections are due this year, in the build-up to governorship elections. In the past, we have always seen police do such dirty jobs. In Jonathan’s time, soldiers have taken over. One therefore wonders what the Peoples Democratic Party (PDP) has been doing to improve the efficiency of the police force since 1999 that it has been in power at the centre.

    Given the level of corruption, sorry stealing in the country (our president has said there is no corruption in Nigeria, so, I am sorry for that slip of the pen!), we can almost be sure that what was taken delivery of may not be all that was imported. Perhaps what Minister Nebo took delivery of was what was left after the people who needed some of the items had stolen theirs. They know it is Nigeria’s money, our money; and our money, really, is no one’s money. As Chinua Achebe noted in one of his books, this thing is mine is different from this thing is ours. I know this because if you import ordinary cars, port rats (you see, we have all manner of ways to shield thieves; the president said what we have is mere stealing, not corruption; now those in the ports call the thieves there port rats instead of thieves) would have tampered with them before they are cleared at the ports, in spite of the presence of all kinds of security men there. This is aside the fact that those who imported the power equipment had probably creamed off their own share of the contract cost. We may also need to be sure if the items are not even used ones that were bought as new from where they were imported. I hear a lot of such purchases happened in the days of the National Electric Power Authority (NEPA) and PHCN.

    Moreover, how are we even sure that orders had not been placed again (and again) for the same items? If we did not know that such large consignments were wasting away at the ports for over a decade, the possibility of this duplication of purchases is very high. Then we can be sure that some of the equipment would have gone bad or even become obsolete; in which case they are useless. But for the fact that PHCN has now been privatised, it is even  possible that some of them would still rot way wherever they are taken to because they still would have been abandoned there, with no one remembering to look for them after the initial shock has died down. We are so used to such waste in government that we can hardly be shocked by such abandonment again.

    In countries where the government is serious, those responsible for the irresponsibility would by now have known that they are already in soup. They are economic saboteurs, pure and simple. But in Nigeria, they know the way out of their crimes: join the ruling party. Anyway, the government must be seen to be concerned and doing something on the matter. So, in line with the Jonathan administration’s characteristic threats, Nebo had threatened to probe the abandonment of the equipment and bring culprits (if any), to book. So, it is possible no one is responsible for the abandonment! Anyway, he may be right. We have heard such empty threats from the Jonathan presidency many times. For instance, since March when at least 18 Nigerians died on Nigeria Immigration Service job queues and the administration promised to probe the unfortunate incident, we are yet to hear from the government again. Those who die that way in Nigeria, especially under the PDP, have always died in vain as all those involved in such criminal neglect need do is identify with the ruling party and their sins, be it corruption or mere stealing, or manslaughter or even murder, are forgiven. As a matter of fact, ability to commit crimes seems an added advantage where the desperate ruling party is concerned. At least four of the people suspected to be connected with the murder of the late attorney-general of the federation and minister of justice, Chief Bola Ige, are now something, either in the Jonathan presidency or in the ruling party itself.

    Anyway, in all of these, it is Nigeria that has been shortchanged. Apart from being denied electricity that could have improved if the power equipment had been utilised for the purpose that they were imported, they (Nigerians) have also been denied the revenue that should have accrued to the Customs. The question now is whether the new owners of the electricity firms were aware of the existence of these abandoned items. If they were, then they should have taken them as part of their inventory, in which case they would have had to calculate the demurrage and pay for them. Just imagine the congestion that would have been caused by the abandonment of almost 250 containers for that long! Show me any other country where such would happen without heads already rolling or the people trooping to the streets to demand that heads must roll. Show me a country that is run in such rudderless manner!

  • PHCN cable kills three,injures scores in Ogun market

    There was pandemonium in Ifo market, Ogun State penultimate week, when three persons were electrocuted while many others sustained various degrees of injuries.

    Trading activities at the market was said to be in full gear when electric cables of Power Holding Company of Nigeria (PHCN) suddenly snapped, killing three traders instantly.

