DISCOs operating PHCN’s billing model

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This is the second installment of our special report on power. In the first edition, yesterday, we observed that transformers, pillars and other machines that have been installed and in use for the past 15 to 20 years are due for replacement

Searching for light in the dark part 2

By Adekunle Adekoya, General Editor & Hugo Odiogor

HE said: “The introduction of a tariff system driven by market forces ignored the fact that Nigeria’s economy is import dependent and that there would always be of fluctuation of prices arising from the cost of sourcing foreign exchange and other charges that were paid at the port of entry, bribes and other levies which the electricity generation and distribution companies are made to pay before they come up with the final product”.

This would be pushed ultimately to the consumer of the electricity product and there would be ripple effect on the general price level in the economy.

electricity-NIGERIAHe said “We are not in transparent business environment where we could easily determine the unit cost of electricity generation and the per capita consumption”. For instance, “We also know that government institutions and agencies, public office holders at the national and state levels, who live in designated estates, military barracks, residencies of security agencies are usually obstinate and reluctant to pay their electricity bills.“

Business practices

“Consequently, the power companies let them be, either to buy protection from them or to avoid trouble. There is no level playing field as those who have a responsibility to ensure good corporate governance and business practices are compromised and socially corrupted by the power companies.

NERC: Regulator or strangulator?

“Also worrisome is a development within the Nigerian Electricity Supply Industry (NESI), where the Nigerian Content Policy is heavily skewed in favour of the investors whom the NERC is introducing the legal framework to guide their operations and to ensure that their investments are secured and made profitable.

Top among the list of the discontent are the:

*Drastic drop in the level of power generation in the country, attributed to acts of vandalism on gas pipelines and electricity infrastructure;

*Unilateral suspension of the pre-paid metre scheme which was a pre-condition set by NERC for privatisation;

*Reliance on the practice of estimated billing system which gives the DISCOs the leeway to collect revenue for services not rendered;

*Emergence of an electric power cartel which arbitrarily manipulates the billing system;

*Use of market forces to determine electricity tariff under the Multi Year Tariff Order (MYTO), and

*Dearth of qualified manpower arising from the massive engagement of staff from defunct PHCN.

*Disregard for consumers rights and complaint of poor services arising from massive drop in capacity generation.

‘Appropriate power pricing an issue’

In an exclusive interview, Minister of Power, Professor Chinedu Nebo said “the issue confronting the new power companies is how to ensure appropriate pricing for electricity consumption for the low income earners and the elites, through appropriate metering”.

Another critical factor is
how to stop the leakages that occur from the points of generation to transmission, through reliance on obsolete transmission lines, acts of vandalism of of electricity equipments ang gas pipelines.

Professor Nebo attributed problems in the power sector to the system, and bad attitude of some Nigerians who are known “to deliberately flout laid down rules and violate every operational guidelines in order to satisfy their selfish desires”.

According to Nebo, the actions of these unscrupulous persons find expression in their deliberately overloading the transformers and over stretching their functional capacities, manipulation of metres to under-read actual consumption, using one phase metre to carry heavy load in homes and offices, using substandard cables to connect electricity to residential premises and offices, without regards to the safety of the buildings and to the power infrastructure.”

According to him, “these actions have caused extensive damage to the power infrastructure and loss of revenues to investors in the sector.”

Since the enactment of the
Electric Power Sector Reform Act 2005, Nigeria’s electricity landscape has witnessed major changes resulting in the emergence of private sector led Nigeria Electricity Supply Industry (NESI) as the Federal Government realised that it could no longer meet up with the financial requirement of funding the capital intensive power sector.

Erstwhile chairman of the House of Representatives Committee on Power, Hon Ndudi Elumelu in an interview said the Obasanjo administration did much to tackle the problem of Electricity Power Sector, but in the end the result was not commensurate with the massive effort and financial commitment. It was the Obasanjo administration that initiated the Electricity Power Sector Reform Law (EPSR) 2005, to liberalise the sector and break the existing monopoly of NEPA. This was followed by the incorporation of successor companies of defunct NEPA. The EPSR was to achieve the following objectives:

*Ensuring improved and sustainable              supply of electricity.

