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Power sector reforms: Jonathan, the Power President

By Yemie Adeoye
SINCE assumption of office as President, Commander-In-Chief of the armed forces Federal republic of Nigeria, President Goodluck Ebele Jonathan has not minced words about his unalloyed commitment to steady supply of electric power nationwide, he has also matched those words with action as he recently launched a roadmap for the reforms in this all-important sector, thereby proving his avowed resolve to tackle the perennial menace of shortage of electric power in the country with a dose of practical solutions.

Goodluck
Right from 1896 when electric power was first generated at Ijora in Lagos via a 60kw plant, never has the subject of provision of adequate power supply taken such a centre stage in our collective national consciousness. From the cascading hills of Gwoza in Borno State to the sandy beaches of Lekki in Lagos down to the labyrinthine creeks and rain forests of the Niger Delta region, the desire to achieve stable power supply is strong and infectious.

For good measure the quest for stable power supply among teeming Nigerians is well placed. Throughout the world, electricity remains the catalyst for economic growth and everyday living. While some climes are celebrating five –ten years of uninterrupted power supply it is common knowledge that some locations in the country exist without power for weeks and months.

As at the last count the country’s power generation level stood at a paltry 3800 mw ( courtesy of hydro power generation from persistent rainfall) a far cry from the desired level of over 6000 needed to place the country on the path of near stable power supply. Conversely, South Africa with a third of Nigeria’s 140 million population has eight times that capacity.

However amid the long tales of anguish and jeremiads comes a strong sense of hope from President Goodluck Jonathan who has since the inception of his administration taken some unprecedented moves aimed at reversing the epileptic power situation for good.

Making Power Reform the Catalyst of Economic Growth
Even the most rabid critic of the President cannot help but agree that for the first time in our living memory as a nation there is a well_scripted initiative by a government to correct the electricity power deficit and transform the sector into the main pillar and catalyst of sustained economic growth.

Though President Jonathan did not in anyway orchestrate the deplorable power situation in the country, he has taken upon himself the mandate to ensure that the power problem is fixed once and for all. Days after his emergence as President, Nigerians were greeted with the inauguration of two committees saddled with the task of fast_tracking the resolution of all issues pertaining to power sectors, and achieving stability in electricity supply throughout the country.

These are the Presidential Action Committee on Power headed by the President with the Vice President as alternate Chairman and Presidential Taskforce on Power headed by renowned professor of robotic engineering Dr. Bart Nnaji.

While the Presidential Action Committee on Power which meets weekly is charged with the responsibility of providing leadership and guidance to determine the general policy direction and strategic focus of the power reform, the Presidential Tax Force on Power is the engine room for the day to day planning, and it is charged with the responsibility of developing and driving forward the action plan of the Nigerian power sector with achievable targets, especially with reference to the areas of power generation, transmission, distribution, as well as fuel to power.

Moving towards Government Disengagement from Management of Power Generation and Distribution
Under the new thinking, Nigeria will privatize power generation and distribution. Though Government will continue to own the national grid, its management will be privatized to firms with requisite technical and commercial savvy.

The push for the power sector reform in Nigeria is buoyed by the traditional inadequate electricity supply, incessant power outages, low generating capacity and high technical and non_technical losses that characterized the Nigerian electricity industry.

Speaking on the President strides in the power sector in so short a time, President of the Nigeria Gas Association(NGA) and Managing Director of the Nigeria Liquefied Natural Gas (NLNG) Company, Mr. Chima Ibeneche stated that the President’s launch of the power sector reforms is a welcome development that should be followed with ruthless implementation as the gas sector can not wait for the implementation of the new gas pricing regime especially as it positively affects the power sector.

“It is important for us to realize that imbalances in the chain of gas in the ground to gas development to power are really what have prevented Nigeria from observing optimal development in gas to power sector. What the new price regime aims to do is to give those who intend to get the gas from the ground to the surface a reasonable return for their investments.

It also allows those who builds gas infrastructure to achieve certain returns that will justify that investment. Prior to now it was only meaningful to develop a gas field if it was meant for export.