    Not a few traders and buyers were said to have been injured while scampering into safety. The injured are now receiving treatm ent at the Ifo General Hospital while the bodies of the dead victims have been deposited in the hospital’s mortuary.

    One of the traders who witnessed the incident, Sherifat Adele, said: “The deadly wire snapped and fell on three persons and not two as being rumoured by some people. The victims died on the spot while others got injured while trying to run away from the scene of the incident.”

    The traders later staged a protest at the branch office of PHCN in the community to register their displeasure over the unfortunate incident.

    The spokesman of Ogun State Police Command, Mr. Muyiwa Adejobi, said: “The story is true but only two persons died while two others were injured.

  • Stable power: Still a long way to go

    Stable power: Still a long way to go

    The citizenry expected improved power supply following the coming of the distribution and generation companies. They have been disappointed. Reason: epileptic power supply is still the order of the day. Assistant Editor EMEKA UGWUANYI reports.

    GOING by the rebasing of its Gross Domestic Product (GDP), Nigeria emerged Africa’s largest economy, but indices to support the supposed growth are not visible. Electricity, which is the key driver of industrialisation, remains a problem as demand outstrips supply.

    About 10 years ago, the Federal Government embarked on privatisation of the power sector as part of search of lasting solution solution. This culminated in the enactment of the Electric Power Sector Reform Act (EPSRA) 2005, which set the rules for transition to private sector control, such as the unbundling of the Power Holding Company of Nigeria (PHCN) into 18 successor companies, establishment of appropriate tariff regime and gas pricing, to encourage private investors. tin line with the law, President Goodluck Jonathan launched the Power Sector Reform Roadmap in 2010.

    These activities led to PHCN’s privatisation and handover of the power assets of the successor companies to private investors in November, last year. But, contrary to the expectations,there is no improvements in supply. Rather, it has dropped by as much as 50 per cent, leading to massive load-shedding and blackout in all parts of the country. Even the investors are disappointed. They are complaining that besides inadequate gas, which accounts for the drastic drop in power supply, what was handed over to them is below what they expected.

    Consumers’ view

    Industrial and residential consumers told The Nation that they have not seen any difference between the defunct PHCN and now private sector driven power sector. They said power supply has dropped below what it was when under government management. They noted that despite the poor power supply, they still are still paying the same tariff. They lamented the recent upward review of the tariff, which they are bound to pay even without commensurate supply.

    Investors’ challenges

    After the takeover of the assets of the defunct PHCN, the investors said they discovered that the privatisation was based on wrong assumptions because there was cash crunch in the sector and that the financial institutions were not willing to fund the projects, having committed about N1 trillion, which they (the lenders) were doubtful of recovering.

    The investors also felt bad that their projected revenue fell below expectation. They said cash collected from power customers was lower than expected and as such could  cover their. They explained that solutions to the issues proposed by the regulatory agency in the sector had not achieved results. They said the GENCOs and DISCOs face deviations between their projected business plans and the actual situation. The deviations, they said, are bigger than what can be handled within the limits of the official assumptions in the privatisation.

    The exposure of the financial sector to the power sector, they said, is heavy and the  uncertainties arising from it is increasing their (financial sector) risk perception, which makes additional financing to cover the gaps identified in the sector difficult. They noted that the expected change would hardly come if there is no change in the way the situation is evolving.

    The investors explained that, according to the reform agenda, the DISCOs purchased electricity from the GENCOs through a special business unit (SBU) – the Nigerian Bulk Electricity Trading Plc (NBET) – a public liability company owned by the Federal Government.

    The DSICOs sell the electricity to consumers and collect payments for their service and pay the GENCOs, unfortunately not all electricity purchased from GENCOs is sold and not all the money is collected because of losses – that is, the Aggregate Technical, Commercial and Collection (ATC&C) losses. This development, they said, constitutes serious disruption because their business plans are based on certain  assumptions.

    They lamented they discovered that the available electricity was less than what was announced by the Bureau of Public Enterprises (BPE) during bidding, adding that the power sector regulator, Nigerian Electricity Regulatory Commission (NERC) said it would be carrying out tariff adjustment regularly to meet their business plans and compensate for the collection gap from the consumers but that hasn’t happened.

