Mr John Ayodele, Deputy Managing Director, Ibadan Electricity Distribution Company (IBEDC), in this interview with SULAIMON OLANREWAJU, enumerates the challenges faced by the electricity distribution company and the steps being taken to redress them.
T HE Discos are reportedly owed billions of naira. How much is IBEDC owed; what is the distribution of the debt between the private and the public sectors; what efforts are being made to recover these amounts?
IBEDC, like any other Dicso, gets its power from the grid which is owned by the Transmission Company of Nigeria and all the main generational companies come into this grid and they are also metered on their own end. So we know how much comes out of each of the Gencos, but it is aggregated on the grid. But each of the entry point is metered, so we have our own metres all over; wherever we get power from. So it is this energy we receive that we build on. At the moment, I can say that we are indebted to this energy deficit which we pay through market operators and the Nigerian Bulk Electricity Trading Company (NBEC), which people have called the owner of the grid power because they account for this energy and when they bill us, it is from that money that they pay all other services.
The money we collect basically is the value chain money from which we pay MBET and whatever is left is what we take for our own operations. The tariff is also structured that way, by aggregating the cost of service plus some return on investment for each of this sector aggregated, and from there they work out a tariff that supports this aggregated payment.
But MDAs don’t pay, public too doesn’t pay; many of them even bypass our metres so they use electricity for free. There is the Aggregated Technical, Commercial and Collection (ATC&C) input, which goes a long way to define our efficiencies. So there are some levels of ATC&C losses allowed in the tariff, because they know that there is no possibility of collecting all money, but the tariff is such that it does not account for the full ATC&C losses; it does not cover a lot of collections because it is assumed that we collect almost every money we are owed.
The MDAs are not paying, even from the private sector too we suffer a lot of losses due to a court action instituted by the Manufacturers Association of Nigeria (MAN), where we had a court injunction that says that the new tariffs should not be implemented. So, MAN is holding on to that injunction, so the industries don’t pay the new tariffs. So, with that alone, this company suffers close to N1.6 billion loss every month. This is as a result of the MDAs, the private sector and the public not paying what they ought to pay.
In addition to that, one of the agreements reached between the Federal Government and the Discos is that if the foreign exchange rate should vary, it would reflect in the platform for payment but that has not been done. So the bill to us contains changes in the forex, from N197 to about N310, already embedded and machined into the tariff structure for which we pay, but we have not been able to pass this to the customers. So embedded in that is already about N1.5 billion, depending on the amount of energy. But it ranges between N1.5 billion to sometimes N1.7 billion monthly.
So, today MDAs owe IBEDC nothing less than N4.6 billion as a result of not paying up to the tariff; they are still paying N26.80k they were paying about a year ago, whereas the tariff has gone to N41.9. The N4.6 billion that the MDAs owe us is almost the same amount as what the industries owe us. The only difference is that the industries started owing about a year ago, while the MDAs have been owing for long, while what the public owes is twice that amount, which is as a result of bypassing.
With the advent of smart metres, is there not supposed to be a change?
The question is what does a smart metre do? It is not a convicting element; it only enables you to know that someone is tampering with electricity and when you even disconnect; they will go on the pole and bypass. When you bypass, of course smart metre becomes a dull metre.
A metre is smart as long as it is getting something through it and can tell you vividly what rate was used. So, in the real sense, when you look at the investment required, it is not an investment that is small. For instance, many say why are we still doing estimations? Looking at our metering gap, what is required to metre everybody, we need almost N55 billion to N60 billion to metre everybody, which does not mean that bypass will not exist. So, it is all losses all the way.
And today it is more difficult for any investor in the power sector to go to bank and borrow money; nobody will lend him that money, because they know that you are not tradable. So to secure money for the power sector today is difficult; not impossible, but difficult. Not many banks are ready to do that. And in any case, no industry like ours, the Disco will go and borrow money in the commercial bank to do electricity business. You will just be perpetually indebted. First, the money is not coming in as it should be and second, most banks will only give you short term loans and what we need is long term investment.
Your association, Association of Nigerian Electricity Distributors (ANED), is doing a lot to sensitise the public and inform the government about the huge debts. But are you lobbying?
I believe there is some form of lobbying going on with legislators and the executive to understand the problems but not for us to give money out. We don’t even have the money to give. So, if anybody is seeing lobbying from the perspective of whether we have funds, no we don’t. But we lobby so that they could give ear to the situation because you cannot legislate over a situation that you don’t know. You can’t even make policies over something you don’t know. So, our lobbying is more of advocacy, because there is a misconception that Discos are not investing enough money in business or that until electricity services improve, there should be no change in tariff.
The fact is if you go out there, all the lines and transformers are there and those cost money. When customers say that they are not paying, how do I recover money to pay my creditors or to pay suppliers of the transformers? Where will the money to buy metres come from?
There is so much noise about metering. How do you think we can go about that?
For us we are going heavily on metering issues, within the confinement of the resources we have. Like I said we need about N60 billion to metre everybody, the money will not come from anywhere. Certainly, we are running on deficit, so where can such money come from?
Anybody who is in the business of electricity and is not metering is just deceiving him or herself, because metering is the only way you can get your revenue. So we are interested; we want to do it if possible, overnight. There are lots of people out there that are bypassing the metre, the poor, the rich and even the government.
The average monthly bill is about N5.4 billion. What was forecast for this industry before that tariff was set was that we would get N13.1 billion. So, there is a huge difference between N4.5 billion reality and what was forecast that formed the basis for setting up this company.
