Energy

Regulatory inconsistency killing power sector — ANED

In this interview with Ayobami Adedinni and Gbenga Diya, the Executive Secretary, Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan speaks on policy inconsistency, liquidity crisis and sundry issues. Excerpts

The situation of power supply in the country has gone from bad to worse in recent weeks, what is the cause?

First of all concerning the issue of electricity in Nigeria, we need to understand where we were, where we are now, where we are supposed to be and why we are where we are. The major problem has been our level of enlightenment. Looking at this country, we have a population of about 180million people, at the end of the day the rule of thumb everywhere in the world states that we should generate 1000mw of electricity per 1million people. Transferred to the case of Nigeria, for Nigeria to have an uninterrupted power supply everywhere no matter the community will need about 180,000mw but that is a tall order with the way we are currently in the country and even in the next 10 years.

What we need now is how we can generate electricity that would be enough for those who are currently on the grid, the target then was about 20,000mw not that it is enough but it will go a very long way, a lot of people will have 24 hours electricity. February last year was the first time in the history of this country since independence; we had 5074 mw  which means we are still very far away from the expected. After that achievement in which the present government did. Following that in February the bombings of the gas pipelines in the Niger Delta continued thereby reducing generation level from 5074mw to 2000mw and even at a point to less than 2000mw. That has been the major issue because there are gas constraints to the power generating plants. Bearing it in mind that out of 26 power plants; 23 of them depend on gas, 3 of them are hydro; Jebba, Kanji and Shiroro damns. All those three put together cannot even give us up to one quarter of what we need. This means we need the three and also the 23.

When most of the 23 cannot get gas the power plant to urban shut down and they cannot run their turbine , when they cannot run their turbine there cannot be power. Once they cannot generate electricity, nothing for the transmission companies to transmit to the distribution companies. Every day we keep on enlightening the people of Nigeria on various media that we can only give what we have, we are the distributors. Any power that is not generated cannot be transmitted or distributed to our teeming customers. Our own is to keep apologizing to  Nigerians, the obeying and honest Nigerians who doesn’t steal Energy.

We know there are so many Nigerians who are simply thieves, all they do is to steal Energy and yet they want Energy. You cannot eat your cake and have it, you want there to be power but you do not want to pay for that same power that you want. Though we still have a lot of honest Nigerians who are willing, ready and able to pay for the energy they consume. I hereby on behalf of the industry apologize to them for this erratic power supply and I want to assure you that efforts are being made by the government and all the stakeholders to do something about the situation.

What are the efforts that are being made?

The problem of gas constraints, the bombing issue is a government issue and I know the vice president who just visited the Niger Delta is making efforts to resolve the issue, so strategically if they are able to convince the leaders in that region to prevail on their citizens who engage in bombing facilities to stop the act that will ultimately improve power supply because there will be gas for the turbines and that will help the situation.

The issue of Liquidity crisis is also another big issue that should be looked into. Right now the liquidity short fall is standing at about N1trillion as at the end of December it was N980billion. All these things are leverages that ought to have accrued to the industry but were not there and there are many reasons for that; including regulatory rate, fluctuations, regulatory body inconsistency (NERC). I am talking about between 2013 and now. This is not about a person or government; it is not about Mr. Jonathan or Mr. Buhari. Even we the operators we have a lot of things to improve on; our customer services, yes, we have open call centers all over the country but we need to do more. In terms of helping one before clearing and all sort of things. We have reach the bottleneck of the system but the liquidity crisis is making it very difficult, rather than placing faults we carry on our normal business. On the issue of gas, gas suppliers are not part of power sector, they are mainly business men; talking about Shell, Oando and the IOCs, they are business men who sell gas to us and also have other option to sell it outside the country. Gas is sold at accumulated dollar, when they sell to the generation company they calculate it at the equivalent rate of dollar even though they receive naira from them but it is at the rate of that dollar.

Now, this is how we are being affected: generation companies prepare their own invoice based on their own cost of production. Their cost will go up when cost of naira to dollar go up. Essentially naira was N197 to $1 when our current tariff was fixed on the 6th of December 2015, by June 2016 naira was N294 to $1, by December 2016 official rate it was N305. What that means is that the price when it was fixed it was predicated upon an exchange rate of N197 to $1. Also based on generation, first it was 5000mw soon it was increased to 7000mw. Remember that an increase in generation leads to an increase in revenue for the discos and the whole industry. Discos collect revenue on behalf of the value chain (generation, transmission and distribution) if they cannot get enough supply to distribute that means there will be low revenue and it will affect the whole industry. What I am now saying is that because of the exchange rate, the gas suppliers due to the cost of selling to the generation companies.

The generation companies’ cost of producing power has gone up, and then they will prepare their invoice and send it to us down below the chain the distribution company. So that cost has gone up, for instance I buy at N68 and I am now allowed only to sell at N27. We are not saying they should reduce or increase tariff that is the job of our regulator but we have to be realistic. If we are buying something at N68 and we are selling at N27 there is a short fall between N27 and N68, somebody have to pick up the price, remember when we are talking about profit here, we are talking about cost recovery, we are talking about simple term economist call cost of production. There is also a lot of merging debt, we owe the market because we are not able to pay for all the electricity that we received because people are not paying, people are also stealing a chunk of the energy received.