    Since the DISCOs’ revenues are significantly lower than expected, they are unable to pay in full their bills to the Market Operator (MO), which consequently makes the GENCOs receive remarkably less revenues. The MO holds brief for the NBET, whose job is expected to begin in the third quarter of the year when the Transition Electricity Market (TEM) will start.

    The implication of lower revenue generation by the DISCOs is that GENCOs’ owners have to make capital injections higher than expected to cover capacity recovery plans (CRP) and capital expenditure (CAPEX) as well as operational costs, because the DISCOs couldn’t meet their financial obligations to the generators. There is higher financial stress for new owners of the power assets, the investors said.

    The Interim Market Rules (IMR) introduced by NERC to assuage the problems faced by the investors also have not made any positive impact, it was learnt; this is because there is no bankable guarantee that the investors could use to get the additional financing from financial institutions to cover the gap that exist in the sector.

    The consequences of the challenges are that the DISCOs will slow down on their electrification expansion, which will result in lower growth rate for access to electricity than expected; they may introduce more expensive tariffs to end-users, especially those that feed from embedded generation (generation outside the national grid); and slow down on the ATC&C loss reduction plans.

    The GENCOs on the other hand, will slow down their CRPs, which will result in significant drop in electricity supply to customers and lack of appetite for increased investment by the private sector as well as foreign direct investment (FDI).

    The investors also identified power equipment and facilities vandalism as a major challenge, energy theft, energy wastage by customers, lack of urban planning where people build along the right of way of the utility companies and under high tension lines and unilateral decision of government and organisations while carrying out projects within the DISCOs.

    What the investors are doing

    In order not to lose their investment and also retain confidence of the customers they serve, the investors are taking investment decisions and strategies on how best to improve delivery, their revenue generations and expand their network.

    For instance, electricity demand in Ikeja Electricity Distribution Company (IKEDC), according the Managing Director, Abiodun Ajifowobaje, is 1250 megawatts (MW) while it gets only 329MW from the national grid. The Eko Electricity Distribution Company (EKEDC) requires 700MW while it gets about 200MW. Other DISCOs have different consumption demands but certainly none gets 40 per cent of its demand from the national grids.

    They also have different infrastructural gaps that needed to be addressed, such as distribution transformers, feeders and meters to position for efficiency. The owners of Geregu and Ughelli Power Generation Companies, Forte Oil  Plc and Transcorp are investing to expand the assets.

    To improve on supply, the new owners of Eko Electricity Distribution Company (EKEDC) said they would invest N42 billion in five years to reinforce the operation of the company, adding that they have secured $150 million for network expansion and improvement. The company also plans N6.79billion investment in pre-paid metering.

    The Managing Director, EKEDC, Dr. Oladele Amoda, said: “The new investors in the company have secured about N25billion ($150million) loan from a bank to be invested in network expansion, metering of power consumers developmental projects and reinforcement of the network.

    “In the short run, we are investing about N1.3billion on metering while a total of N6.79billion will be invested within the next five years to promote effective billing and adequate metering. Our greatest challenges after the take-over include severe capacity limitations in most of the transmission stations to facilitate delivery of improved power supply to power consumers,” he said, urging the government to enact legislation that would prevent vandalism, energy and cable theft.

    Amoda said the company was discussing with some firms to generate 400MW for the customers of the company, but with special consideration for the industrial customers that need uninterrupted power supply which are also prepared to pay more.

    The management of IKEDC is also working  with its technical partners, Korea Electric Power Company (KEPCO), to ensure meter accuracy and energy loss reduction. Ajifowobaje said: “IKEDC is working with KEPCO to provide a strategic solution to metering that takes cognizance of the needs of all customers within the network. I am happy to report that with the adoption of new technology we have made substantial progress in this regard and remain committed to ensuring that all our customers are adequately metered.”

    He said the firm was discussing with private sector generators to get supplies through embedded generation to complement what  it get from the grid. “KEPCO is working to double generation from Egbin Power Generation Company in the next few years. Egbin’s installed generation capacity is 1320MW while a fresh plant that will generate 1350MW is being planned. Substantial renovations have taken place in the company while reinforcement of equipment and facilities are ongoing,” he said.