The monthly collection forecast is that out of the N13.1 billion bearing ATC&C losses, we would collect N12.9 billion. But what we are collecting today is about N3.4 billion.
We receive a bill of about N5.6 billion monthly for electricity we are supplied, while we collect N3.3 billion, that means N2.3 billion is already outstanding that we cannot pay. The average unit cost of electricity to us is N22 per kilowatt/hour and we collect an average of N13, that is the aggregate of our total energy. So there is at least N9 difference per unit of electricity that is outstanding.
As of today, Federal Government owes IBEDC about N3.4 billion; the states that we cover owe us about N908 million, and local governments owe about N128 million. Seven out of 10 metres installed are bypassed within 72 hours.
Is there any hope of collecting the debts?
There are lots of regulatory hurdles. For instance they say that you cannot disconnect anyone without giving two weeks’ notice. Why should I notify someone who has consistently used power without paying for years?
Isn’t that the essence of having prepaid metres, as people only use what they paid for? Do people still bypass that?
Because the metre is not with IBEDC but rather with customers, people still tamper with it. It is not as if we don’t want to provide prepaid metres; but in business, one has to look at the trend and also use technology.
Why are people struggling for prepaid which is more expensive?
A prepaid meter single phase now is almost about N35,000, whereas the non-prepaid metre goes for about N23,000. So it is heavy in terms of investment, but prepaid just shows that you will pay before the service.
We recently caught some people who cloned the prepaid metre and were vending electricity for people outside this boundary and keeping the money. Some of those we caught included members of the Licensed Electrical Contractors Association of Nigeria (LECAN), some of our staff in the field and staff of the company that is collecting money for us.
What we are trying to do now is to leverage on technology to stop energy theft. If technology allows me to read you well, why do I need prepaid metres? So because of the investment required, we are thinking about new technologies. With the new technology, we can take a whole area, remove all their metres and put new metres there. Those new metres can be read from anywhere. When I read that, I can then download from there straight to your billing platform and you get your exact bill. So if that is possible, why do I need to go for prepaid that has higher investment value and doesn’t give real value and yet people are still able to bypass. The question of bypass is common, whether it is prepaid or post paid.
Are these some of the reasons you were rejecting supplies by Transmission Company of Nigeria (TCN) at some point?
There are four categories of customers: there are communities that don’t pay that we have to fight every day, they tell us that they can’t pay more than N500 per metre. Why must I continue to supply such community? I can take them off because they are adding to my cost, for which I’m being debited every day.
Also, because electricity is not constant, many of my big customers, that is the industries that use the electricity and will even subsidise the service for the residential customers, are no longer taking power because of the way it fluctuates. It comes at a loss for them eventually on their manufacturing process. Many of them are no longer using our power; they now have their own power plants. So if I don’t have load, what do you want me to do? And also because at a time forex was a problem, most of them could not source forex for their products, so they are not taking power.
So it is not as if we are rejecting the loads, there are just no customers to pick the power. The other aspect that they are complaining about, for example many come here and say pick more load in Iseyin. But I cannot pick more load in Iseyin, as I would prefer Shagamu, but they would say no. So, where I need power, you can’t give me; where I don’t need power, you say I should take power.
The economic situation has made many companies to fold up or suspend their operations, so the people who would take the load are off the grid. And there is nothing we can do about that.
When are you launching the new technology you spoke about?
It has taken off and in fact we have got delivery of about 1,500 such metres. Why we have not embarked on it is that we are doing a test run, we don’t want a technology that would fail us on the way. We have just completed the test run. Now we are carving out areas where we would start.
How far have you gone with the CAPMI scheme?
CAPMI is a scheme that was introduced by NERC pre-privatisation which continued into privatisation. But because it was not designed for privatisation, people will say they paid over a year and have not gotten their metres. This is because in the last one year, the metre suppliers said they couldn’t source foreign exchange. Even if they could source, when the metre fee was fixed by NERC, the exchange rate was N197, and now that it is three times that amount and people still want to pay the same amount. So many of the people that we gave contracts to could not supply at the NERC-fixed rate, which means that it is we who must now look for money to subsidize because we can’t go back to the people who have paid and tell them to pay again. So it is a dilemma that we are trying to resolve. But thank God that we have companies now that have accepted to take those ones and supply them at the old price, with the hope that when we have more money, we can pay them the arrears. And that is what we are doing. So the metering scheme has started.
So what is the future of the company given the challenges you enumerated?
Things can’t continue this way, because electricity is the real backbone for industrial development. So we have no choice. We have to work through it. We are in our teething period; it has just been three years that privatisation took effect. It is not like the telecommunication industry that came with their brand new technologies. For us, we depend 100 per cent on the old investments, trying to invest in new areas and trying to update old ones.
There are power cables older than 50 years. So those are part of our investment structures. Today, we have more than 230 transformers we just bought. That is a lot of money. As an investor, for us to borrow money to invest in transformers, we must see that the area has prospects.
Is there a part of the agreement between the Discos and the government that says government should support the industry?
The government has 40 per cent of the business, it means that 40 per cent of the profit will go to the government. It also means that the government should also be responsible for 40 per cent of investment in the company but government has never put in one kobo. Even when they lent us money through CBN, it was almost 11 per cent long, which is just killing.
However, there is absolute hope for the industry, but it is a slow moving business. Nigerians should bear with us. Electricity supply will get better, as a matter of fact, it will be stable, but it is a long journey. We need to be patient. It is like climbing a hill, by the time you get to the crest, it will be a free fall, but before one gets there is the issue.