*Efficient metering and billing system to improve revenue generation capacity.

*Guarantee overall customer satisfaction in delivery of quality and reliable service.

*Rehabilitation of neglected Infrastructure & Expansion.

*Restructuring; deregulation; privatization of the electricity sector.

*Key infrastructure expansion projects   by the Federal Government.

*Transforming NEPA to a Power Holding Company of Nigeria (PHCN) to be floated on the stock exchange for the public to subscribe to its shares.

*Unbundling the business units of the defunct NEPA into incorporated successor companies.

*Guarantee private sector participation in power generation, transmission and distribution.

A major component of the
EPSR was the setting up of the National Energy Regulatory Commission (NERC) to regulate the electricity market. The NERC was inaugurated in October 2005 with a mandate to regulate all activities in the Electricity Sector.

NERC is expected to provide the frame work to develop competitive electricity market with the breaking up of the monopoly of NEPA. Apart from the legal framework that empowered the electricity power sector reform, it is important to state here that the emergence of a regulatory agency, the Nigerian Electricity Regulatory Commission (NERC), is to ensure:

*Optimal utilization of resources for the vprovision of electricity services;

*maximize access to electricity services by promoting and facilitating connection;

*Adequate supply of electricity to consumers;

*Avoid exploitative billing by private operators;

*That regulation is fair and balanced for         licensees, consumers, investors, and other stakeholders.

It also resulted in the creation of successor companies to PHCN. These included 11 Distribution companies (DisCos), six Generation companies (GenCos) and one Transmission Systems Company (TranSysCo) in November 2005.

Vanguard was at the headquarters of NERC to speak with management of the Commission who claimed they could not entertain media enquiries. The visit however yielded fruitful result as our reporters attended the stake holders session brainstorming on the National Content Policy being put together by the commission to regulate the operations of the new companies and investors in the power sector.

Apparently, there was no enabling legal framework to guide the relationship between the new power companies, the regulator, and the consumers, prior to the privatisation. What was in existence was the laws that protected PHCN as a public sector power monopoly.

Majority of the stakeholders are CEOs of the new companies that emerged from PHCN, suppliers of electricity equipment, metre manufactures, producers of transformers, cables, semi-conductors, lawyers, Nigerian Society of Engineers, etc.

Vanguard discovered that NERC was silent or pretended to be unaware of the complaints of consumers about the inefficiencies associated with the operations of the DISCOs which are relying on the old technology and manpower left behind from the former power supply company which could not raise its capacity beyond 3,500MW before it was shoved aside.

Engr. Badejo said:  ”What is generally presented to Nigerians as privatization of the power sector is transfer of public monopoly to private and profit seeking individuals who have connections in high places and at the same time, using the instruments of government to protect them.”

Secretary-General of National Union of Electricity workers, Comrade Joe Ajaero, told Vanguard that “what is unfolding in the power sector is a grand plan by the forces that control the oil and gas sector that were favoured to purchase the electricity companies to systematically enslave Nigerians who would be spending 25% of their income on electricity supply.”

Discriminatory billing system

The arbitrary, discriminatory billing system based on estimation is illegal and excessive extortion as consumers are denied any form of redress when they complain about the exorbitant bills which do not take into consideration other costs of living, namely transportation, education, medical expenses, fuel for generators at home and other life sustainers.”

According to Ajaero, this situation would lead to further impoverishment of Nigerians and systemic enslavement as Nigerians who earn their income based on local economic determinants are forced to pay international prices for goods and services produced by cheap local labour, just because we want to satisfy the IMF and the World Bank.

According to Ajaero, “there is a 2013 landmark decision aimed at eliminating corruption and inefficiencies in the power supply chain”.

But Power Minister, Prof. Chinedu Nebo said, in reaction to Ajaero’s assertions that “President Goodluck Jonathan has taken the right step with the privatization of the Electricity power sector although 40 per cent, is still held by the Federal and State governments, workers and host communities of power generating companies”.

The minister argued “that in no distant time, Nigerians would be delivered from the scourge of perennial power outages as it is the intention of government to ensure that 75 per cent of the population have access to electricity by 2020. “.

