December 28, 2020

NIPP intervention and challenges of electricity privatisation

Transmission is bane of power sector, FG moans

By Kunle Kola OLUBIYO

NIGERIA returned to democratic governance in 1999, giving birth to a political milestone known as the 4th Republic. The Power Sector had gone over 20 years without a single major capital infusion by the government. This arguably set the tone for what was going to be a massive investment to revive the sector.

In order to fast-track different government-funded projects into mainstream contention, the National Integrated Power Projects, NIPP, was conceived in 2004 under the President Olusegun Obasanjo administration as a government-funded quick intervention in the ailing power sector inherited by the new civilian administration.

At the onset of conceptualization of the ideals of NIPP, the National Council of State, NCS, and the National Assembly, approved an initial $2.5 billion as seed money for the National Integrated Power Projects, NIPP, from the Excess Crude Account.

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The Niger Delta Power Holding Company Limited, NDPHC, was thereafter incorporated as a limited liability company to serve as the legal vehicle to hold the NIPP assets and further crystallise the noble ideals of the NIPP concept. Today, the NIPP, under the Niger Delta Power Holding Company, NDPHC, has entered the second phase of its implementation.

Phase 1 comprised in the main, of an assurance that the ten gas-fired plants developed by the NDPHC get privatised so that proceeds from the exercise could be used to invest in power projects in other parts of the country not captured under the first phase of the NIPP, especially the Northern region where NIPP plants are not located.

The Federal Government, in 2013 commenced the privatisation of the gas-fired plants. Proceeds from the sale of 80 percent equity of NIPP Generation Assets were to be ploughed back into the joint coffers of the Federal, State and Local Governments and reinvested in the NIPP phase II. The 10 gas-powered plants are Olorunsogo II Power Plant, Geregu II Power Plant, Gbarain II Power Plant, Alaoji Power Plant, Omoku Power Plant, Egbema Power Plant, Sapele Power Plant, Omotosho II Power Plant, and Calabar Power Plant.

With the completion of Phase I, NIPP power plants are by their original mandate designed to collectively add an additional 5,000 MW of gas-fired generating capacity to the Nigerian Electricity Grid Value Chain. Phase I of the NIPP Projects also covered Transmission Projects. As at May 2016, the overall completed 330kV transmission line was 1336.9kms of the contracted 1634.4kms. It represented 82 percent completion of the job. 132kV transmission line covering 405.5kms was completed out of 719.3kms contracted out.

It represented 56 percent completion of work. In addition, the overall completed 330/132kV transmission substation capacity was 3810MVA of a targeted 6000MVA, representing 64 per cent completion, while completed 132/33kV transmission substation capacity was 1920MVA against  3100MVA contract target. It represented 62 percent completion.

The Distribution sub-sector also gained from the quick intervention by the NIPP. A total of 296 distribution projects grouped into 43 lots spread throughout the country were awarded in February, 2007. Each of these projects included injection substations of varying capacities ranging from 2.5 MVA through 7.5 MVA to 15 MVA, with associated 33 kV and 11kV distribution lines complete with CSP transformers to serve numerous customers across the country.

The NIPP projects have gulped over US$7.385 billion since August 2005 when the National Council of State and the National Assembly first approved an initial funding of US$2.5 billion for NIPP from the “Excess Crude Account”, ECOA, with an additional US$5.375 billion from the ECOA as a Power Emergency Fund to complete the NIPP.

These figures evoke a feeling of earnest activity by the NIPPs. But it has not been a smooth sailing for this vital government agency established to bring about a better livelihood for Nigerians within their areas of operation.

The NIPPs have faced several challenges; firstly with the suspension for two years, of the projects when late President Yar’Adua came to power in 2007. A second hurdle was in the shape of delays in securing instruments of guarantees and gas supply agreements, right of way for some of the transmission projects, a finance shortfall and other encumbrances.

The NIPP has now gone into Phase II, with attention going to solar and hydropower so as to cover the Northern parts of the country. It has received over 100 expressions of interest for the NIPP power plants, and this was followed up with publication of a list of prequalified bidders on August 19th, 2020 by NDPHC and the Bureau of Public Enterprises, BPE.

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The success recorded by the NIPP in Phase 1 has shown that with the right political will, Nigeria can actually overcome the perennial problem of power shortage. In seeming agreement with having the right man on the job, the Federal Government recently displayed the right political will by reappointing Mr. Chiedu Ugbo to continue as head of the Niger Delta Power Holding  Company.

Wheeling capacity

But to achieve the Nigerian Government’s targeted increase in electricity wheeling capacity, there is a general consensus that government would need to take a number of additional wide-ranging steps including action towards fiscal stability, cost reflectivity and transparency of the electricity pricing structure which supports a level of economic returns to IPP developers without compromising affordability of power supply to final consumers, implementing investment-friendly market reforms in order to attract private investment, and providing regulatory and fiscal support to distribution companies in their deployment of technology.

Not least is the funding of capital expenditure programmes required to develop a robust system of metering, billing and revenue collection and perhaps more importantly, promotion of competitive electricity markets where the end users/customers will have a choice and envisage an ideal market-driven Post Transition Electricity Market (PostTREM ) as well as the Eligible Customers Framework (willing buyers/willing sellers) Regulatory Framework of the Nigerian Electricity Regulatory Commission (NERC) which at the moment is considered somewhat inactive or dormant.

Given the right push and much desired political will,  the power sector,  the Nigerian economy and the end users of electricity will hugely benefit from privatization of the NIPP/ NDPHC investment in critical infrastructure. To us as gatekeepers, electricity consumers and conscience of the public, the NIPP/NDPHC Phase II is the new normal and the way to go.

The critical infrastructure that electricity is has been recognized by the government which in turn, appointed worthy ambassadors to take the power equation into a zone of comfort for end-users.  That said, consumers of electricity wait expectantly as the NIPP/NDPHC initiative gets set to deliver yet another milestone in citizen well being and a nation’s pride of achievement.

Olubiyo is President, Nigeria Consumer Protection Network.

Vanguard News Nigeria