    On gas supply inadequacy, the Group Managing Director of Nigerian National Petroleum Corporation (NNPC) Andrew Yakubu said the corporation is building new pipelines to supply gas to thermal power stations, while most of the vandalised trunk pipelines have been repaired and are working. He noted that a chunk of domestic gas production is dedicated to power and assured that with the completion of the pipelines under construction, gas needs will be substantially met.

    Stakeholders’ view

    Members of the organised private sector, including the Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI), and operators of small and medium scale enterprises, confirmed they haven’t seen improvement in power supply from the utility companies.

    The Chairman, Infrastructure Committee, MAN, Reginald Odia, said their members are optimistic that the new investors would fix the power problem but that would not come quick because the sector has been neglected for decades resulting in lack of infrastructure and dilapidation of existing ones.

    Odia said: “For over 34 years, the power sector has been in deterioration. Past administrations neglected the sector until the regime of President Olusegun Obasanjo, who saw reason for substantial investment in power generation segment of the value chain.

    “The existing infrastructure was dilapidated, there were no new investments in the sector within the mentioned decades, therefore, we cannot expect the new investors to perform magic in terms of improved supply. They have just spent over six months on the sector’s management, and this period is too short to assess them because they have to put the infrastructure in place and this cannot be accomplished in months.

    “For energy to improve to the expectation of Nigerians, it will take at least five years, and within these five years, the investors have to massively invest in generation and distribution. Investors in distribution companies need at least N60 billion investments yearly for five years to make reasonable mark in supply while investors in generation need a minimum investment of $1.5 billion to generate reasonable and sustainable power.”

    He said that although transmission segment is managed by a private sector company, Manitoba Hydro International of Canada, government has to make huge investment in the area.

    What the government should do

    Stakeholders said the government should have an understanding with the local and international financial institutions that supported the privatisation and investors because they are suffering. The understanding, they added, would open an additional window of financing from such institutions.

    The government, they added, should establish a ‘tariff increase roadmap’ within feasible limits and far beyond the multi-year-tariff-order 2 (MYTO II) tariff review terms and firm it up through proper legal instruments. MYTO is the current tariff system used in billing electricity consumers in Nigeria, which is holistically reviewed every five years, and the system is in its second phase. Having started in 2008, the first phase ended in 2012.

    The stakeholders suggested that debts arising from interim market rules (IMR), which guide the power sector operations, from gas, tariffs, among others, need to be converted into enforceable legal instruments. Because the privatised companies need access to financing to cover the revenue gap apart from what investors have already committed during the privatisation, it wouldn’t be bad for the government to organise a stabilisation fund from which DISCOs and GENCOs could have this additional financing. The size of the fund shall arise from a thorough independent study with government’s guarantee, they added.

    However, there are some factors that militate against some of the proposals. With the poor power supply level, tariff increase may not go down well with consumers and also the government doesn’t want anything that would have it deeply involved in the management of the power sector.

    The government said in view of the critical role of transmission in the supply chain, it has made provision for rehabilitation; upgrade and expansion of the transmission infrastructure across the country for wheeling of electricity to Nigerians.

    The government said it sought external funding for the Transmission Company of Nigeria (TCN) from the African Development Bank and the Eurobond, among others, and has released N300 million from the Eurobond to the company.

    It said in January, it approved N1.9 billion for the supply of 746 kilometres of aluminum conductor composite core reinforced (ACCR) for the re-conduction of the Onitsha-New Haven 330kv transmission line that runs up to Makurdi in Benue State, secured a loan of $170 million from the French Development Agency to boost power transmission in the Federal Capital Territory. These are just few of the interventions in transmission sector, the Minister of Power, Prof Chinedu Nebo said.

    He added that in compliance with global shift to renewable energy, the government is building 700MW hydro plant at Zungeru, and is planning construction of 3,050MW Mambilla hydro project, among other smaller plants, including the Gurara 2.