In this concluding part of the series on unfair practices in the power sector, JOSEPH JIBUEZE examines how regulators look the other way as Nigerians pay through their noses for power not used.
Electricity consumers are at a loss. Reason: there is no justification for tariff increase. Assistant National Secretary, Nigerian Electricity Consumer Advocacy Network, Mr. Obong Eko, said: “We have it on good authority that Nigerian Electricity Regulatory Commission (NERC) is under intense pressure to increase electricity tariffs as it finalises the review of the requests presented by the Distribution Company’s (DISCOs), but this will not work because they have no basis to demand for any increase whatsoever.”
He argued that DISCOs were not following the parameters set for them by the regulatory body, which was why they always complained of not making enough revenue. According to Eko, one of the parameters is that the DISCOs should meter all their customers. He stressed that only about 30 per cent of electricity consumers nationwide were currently being metered.
“They were also told to employ enough hands to help them collect bills from a sizable percentage of their customers. But after our analyses and investigations across the country, we discovered that on the average, most DISCOs only collect bills from one out of every five customers. Now, tell me, is that how a business should be run? And if a business is run in such a manner, will it break even, talkless of making a profit soon enough?
“What they do is to over-bill the few faithful customers and continue complaining that they don’t make profits. They should, as a matter of urgency, carry out adequate customer enumeration. We are tired of hearing that they don’t have money. If you had no money, why did you apply for the acquisition of a power firm?
“What they are doing now is to bill consumers excessively in order to generate revenue to acquire meters. This, of course, negates the normal principle of investment. You put in money in the business by metering customers, because the meters will ensure that you get what is due to you and it ensures profitability and not the other way round. They must know that no matter the pressure on NERC, consumers are opposed to any form of tariff increase until meters are provided.”
Eko stated that an increase in tariff would be highly detrimental to the economy. He argued that many small businesses would go bankrupt if NERC should increase the power tariffs, adding that this would push up the unemployment rate in the country.
He added: “Currently, many Nigerian companies find it tough to effectively compete with their counterparts internationally, not to talk of when bills are hiked. Please, this should not happen. A lot of companies come to us, telling us to interface with NERC and make them see reasons why Nigeria is not ripe for an increase in electricity bill. In fact, many of these companies spend about 30 per cent of their revenue to pay for the electricity. So, if the bill is increased, how much of their revenue will they now pay for electricity alone? The Federal Government must not allow this.”
Adebiyi said rather than tariff increase, there should be a multiple long-term financing approach, sourced from the banks, capital market, insurance and other sectors to finance the power sector.
“Poor masses are paying an estimated and indiscriminate bills ranging from N5, 000 to N18, 000, while spending an average of N15, 000 to N20, 000 for fuel to maintain generating set weekly. Businesses have collapsed, industries have closed down and residents cannot sleep comfortably at night due to power outage.
“Companies and commercial houses are groaning under throat-cutting bills which they are paying for. Yet, they are not getting the benefits of such payments,” Adebiyi stated.
He stressed that the proposed tariff increase was coming amidst the tangled web of poor power supply with no reasonable proof of improvement.
“The situation is self evident. It readily speaks for itself because everyone is suffering from outage. Bringing further increase amidst this tangled web of hardship and without any improvement in power supply will be highly unjustifiable and will be an economic burden on populace. It is totally absurd and not for the good of the people, and therefore must not be allowed,” Adebiyi said.
Despite the frequent nationwide blackout, NERC announced plans to increase tariff. The first move to hike was halted by the Federal High Court in Lagos. Justice Mohammed Idris, on May 28, restrained NERC from implementing a new tariff, which would have become effective from June 1. He barred the respondents, including DISCOs, from effecting any increment in electricity tariff until the suit is heard and determined.