We have government; we have ministries, department and agencies owing us. Efforts are being made to pay but as at this morning they are yet to pay. I will continue to talk on this until it is paid. When it is paid I will be the first person to go to the press and say thank God they have paid their debt and when they only pay part of the debt I will say they have only pay part. I am talking about the debt of over N100 billion from about Nov 1, 2013 till date. We have the Ikeja cantonment that have never paid for light and there they are, they use light and they are not paying and all the military installations in Nigeria everywhere. It is a sad thing for the country; well I really pity you the coming generations.

What we are saying is that if they are taking something and not paying for it, electricity is a product like any other product. It is not different from other products. Distributors can only be able to distribute where there is produce and supply. It is a simple analogy but people don’t want to hear that, all they keep saying is they want light. I too I want light, I am a customer of a DISCO like everybody else. I suffer in the same faith but the reality is that we are not generating enough and there so many reasons why we are not generating enough.

How are you coping with the recent directives by NERC that you should meter all customers before end of February

We are doing it, we are trying our best.

How realistic is it?

That is left for us to see, let the deadline come. We have no problem with that. What I can tell you is that when we get to the deadline then we will talk. I have been in the industry for a while. I also want to emphasize this; it is in our own interest to meter all our customers not just Maximum Demand customers even all other customers. But we should be realistic and not play politics with power supply. We discos are in the business of power supply, those who are in the politics of power supply can play their politics. I am talking about metering customers not only the MDs, metering all Nigerians. The current metering gap is so wide following the neglect of over 60years; we cannot do that just in three years. That is not realistic.

How far about the debt owed DISCOs by MDAs?

Efforts are being made to pay the debts.

What are the efforts being made to eradicate meter bypass?

If you check the national dailies you will see that we have been making awareness on it, even on the radio stations. We have been moving around to enlighten people on energy conservation.

The Acting Chairman of NERC said the tariff plan is not realistic, what do you have to say to this?

He was also the one that said the business is not sustainable unless there is an increase in tariff, now last week he said people need to be careful. Tony Akah is my personal friend; I will not criticize my personal friend in public. I can criticize an institution, NERC is an institution. It is beyond Tony. Just like when you talk about power and you are now blaming Fashola. It is beyond Fashola, the man is hard working, very passionate, doing all his best. There are a lot of things that work that need to be taken care of. Until those things are done, we cannot get there. I leave you to look at Tony’s message to the National Assembly members when they were on oversight function. I would not say more than that.

Can you shed more light on policy inconsistency?

For example, sometimes in 2015 before the election NEC decide to freeze the tariff plan for the R2. R2 class is the one majority of Nigerians use. It is a residential tariff for private residents. That was done with a political motive to assist the former Presidential ambition to win the election. There is nowhere in the world where a  regulator will step into the political arena dancing macabre  dance to fulfill the aspiration of his masters and then destroy a sector for that reason. That is regulatory inconsistency.

Another one is that the current tariff was brought in late December 2015 but they said it should be effective from the 1st of February 2016 leaving January. Simple arithmetic that January that they left created a short fall of N0.8billion. When you fix a tariff you must try to save and nurture an industry that is still at his infancy stage. We are just three year and few months old. An industry like that requires a lot of nurturing like a baby. So NERC needs to do a lot more work, I would not blame those who are there. NERC is under people who are in acting capacity.

They came into power on the 29th of May 2015. How come they could not find professionals? Does Nigeria lack qualified people like that? Is it a question of “paddy paddy” government, whereby you bring your paddy and I bring my paddy? Even if they advertise it, we will have qualified people. Why are we going to beg one professor in America who is not ready and willing to come? Is he the best person in the world? Is he the best Nigeria can offer? Is he that somebody just wants that person because of where he hail from?

Until Nigerians begin to do things on merit and we jettisoned selfish interest, ambitions and aspiration. That is why I said it appears we do things like bring your paddy and I bring my paddy. If the person there is not ready why can’t you appoint Shasore, who is the former Attorney General of Lagos state, and he is qualified. Why not make him chairman of NERC? We also have Mrs Bola Onagoruwa, she is also qualified with industry experience. There are many people, why can’t we use one of this people? Why going to America to call someone who is not willing to come?

What is the update on the intervention fund provided by the CBN?

We have legacy debt being owed the market, mainly the gas suppliers in this case. They were owed before the days of PHCN before proliferation. There was no money for the Discos and Gencos to pay, so the CBN came in that we will do that but we will get the money back. Unfortunately the money is on the Discos book, when you put a debt on your book of which the money you did not spend or in your pocket. So the debt on your book makes it impossible for you to borrow money from financial institution to pay them because your business is not bankable. Another one is that the funds, of course we still have few that are yet to access it. But it is the way of paying back which is false charge that is, from the revenue you make you pay them back first every month.

What are the other challenges facing the power sector?

It is liquidity crisis, if we solve liquidity crisis, we have solve the entire problem. Regulatory consistency we need that. Government need to be more consistent. Government need to learn to live by the words and tenets of an agreement. For us at Discos we don’t believe in blaming and shaming. We believe in working together with all other stakeholders to solve problems. If I keep on blaming transmission or regulator for my woes, we won’t get anywhere.

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