In this Interview with the Editor in Chief/Publisher, Nigerian NewsDirect, Dr. Samuel Ibiyemi, the Chief Operating Officer of Ibadan Electricity Distribution Company (IBEDC), Engr. John Ayodele, lamented the increasing heap of debts the Distribution Company is incurring. He spoke on how the conditions posed by the COVID-19 pandemic have worsened the challenges of Distribution Companies (DisCos), with the difficulty involved in getting revenue from users of electricity, many of whom have been worst hit by the COVID-19 induced economic downturn. Among other striking issues, he harped on metering matters, stating that the Company is adopting a new “no meter, get disconnected” strategy as a measure to address the alarming revenue shortfall. Excerpt:
Few months since the COVID-19 pandemic struck, what are you doing to satisfy your customers under the current circumstances?
Well, I dwell on two major issues; which are, what we are doing for our staff and what we will do for the customers. The first month was in March and we had a lot of issues on how to comply. This is because of the following reasons: Firstly, we didnt want our staff on the street because of COVID-19, but at the same time, if they don’t distribute bills, customers will not pay. So, we used that month to test the waters by telling our staff not to engage with customers and the effect was that we got less than half of our supposed revenue.
At some level, we started approaching a certain figure indicating about 50per cent decline in revenue because people were not paying. Only those on prepaid had to blend, but then, some of them went on bypass, knowing fully well that there are no people to detect and arrest them.
So, by the end of May, when the government announced that those on essential services could carry-out their businesses, we then mandated our staff to go ahead with the distribution of bills and that was when our revenue started coming up gradually. We are still not there however. The first month, we completely ran at a loss that amounts to about N4.8 billion unpaid bills. The following month, there was a slight shoot as the total lockdown was over, and people are expected to come forward to pay. In March and April, we decided that we were not going to cut anybody short because that happened to be the first time in Nigeria that citizens experienced a lockdown. This we did, thinking people would pay, but nobody paid.
As our staffs go out however, we usually equip them with Personal Protective Equipments (PPE) such as face marks, hand gloves, and sanitizers for their operations and its been working out. The pandemic has not taken so much toll on our field staff, because we recorded only one COVID-19 case.
How do you intend to continue operations with the huge loss of N4.8 billion earlier mentioned?
I must tell you, even before the advent of the pandemic, we were losing between N1.8 billion and N2.5 billion monthly. As you know, we buy electricity and get count of what we billed and what we collect. It was not even worth the energy that has been sold to us. The energy sold to us today is almost N8 billion. The billing that we expected to get is between N6.8 billion and N7 billion and we were only able to retrieve between N4.5 billion and N4.6 billion. Before the pandemic, we are used to incurring a loss close to N2.5 billion every month, but during the pandemic it catapulted to between N4.5 billion and N5 billion loss; which we have not been able to account for.
So, what is the way forward now?
We have been working with the government and the Nigerian Electricity Regulatory Commission (NERC), to see the issues, because NERC had initially said that we shouldn’t make people suffer because of COVID-19, which means no disconnection. But when they saw the result of no disconnection, they stated that we could go ahead and disconnect customers who have refused to pay. Even with that, we had to be lenient with customers, as we know that people haven’t been able to go out and businesses have been down. So, we have been a bit slow in achieving that. Be that as it may, very soon we might have no option than to go on an aggressive disconnection, which means; no payment, no electricity. So, it’s not a question of saying we have 90 days, because I don’t have 90 days to pay my bills; I have only two weeks to pay my bills. So I can’t wait for 90 days to get things done. However, we are still looking at those issues, because NERC has a rule that states that before you disconnect, you have to give the customers some notice, but now it is clear that no pay, no electricity. The customers don’t have 90 days, because when they receive the bills, there is always a specific date written on them for payments to be made.
The government once mentioned that there’ll be some kind of intervention for customers, what is the update on this?
I am not too sure I will want to comment on the intervention issue, because when they say intervention in the electricity sector, it doesn’t apply to DisCos (Distribution Companies) as DisCos have never received any funds from the government. The only intervention I can remember was in 2014, when we received N318 billion, and it was a loan given to DisCos. More than 50 per cent of that amount was used to pay negative debts and we are paying for it. IBEDC was supposed to receive N26 billion, but we eventually received N11.2 billion. So, almost N15 billion was used to settle negative debts, yet, we are paying for that. NERC would say the amount was factored into electricity bill and all that, but in the face of customers not paying, how do we recoup the money; both the loan and the debt. The government introduced Meter Asset Provider (MAP) to ensure that if the public sectors don’t have funds, the private sectors would have funds, but it has been a marred process which we are still trying to resolve, as we are in discussions with NERC over the issue. The discussions have been affected however by two things; One of which is foreign exchange. People imported meters when the foreign exchange was about N306 to a dollar and DisCos didn’t have access to buy meters with the foreign exchange from the Central Bank Nigeria (CBN). Regarding that development, we are in discussions with CBN and they have said henceforth, we should bring all our requirements for meetings. We have not reached a conclusion, but the CBN is very willing to accommodate them.