As the suit was pending, NERC announced plans to go ahead with the increase. But, the House of Representatives, on December 15, halted the plan pending the completion of its committee’s investigation of some stakeholders in the sector. In a letter to NERC, the Babajimi Benson-led House Ad-hoc Committee investigating the activities of DISCOs, told the commission to abide by the directives in a previous letter it wrote urging it to suspend the review of electricity tariff.
The letter, signed by Benson, reads: “Our attention has been drawn to various news items published in many newspapers of December 13, 2015 to the effect that your commission has concluded plans to announce new electricity tariff to Nigerians this week. It is our opinion that any plan by your commission to announce new electricity tariff will run contrary to the spirit of the letter under reference and undermine the outcome of the investigative hearing by this committee as it relates to infrastructure and billing by electricity distribution companies. We, hereby, once again, demand that you suspend the announcement and/or implementation of any increase in electricity tariff until (the) above stated issues is concluded.”
Insight into regulatory failure
The power sector is segmented into three parts – generation, transmission and distribution companies. Generation companies (GENCOs) sell to the DISCOs, who in turn distribute to industrial and domestic users. The transmission line transports the generated power to the various DISCOs. The consumers buy power from the DISCOs from their retail kiosks.
The generation and distribution segments were privatised by the Federal Government, but there are allegations that the process was heavily compromised and flawed, according to a Senate ad-Hoc Committee on Power.
At a public hearing on the privatisation of the power sector, committee Chairman Senator Abubakar Kyari alleged that some members of staff of the Bureau for Public Enterprises (BPE) were board members of some of the registered power generation and distribution companies. He alleged that they received exotic jeeps from those companies as privileges. The committee said the development may not be unconnected with the inability of regulatory agencies to carry out their responsibility of diligent supervision.
A former Minister of Power, Alhaji Bello Suleiman, urged the Federal Government to investigate the privatisation of the power sector carried out by the BPE. The former Managing Director of the defunct NEPA, said: “With all due respect, there is an urgent need for independent scrutiny of the privatisation exercise in the power sector. The perception is that it has not been transparent.
“The experts should examine whether the companies are capable to financially and technically take the country to the level of the 40,000 megawatts. If we do nothing now to ensure that they are the right persons, at the end of the day we may fail.”
Why power failure persists
President Muhammadu Buhari said sabotage and theft of gas were undermining efforts to increase power supply. In a statement by his Senior Special Assistant on Media and Publicity, Garba Shehu, the President said damage of pipeline installations continues to be a problem despite improvement in power in the recent period.
“Power is a running battle because the saboteurs are still there. We have the potential. We have gas, we have qualified people but we are contending with a lot of saboteurs who go and blow up installations. When gas is pumped to power stations, thieves and saboteurs such as the militants cut those supplies,” he said.
He noted that the government has a reduced role in the sector due to the privatisation of the institutions under PHCN, in the process of which, he said, the facilities “have been sold to a number of interest groups.” The president said with increased surveillance, power supply will increase. “Supplies will become steady; there will be less sabotage as we secure the pipelines,” he said.
According to experts, another challenge is the regularity with which power dips. The Federal Ministry of Power disclosed that power supply from the Transmission Company of Nigeria (TCN) dipped to 2,881.56 Mega Watts (MW) on November 18. Earlier on November 15, the ministry’s statistics showed that TCN sent out 3,682.32MW to the distribution firms. In effect, power supply dipped by 800.76MW within a matter of days.
According to the ministry, energy generation that stood at 3,754.96MW on November 18 also dropped to 2,945.75MW. The Nigerian Electricity Supply Industries (NESI) Highest Peak Generated, which was 4,810.7MW reduced to 4,073.4MW.
Earlier on October 1, power supply that was 4,008.53MW a week earlier, dipped to 3,619.70MW. Of the 3,704.73MW that the Electricity Generation Companies (GENCOs ) produced, TCN could not evacuate 85.03MW. The power ministry noted that peak generation was 4,307.4MW from 4,405.3MW, indicating a drop of 97.9MW in a space of 10 days.