For instance, today the international gas price is about 3.6 dollars per million scf of gas and what the minister has set for the domestic gas to power is about 2 dollars per million scf, so she has narrowed the gap from where it was before which was far less, and certainly at about 2 dollars per million scf it begins to make sense that somebody can actually raise money to invest in gas production, and once you can ensure the availability of gas for power it means you can expect a reasonable gas supply so its going to have very direct impact on development of gas supply to Nigerians.

Couple with this is the power road map which has been unfolded and which came by a desire to privatize power distribution and generation, with the federal government’s retaining control of only the major gas transmission trunk_line.

When you have opportunities for people to invest in gas development and opportunities for people to invest gas development and opportunities for people to develop in power generation and transmission, you have automatically created an avenue for the private sector to take control of gas and power and in my opinion this is the right way to go to guarantee power supply to Nigerians.

It is however critical that the implementation of roadmap, especially as it concerns the privatization of Nigeria’s power utility infrastructure and the execution of the power pricing and subsidy review and infrastructure-management aspects of the roadmap be devoid of undue politicization”.

He noted that although private funds are required to move the gas and power industries to the pride of place they deserve in our economic landscape, it is still important for the Nigerian government to selectively and in the national interest invest or incentivize investments in key infrastructure that can jump_start the development of the gas business in various areas.

From all indications the administration is intent on steady implementation of the 2005 power reform legislation which seeks a holistic approach of restructuring the power sector and privatizing of the seven business units unbundled from the then National Electric Power Authority, NEPA. Under the arrangement, NEPA was unbundled into seven generation companies (GenCos), one transmission company (TransysCo) and eleven distribution companies (DisCos).

It is envisaged that the arrangement would encourage private sector investment particularly in generation and distribution thereby effectively squelching any form of monopoly thus paving way for the natural emergence and entry of independent power producers (IPPs).

The structure which has since come into effect since 2004 leading to the coming of the Power Holding Company of Nigeria, PHCN, seeks to encourage a sizeable management team at the headquarters while the individual managers of the unbundled segments are designed to enjoy some level of autonomy .
In the new arrangement, TransysCo will be government-owned and managed by system operators (SO) and transmission operators (TO).

Placing emphasis on replacement, upgrade and refurbishment of obsolete infrastructure
While it is true that the inability of the generating stations to function at installed capacity has been the biggest obstacle to adequate power supply in Nigeria, there is little doubt that the usage of old and unserviceable transmission lines, transformers and other sundry electric infrastructure have contributed to the electricity crisis. Moving to tackle the menace, the government in July announced the award of a $3.5billion contract for the construction of a national super grid to address the power transmission challenges.

The new 700 KV SuperGrid which will be completed in four years is designed to transport electric power across vast distances which the existing 330/132KV grid cannot meet. The project will be funded as a Federal asset with additional financing from private investors and international finance and development agencies.

Industry experts inform that the SuperGrid which will run along the same route as the existing 330/132KV grid is capable of addressing Nigeria’s future energy challenges including transition to more sustainable energy sources, reduction of power loss per transmitted megawatt and improving power voltage profiles across the country.

It is believed that the major advantage of the 700 KV super grid over the existing 330/132 KV grid is that it will significantly reduce the huge amount of power currently lost in the process of transmission.

The consensus among experts is that without the super grid, the quantum of power lost in transmission will continue to increase as more power progressively becomes available for evacuation from the new and rehabilitated generating stations. Periodic systemic failures will also become more frequent.

Already, current projections by the Presidential Task Force on Power indicates that Nigeria’s available generation capacity will rise to 6939 mw by April next year and 14019 mw by December 2013.

Driving Critical Interventions in Gas to Power
Events in the power sector under the watch of the President have seen the advent of novel initiatives aimed at increasing the volume of gas available for power generation.

Apart from ensuring that oil companies comply with domestic gas obligation requirement ahead of export commitments, the President has engendered some level of vital intervention in gas supply to power stations which has led to the following:

The review and commencement of immediate implementation of a revised and more viable commercial framework for gas to power anchored on a revised Gas to Power price to more commercially viable levels in a phased manner from the current $0.2 to $2.0 per million British thermal units by the end of 2013; introduction and ongoing execution of world class bankable Gas Supply and Purchase Agreements (GSPAs); and securing the World Bank Partial Risk Guarantee solution for the legacy problem of non_payment for gas consumed by the power sector.