The other aspect of it is the fact that suddenly tariff changed in the port from 10 per cent to 45 per cent. So, some people have meters available in the port for the past five months, but they are unable to clear them because of this. We are also discussing with the government and the Minister of finance has agreed that the President will approve that those meters that arrived during the changing process and were already ordered before then will receive waivers. We were informed yesterday that the president had approved it. The CBN has also said it is ready to provide funds for meter manufacturers. The Bank has also promised to allow them a foreign exchange window where they will not be subjected to bureau de change.
Talking about these debtors, on what category are they placed, given the huge loss?
The truth is that there are several categories of losses. There are those who connect illegally; they don’t have any meter at all. There are also those who have bypassed their meters and they consist an average of over 200,000 people. Even for us to get staff that will go and police everywhere is a tough thing to do when you are still making losses. We have caught some of them, but we are not everywhere. In Ota area of Ogun State, we discovered that an average person pays about N1,500 per month, even with the giant houses over there and those who are consuming so much power. So, you know that, that average is low because 55 per cent of them have bypassed their meters and it is a very tough game for us.
With these debts, how have you been able to pay the supplier?
We have been owing the market. As I speak today, as at December 2019, we were owing the market N243 billion for just one DisCo (Ibadan DisCo); that is what is called market shortfall. However, the government also knows that because tariff is not cost effective. They are going to calculate what we have lost as a result of tariff and discount off net of the balance which we still have to carry on our sheets.That takes me to the next level that with N243 billion sitting on our records, there is no way we can borrow money anywhere in the world, which means we cannot borrow to fund investment while living from hand to mouth.
Can’t you borrow from banks?
No, not at all.
Are you saying IBEDC is owing banks in Ibadan?
Well, IBEDC as a company does not owe banks because we can’t borrow. Our shareholders owe banks because they borrowed money to do business. Earlier, what we do is borrow money to do business and pay almost N60 million as interest on N3 billion that we used to run our operations, but we had to stop it. Today, we are not owing any bank any money for operations because they wouldn’t even lend to us anyway.
What has been the effect of these borrowings on Managers?
The effects have been that we cannot sleep well. When you think about people who watch their transformer damaged, their cables stolen, their transformers exploding here and there, they expect that we will replace them, but the question is where is the money?
In fact, it has now gotten to the extent that honestly if an area experiences a blow of transformer, and such an area is where customers are non-compliant with payments, we don’t even pay attention. This is because we can’t borrow money elsewhere to deal with those who don’t pay up. The residents might say they will pay, just to get the transformer fixed, but as soon as it is fixed, nobody pays. Another issue is that they are not careful in watching over the assets in their care. A lot of customers watch their transformers get damaged because they will feel like it’s not their business.
What are you doing about staff colluding with customers to bypass many rules and guidelines to protect transformer?
In the last six years, I think we have sacked close to a hundred staff because we wrote to them about the organisation’s zero tolerance towards such attitudes. Some challenged the verdict in court, saying that it didn’t follow legal procedures. We’ve been battling with that, but our legal system is somehow slow. However, once we have been able to resolve the meter issues, we will then look into other things, because now we are going to take available meters to all houses and request they sign for them or get disconnected.
What do you think is the way forward in the face of these debts and the threats of a takeover of DisCos by the Senate?
We are in dialogue with the government. I think a lack of understanding of the sector brought about those issues. But recall there was a Senate committee meeting held on the issue and we made presentations and you can see now that their language has changed. They are now defending the industry and are no longer seeing DisCos as the problem, because they have realized that the problems go beyond DisCos and are deep rooted in the entire value chain which they have now come to understand. In fact, the last stakeholders meeting they held, the Senate President, Ahmed Lawan, who was saying the government needed to approve the takeover has said he now understands better. So, before there was a lack of understanding, but now they’ve gotten understanding and I don’t blame them because in Nigeria, it is public opinion that is mostly accepted, as many people don’t care to verify the legitimacy of their sources of information. In the last two months, the Federal government set up a committee that mandated the CBN governor to mediate in the affairs and we’ve been in communication with them. Recall that we listed all issues to them and now they are beginning to say that in the real sense, it is not DisCos alone that has the problem. Everyone has issues, and if these issues in the sector are not tackled, the sector cannot make progress.
What are other problems faced by DisCos?
The problems still are the inability to collect debts from customers; no funding to invest; reduced ATC (Available Transfer Capability) and many issues tied to lack of funding. Again, there are regulatory issues like the recent directive of no disconnection in 90 days, which is affecting the funds we need to run the operations of the business. Other regulatory issues regard not charging the right tariff which will lead to tariff short falls; cross subsidization of tariff which makes things unbalanced; and the inability of TCN (Transmission Company of Nigeria) to supply electricity needed. So, it has resulted to zoning of power supply which is not ideal for business. The same feeders that supply industry, supply residential buildings also and this is a problem and the way our system is built here, builders do not consider futuristic tendencies as they build on almost any space available. So, even if we intend to construct new lines in Ibadan, there may be no space for such, as people have built even under the lines now. Again on TCN, they don’t always deliver power when needed. For instance, I might need 150 mega watts of power, but TCN may only be willing to release 70 mega watts. We are in the process of getting power to factory dominated areas like Shagamu and Ota, so we can feed two different companies at the same time. We have even signed MOUs with two companies on captive power, but getting funds and approval is always a very cumbersome process.