According to TCN, the dips are partly caused by damage to transmission lines. It said when Tower No 62, on the Okpai-Onitsha 330KV double circuit transmission line which was evacuating power from the Okpai Power Station in Delta State, was vandalised, it resulted in the reduction of available power to the national grid by about 480MW. TCN said two of the four legs of the transmission tower were cut by vandals, causing the tower to hang precariously and posing a major threat to transmission grid integrity.
NERC Chairman, Dr. Sam Amadi, attributed one of the dips to a fire at the Kainji Hydro Power Plant. He promised that the Calabar Power Plant would soon come on stream to raise the power generation profile of the market.
Billions sunk into darkness
Since 1999, a total of N2.74 trillion? has been spent on the power sector, Permanent Secretary at the Ministry of Power, Godknows Igali, said. But some analysts said the actual figure is over N5 trillion.
Igali said: “Since 1999, the sum appropriated is N1,565,638,385,735 and the actual release was N948,212,192,810, including all the value chain and all agencies. What was released under Multi Year Tariff Order (MYTO) from 2009 to 2013 under subsidy is N155,089,910,730 to cushion the shock of the slash in tariff.”
He added that the Nigeria Integrated Power Project (NIPP) received $8.3 billion (about N1,66 trillion) from Excess Crude Account (ECA) to fund 10 power plants projects during the period, adding that the projects had been completed. Igali said out of 79 generating plants in the country as at 1999, only 19 were functional, generating only 1, 750 megawatts.
“Despite the effort at investment by government, we have not been able to invest in a consistent manner in the power sector. TCN requested for N147 billion in 2011, but it was allocated only N45 billion, out of which only N30 billion was released and that has been the story,” he said.
According to industry observers, PHCN and its successor received a chunk of the over N5 trillion. Funds were also expended on the NIPP, supervised by a special purpose vehicle – the Niger Delta Power Holding Company (NDPHC) Limited. The NDPHC was created to fast-track the attainment of stable power supply when past efforts failed.
The NIPP programme was conceived in 2004 and the NDPHC was created a year later. In 2007, $16 billion was allocated to the NIPP and used up within four years. The project was engulfed in controversy and litigation because of the alleged unexplained utilisation of the fund.
According to the BPE, the government sold the 17 companies unbundled from PHCN for over $2.6 billion. The Federal Government also secured funds for the power sector from different international development organisations and companies to tackle the challenges in the generation, transmission and distribution value chain.
For instance, the development of some projects, such as the Zungeru hydro electric power plant with installed capacity 700MW was funded with such funds. The Federal Government, according to the former Minister of State for Power, Hajiya Zainab Kuchi, spent N162,990,364,379.30 to implement the project in 2012.
Seventy-five per cent of the funding was from the EXIM Bank of China. The counterpart funding of $309 million came from the Power Ministry. The project was being implemented by a Chinese consortium, CNEEC-Sino Hydro. Besides budgetary allocations, there were interventions from different development organisations. Igali explained that the European Union, JICA and GIZ bankrolled some projects.
Last month, the former Minister of Power, Prof Chinedu Nebo, confirmed the supports from bilateral partners in form of loans, such as $700 million from the World Bank, $200 million from JICA , $370 million from African Development Bank (AfDB), $500 million from EXIM China and $1billion from Turkey Projects.
In the transmission segment, the AfDB also released a loan of $100 million to the Transmission Company of Nigeria (TCN). Last year, it was estimated that the TCN required about $3.7 billion to increase power transmission capacity, make the network more stable and reliable and improve efficiency of electric power transfer by reducing transmission technical losses.
However, while there was no budget for the PHCN in 2013, N5.2 billion was distributed to generation and distribution companies as well as to TCN. The money was part of the N13 billion intervention fund for critical projects implementation, which was for upgrades and major repairs to bridge the gap created by the zero budget for the companies.