The National Electric Power Policy (NEPP), which gave birth to the privatisation stated that its objective is “to establish in the long term an electricity market structure in which multiple operators provide services on competitive basis to the broadest range of consumers”.

It further stated that “under a competitive regime, competitive market forces would be the best determinant of appropriate and sustainable level of tariff charged by the various carriers of their services”

Nigerians have been   skeptical and distrustful of setting of time lines and the avalanche of promises that are not kept. In fact, they have seen series of failed promises in the past.

It was seen as a fast-track approach to improving the nation’s electric power supply through generation, transmission, distribution and gas supply projects to and from thermal power stations.

Among the high points are:

*Construction of 7 new power stations with a capacity generation of 2,774 MW;

*Distribution network expansion of 250 new lines comprising of 4,367 km and 22,598 transformers;

*Gas pipeline associated transmission infrastructure from Adanga to Calabar estimated to cost N15 billion.

All the power plants are to be fueled by gas.  The Joint Venture Partners in synergy with NNPC will supply all gas from associated and non-associated gas sources.  Gas transmission pipelines will be constructed to convey the gas from new and existing gas sources to the power station sites.

The idea of concentrating on the use of gas powered stations is to reduce gas flaring in the Niger-Delta Area.

Experts told Vanguard
that about 748 million metric standard cubic feet per day (MMSCF/D) will be consumed by the power plants.

Hon. Ndudi Elumelu told in an interview said that the Federal Government and the new investors in the power sector must learn from the mistakes of the past administration which sank over $13.5 billion into the power sector only to achieve nothing.

According to Elumelu, the Obasanjo administration meant well when it embarked on the NIPP project but it was later discovered that some Nigerians had used the scheme to defraud the nation. Vanguard checks at NERC revealed that the National Electricity Regulatory Commission was still fleshing out what it called National Content Policy which is expected to provide a legal frame work to guide the relationship between the NERC, the GENCOs, the TranSysCo and DISCOs. It will also safe guard the consumers from what Prof Nebo reports across the country.

The Chief Executive Officer of Sahara Group, Tonye Cole doused whatever optimism Nigerians may have on steady and stable electricity supply when he told Vanguard that “it will take at least five years from now for Nigerians to enjoy steady power supply “.

According to Cole, “the private companies still have to work with the government and the regulators to achieve realistic results as the power sector requires investment capital to replace obsolete and dilapidated equipment in the generation and transmission sectors.”

Experts in the industry told Vanguard if the GENCOs can produce up to 10,000MW as expected by Nigerians, the present transmission lines which were installed in 1987, which consists of approximately 11,000km of 330KV and 110KV, would not cope in evacuation of the power generated as they have been struggling to cope with a capacity of 4,600MW and have been incurring huge power losses along the transmission process, besides power theft.

He said: “What is required now is updating the obsolete and dilapidated generation and distribution equipment, appropriate metering and billing, rationalizing the billing system”. Prof Nebo, believes that Nigeria is on the right track with the privatisation programme in the power sector. .

Public monopoly

Comrade Joe Ajaero, Secretary General of National Electricity Workers said “the privatisation policy of government was putting the cart before the horse as government ought to have created the enabling environment before putting up the companies for sale”.

According to Ajaero, “what the government has done was to transfer public monopoly to private monopoly entities and armed them with instruments to milk the consumers by denying them the legal instruments to check excessive and arbitrary tariff hikes.

He said electricity consumers in Nigeria have over the years been serially enslaved by the power companies which have over the years, relied on legal protection from government to extort consumers through estimated bills for electricity not supplied.

Participants at a Vanguard Conference Hall on Power Supply in Nigeria strongly canvassed for protection of consumers from unbriddled exploitation by the private companies that are in a hurry to recoup the funds they sourced from banks to purchase the successor companies of PHCN.

Prof. Pat Utomi is of the
view that “the habit of government always wanting to fleece Nigerians in order to have more money at its disposal to spend will continue to breed corruption, poverty and social discontent in the country”.

Reforms to re-jig  power sector

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