Also in line with the President’s vision for power, the Petroleum Ministry in concert with the Nigerian National Petroleum Corporation, NNPC, has redoubled effort on the reliability of gas supply for the short term from all existing gas plants thereby attaining an all time high gas production and supply to the power sector. Also, repairs of some critical pipelines were effected and today all operating PHCN gas_powered plants are fully served with gas.

Already, the NNPC is focused on project delivery to assure additional 300mmcf/d before end of the year – most of which will be dedicated to upcoming Niger Delta Power Holding Company power plants.

To consolidate and expand its gas delivery infrastructure in support of further power sector growth, the Petroleum Minister, Mrs Diezani Alison_Madueke, recently announced a three_step infrastructure delivery agenda which is currently underway.

The initiative is seeking to focus first on immediate delivery of adjunct pipelines to enable supply to new power plants like Alaoji that will mature within the next 6_9 months. The second focus of the initiative is the consolidation of the gas pipeline grid by end 2012, by ensuring end to end east_west pipeline connectivity and attainment of a national specification for gas going to power plants through the phased deployment of central processing facilities. The third is to deliver a major expansion of the network for sustained growth in supply to the sector between 2013/2015. Envisaged Critical projects include the Ob/Ob_Oben line, expansion of the Escravos_Lagos Pipeline System and the Calabar_Ajaokuta_Kano pipelines as well as additional central processing facilities.

Launch of Power Sector Road Map
In its close to three decades of existence, the Eko Hotel and Suites in Victoria Island Lagos has never seen such a huge convergence of A_list government functionaries for one event. Gathered at its New Expo Hall on 26th August, 2010, were President Jonathan, the Governor of Lagos State, Babatunde Raji Fashola, in company of 10 other state governors and three deputy governors. Also present were the Minister of Finance Mr. Olusegun Aganga, Minister of Petroleum Resources, Mrs. Diezani Alison_Madueke, Minister of State for Power, Nuhu Wya. Also in attendance were the captains of industry in Nigeria too numerous to mention.

The event was the official launch of the power sector road map designed to launch the administration’s initiative to productively engage the key stakeholders of the economy in a focused discourse on plans to effectively tackle the critical challenge of the enormous electric power deficit and transforming the sector into the major driver of Nigeria’s economic development process. By the time the President was done with the launch, few people were in doubt about the workability of the set objectives.

The President identified the factors that adversely affect reliable electricity service delivery in Nigeria to include the absence of a sustained and deliberately deployed long_term power development strategy, under_exploitation of the country’s abundant energy endowments and the absence of adequate implementation of reform policies. He further identified tariff as the critical factor in resolving the entire value chain of supply of electricity.

While moving to ensure that the relevant agencies achieve a tariff structure that will give incentives to investors, President Jonathan enthused that by God’s grace come December 2012, Nigerians will not just celebrate one day, but one week, one month, and even longer periods of uninterrupted power supply.
Under the road map, government will in due course withdraw from mainstream power generation and distribution while allowing the private sector to drive it under the supervision of the re_invigorated National Electricity Regulatory Commission.

As articulated in the Electric Power Sector Reform Act, the private sector will be responsible for generation and distribution, while government will still own the transmission grid, but with private sector management. Already government is in the process of commissioning independent power producers, international oil companies to produce at least 5,000 megawatts of new capacity. These plants will begin production in 2012 and 2013. Government will provide the credit enhancement that will enable them invest in the construction of the power plants.

The road map ensures that Coal will also be exploited in the next few years to install power plants in places as Gombe, Kogi, Enugu and Benue. However, the largest resource to fuel power generation will come from Natural Gas. Government plans to exploit this asset to its fullest by converting flared gas to domestic application for power generation. In line with the Electric Power Reform Act, the power bulk trader which the bureau of public enterprises has now incorporated will have credit backing of federal government to purchase power from private power providers and sell to the distribution companies. The bulk traders are expected to be in operation within two months.

A key factor to realizing government goals in the power sector is appropriate tariff regime. The Road Map advocates an adjustment in tariff regime in line with government’s determination to provide reliable electricity to the consumers but this will be done in such a way that it will not affect the ordinary consumer.

With the focus on the power sector as well as the well being of the ordinary Nigerian, President Jonathan has not only opened a new vista of hope for Nigerians but also shown that responsible leadership can also take roots in this clime.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.