As at May this year, about $11.1 billion had been committed to NIPP. Of the sum, N7.1 billion went into the building of the 10 generation plants, $0.5 billion into gas assets, transmission assets got $2 billion and distribution assets received $1.5 billion. The NIPP plants were designed to deliver combined installed capacity of 5,453 MW. Despite the huge investments, there has been little improvement.
Observers say corruption is also undermining the power section. For instance, the Rural Electrification Agency of Nigeria (REAN), established on March 16, 2006, was mandated by the Federal Government to pursue aggressive rural electrification. But, allegations of corruption soon hampered the effort.
In 2009, the Federal Government, through the Economic and Financial Crimes Commission (EFCC), initiated a 156-count corruption charge at a Federal Capital Territory (FCT) High Court in Abuja, accusing the then Chairman of the House of Representatives Committee on Power, Ndudi Elumelu, the deputy Chairman, Jibo Mohammed, Senator Nicholas Yahaya Ugbane and seven senior management officials of the agency of corruptly appropriating funds voted for rural electrification project. The EFCC accused them of stealing over N5.2 billion.
A budget analysis called Statisense, carried out by an organisation called Slideshare, which covered nine years (2006-2014), showed that the power ministry’s budgetary allocation within the period was N872 billion. The analysis was undertaken to know if the budgets met the United Nations Development Programme (UNDP) recommendation, which stipulates that budgetary allocation should be structured 70 per cent for capital expenditure and 30 per cent for recurrent expenditure. Their research showed that the Power Ministry had consistently allocated more funds to capital expenditure even surpassing the UNDP recommendation, but noted that Nigerians have not enjoyed the commensurate benefits of these allocations.
The report showed that the Ministry of Power got N78 billion, N105 billion, N140 billion and N93 billion as budgetary allocations between 2006 and 2009 while the percentage recurrent and capital expenditures were 4.33 per cent and 95.67 per cent; 3.70 per cent and 96.30 per cent; 18.18 per cent and 81.82 per cent; and 5.31 per cent and 94.69 per cent.
Also between 2010 and 2014, allocations were N157 billion, N86 billion, N73 billion, N77 billion and N63 billion respectively while the percentages of allocation to recurrent and capital expenditures were 2.28 per cent and 97.72 per cent; 9.45 per cent and 90.55 per cent; 4.25 per cent and 95.75 per cent; 5.43 per cent and 94.57 per cent; and 5.44 per cent and 94.56 per cent respectively.
The report showed that the least percentage allocation to capital expenditure within the period was 81.82 per cent indicating 11.82 per cent above the UNDP recommendation.
In defence of DISCOs
EKEDC Chief Executive Officer (CEO) Oladele Amoda said the company has over 400,000 customers, close to 300,000 of which do not have functional meters. He said EKEDC has designed a meter roll out plan through which it would supply meters to customers. According to him, local meter manufacturers do not have the capacity to meet the needs of the 11 DISCOs because indigenous manufacturers are not many. He said they were overwhelmed by meter requirements from the DISCOs.
On how customers without meters are billed, he said: “We put them on estimation category. The estimation is not arbitrary because we go through scientific methodology as provided by NERC. The method follows a sequential order. First, we look at the feeders in a particular area to know the availability of supply on the feeders in a month.
“Secondly, we look at the hours of supply on the feeders and transformers. So, when we are billing customers, we take into considerations the power effects on the feeders and the transformers. Thereafter, we check the availability of power, on average on the transformers, and on the basis of this, we bill consumers after calculating the volume of energy they have consumed over a period of time, usually a month.
“The DISCOs are not happy with estimated or crazy bills. We do not even like a situation whereby we charge estimated bills. As a matter of fact, we want our customers to have meters, hence the decision to put in place a meter roll out plan that is in operation now. The roll out plan is such that every customer would be metered. The only snag is that the plan would take some time before it is fully implemented.”
On estimated billing of those who have meters, Amoda said most meters have outlived their usefulness. He said efforts were being made to create awareness on the use of smart meters, through which the company can monitor power consumption by individuals and determine those who are overbilled.
According to him, $250 million is needed to ensure their customers have meters. “We have spent close to $50 million on meters. You know money is not easy to come by. EKEDC is not the only firm that is asking for loans from banks. We have 11 DISCOs demanding for one credit or the other from the 21 commercial banks in the country. Apart from giving loans to the power firms, banks have other customers requesting for facilities from them. The banks are overwhelmed with requests for facilities,” he said.
On the fact that some consumers with functional meters still get estimated bills, Amoda said: “We know that some customers have issues with DISCOs. Those that have issues with EKEDC, we tell them to come with their complaints with a view to seeing what we can do about them. When customers come to us with their complaints, we look at them and handle them properly.
“We have treated many cases to satisfy our customers because they are kings, and must, therefore, be treated well. When we check our records and discover that customers have been unnecessarily overbilled, we correct the mistake immediately. We have not fully automated our system, hence, the manual correction of mistakes in our operation. When we are fully automated, the correction would be done electronically.”
According to him, EKEDC distributes between 400 and 450 megawatts of electricity. “Though it is not that it is stable, but it is better than what we were getting before. But, it is a far cry from what we actually require. Today, if we get 700 megawatts, we would manage it because there are so many suppressed loads right now.
“The demand keeps increasing; if we see 700 megawatts today, we would be comfortable with it. The target is 2000MW and we hope to meet that target. After meeting this, we would increase our target to 6,000MW. We are working towards achieving that target in the next few years,” he said.
Regional Communication Officer, IBEDC, Kike Owoeye, attributed the problem of estimated billing to antiquated meters. “Estimation billing might not be too perfect and that is why we have been asking those with complaints to come. Their complaints would be looked into. There are some meters in existence since 1955; these meters are already very old and they can no longer function very well. This is probably one of the reasons for some errors.”
The way forward
Analysts say Power Minister Babatunde Fashola has his tasks cut out for him. In his inaugural speech, President Muhammadu Buhari said the nation’s economic woes were traceable to poor power supply. “No single cause can be identified to explain Nigeria’s poor economic performance over the years than the power situation. It is a national shame that an economy of 180 million generates only 4,000MW, and distributes even less.
“Continuous tinkering with the structures of power supply and distribution and close on $20 billion expended since 1999 has only brought darkness, frustration, misery and resignation among Nigerians. We will not allow this to go on,” he said.
Experts have called for an expansion of the energy mix to include other sources such as solar, wind and biomass. They also said there was the need to get existing projects, such as the 10 megawatts (MW) Katsina Wind Farm, working.
President, Nigerian Association of Energy Economists (NAEE), Prof. Wumi Iledare urged the government to unlock the country’s huge potentials in solar, hydro and wind energy.
According to him, endemic corruption, poor assets maintenance, inadequate gas supply to thermal generation plants, transmission infrastructure challenges, and inconsistent government policies have all contributed to the poor state of electricity in Nigeria.
“Until we are able to resolve the huge electricity deficit of the country, huge potentials of the economy would remain untapped and unavailable to current and future generations,” Iledara said.
On power distribution and gas challenges, an energy expert, Dan Kunle, said: “The new minister of power should try to get to the root of the issue of gas production and appropriate pricing and delivery of gas to all the power plants in the country, and then the transmission infrastructure of the country. That is electricity transmission infrastructure of Nigeria.”
Analysts say uninterrupted power supply will guarantee investments, employments for teeming unemployed graduates and reduce poverty level.
A lawyer and energy consultant, Andrew Obinna Onyearu, said Nigeria is experiencing its worst energy crisis with the shortage of petroleum products and shortage of gas affecting upstream and downstream activities across the entire energy space. According to him, the persisting supply disruptions to an already severely limited generation output must be arrested. The vast majority of the functioning generation capacity is old, worn out, damaged and in need of urgent refurbishment or replacement, he said.
He noted that average annual per capita power consumption in Nigeria which is at about 155 kWh is in the bracket of the lowest in the world, being seven per cent of Brazil’s and three per cent of South Africa’s.
Onyearu said over 50 per cent of Nigeria‘s households have no connection whatsoever to the grid, while 60 per cent of those who are to be supplied have no meters, so there is no accurate measurement of what is supplied.
On the way forward, he said short-term measures must start from capacity recovery to restore existing operational capacity to full functionality. This, he said, will require expedited operation and maintenance action involving urgent deployment of human and financial resources, probably out of procurement and management cycles.
“Urgent attention must be given to pipeline vandalism. This problem is man-made and deliberate, which means that its solution will entail short and long term answers. Critically, community-based intervention to reduce and control their occurrence; phased enhancement and escalation of technology; the formulation and implementation of specifically targeted intervention including, perhaps, the establishment of a designated agency with this specific responsibility are all immediately desirable responses,” he said.
Onyearu believes given the limited quantity of electricity generated, load shedding must be better organised, even possibly publicised so that expectations can be managed differently, while the problems with the availability of gas must be addressed, head on.
He said: “Gas availability, generally determined by commitments by gas producers and their attitudes, must be engaged differently with defined target objectives.”
He canvassed the comletion of the NIPP as a medium-term measures, noting that several power plants have, from an engineering perspective, been completed but cannot be brought on stream because of gas unavailability, while others have been deliberately stalled for the same reasons.
The lawyer believes stricter regulation will address the unfair trade practices.
“Post-privatisation issues with the unbundled entities appear hydra-headed and continue to grow in geometric proportions. Existing challenges mean that generation levels upon which commercial stability was based at bid and acquisition stage have never been met. This has led to visible non-compliance with the business plans upon which new owners successfully acquired the assets.
“Metering has become distorted and has led them, unhappily, to abandon agreed plans for comprehensive metering as well as other plans to enhance accountability of supply and other measures to reduce loss. NERC now appears to be responding with measures to cap revenue from estimated billing, a development, sound in conception but bound to create even further but seemingly unavoidable friction,” he said.
On long-term solutions, Onyearu said power sector’s potential is huge with no doubt as to its capacity to fulfill the country’s energy needs, provided there is specific, compartmentalised focus.
“There must be further, contemporary review of the roadmap for power and this exercise must be on going. The gas sector must be completely reformed, much in the same way that power was. Continuing to administer and develop gas as an adjunct product with oil remains an infuriating mistake, this being a persisting reflection of the posture even in the levitating Petroleum Industry (PIB) Bill.
“The entire structure midwifing Independent Power Producers appears to have derailed investor confidence in the sector and is endangering the much-touted private sector involvement especially in generation and distribution,” he said.
To him, the regulatory environment must be stabilised and clarified, while large projects that are expected to boost grid electricity deserve focused attention as well as specific, well-organised responses. The country, he said, also needs to diversify its energy sources.
“As a country, we need to affirm serious interest in other forms of energy and limit the pretended interest in coal, hydro and renewables. The longer these remain academic sources of energy, the farther away we are from genuinely producing adequate power. The NIPP Phase II presents an ideal opportunity to proceed decisively in this direction.
“The tardiness that has attended the implementation of the National Renewable Energy and Energy Efficiency Policy must be reversed. All these must encompass the review of the rural electrification programme. Finally, there must be a permanent solution to pipeline security, otherwise most of these measures will be irretrievably endangered,” he said.
Solving the power problem, the expert said, will require political will. He suggested that the President could assume personal, direct control as it happened under the last administration through the Presidential Action Committee on Power (PACP), with the Presidential Task Force on Power (PTFP) as its Secretariat.
Besides, he said authorities administering various aspects of the industry must be clarified and re-aligned because there are too many overlapping lines of operation resulting in spheres of operation becoming blurred.
Concluded.
