How to resolve persistent power sector crisis

Recently, Nigerians experienced consistent system collapse of the power sector. The larger part of the entire nation was in blackout. That has been the pattern in the last four years. In this report, OLATUNDE DODONDAWA examines what was done in the past four years to rescue the challenges and what should be done to salvage the situation in the next four years.

Introduction

Electricity supply is a chain of processes that begins with the generation of electricity, which is later transmitted to the distribution companies (Discos) through the transmission network for onward distribution to the customers. The discos are the public face of power supply value chain to most Nigerians. They are responsible not just for the distribution of power, but for the sticky issue of collection of revenue from the customers. This distribution sub-sector is key to generating funds to support the entire power delivery value chain. It follows that the activities of the discos are critical to the survival of the entire sector.

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It is true that the discos can only distribute the amount of power allotted to them from the national grid and they have attributed the epileptic power supply to low levels of power generation but there have been instances when they have rejected power from the generating plants, being unable to carry the load.

However, customers are hardly aware of this sort of challenge in the industry leading to the discos taking the brunt of most of blame for all power supply challenges. The satisfaction rate among Nigerians on the performance of the discos is low. There has been much outcry over general customer service, value for money, hours of supply availability, quality of power, communication and customer engagement, quality of electricity supply infrastructure, their experience interacting with staff of the discos, response times and the rate of complaint resolution.

It is noteworthy also that many consumers are still compelled to make contributions to replace the components of failed infrastructure to the extent it affects them. Many electricity customers in Nigeria experience less than eight hours of power supply availability daily. There is therefore a heightened level of frustration by electricity consumers nationwide over the poor quality of power supply amidst high bills/charges for same. There is a need for the discos to take full advantage of the services and contribution of the Niger Delta Power Holding Company (NDPHC) to power sector and keep the customers satisfied.

The three arms of government, the federal, states and local governments established the National Integrated Power Project (NIPP); 10 new power stations to address the problem of erratic national power supply. These plants are to be managed by the NDPHC and it has resulted into building of enviable and world-class power stations and an especially huge transmission network. It is the largest intervention in power infrastructure in Africa and was meant to be a fast-track intervention in the electricity supply chain in Nigeria.

Power Sector Challenges

Prior to power sector privatization, power supply was improving but very slowly. Privatization brought private companies to participate in electricity generation and distribution. The Nigerian government sold out its controlling stakes in the discos and also divested its interest fully or in part in the generation companies.

However certain factors were not taken into full consideration in this unprecedented move from public service to market commodity. Things like this normally attract huge challenges. Profit maximization by private investors becomes superior to provision of electricity as a social commodity.

The privatization process ended up creating geographical monopolies, the discos.

The discos failed to bring the much anticipated investment to salvage the sector that was in dire need of overhaul.

Failure by the regulator, Nigerian Electricity Commission (NERC) to review the tariff for fear of non-acceptability by Nigerians also contributed to discos’ abysmal failure in the sector. Nigerians seem less concerned about paying high tariff as long as there is adequate and quality electricity because they pay more by using alternative sources of energy.

Some calculations show that many Nigerians pay on the average as much as N60 to N70 per kilowatt of electricity through alternative energy generation. While they pay average of N24 per kilowatt for grid energy. They also crave for prepaid meters that will help them to evaluate what they are actually consuming as against the estimated billing system the discos prefer.

Besides the illiquidity challenge that is inherent in the sector, gas challenge is another challenge. Inadequate supply of gas to gas-fired power plants including the NIPP gas-fired power plants. International Oil Companies (IOCs) collect payment for gas upfront from the NDPHC and other gencos. Once the NDPHC payment was exhausted, the IOCs turned off their gas. This created huge problem for the NDPHC as debt owed it accumulated, crippling its necessary purchase of gas. The present administration intervened through the Payment Assurance Programme to the Nigerian Bulk Electricity Trading Company (NBET). It came up with N700billion to resolve the power liquidity challenge. The payment assurance was basically to ensure that gas suppliers are paid. This cured the unhealthy clog and brought needed relief to the system.

FG’s intervention to achieve improved power supply

The NIPP is a big intervention across the generation, transmission and distribution value chain. The NDPHC, which is saddle with managing the NIPPs, 5000MW but it delivers far less. There has been systemic load rejection by the discos. When power is transmitted and the discos don’t pick it, it impacts on the grid stability. What is generated must be equal to what consumers take, provided the transmission is good. If consumers are not fed what is generated, it falls back on transmission. That is the most challenge Nigerians now face daily as they complain of power outages. Power is duly generated and transmitted but it just cannot be distributed to the teeming Nigerians who need it.

The administration came up with strategies. There was the declaration of the Eligible Customer Regime, in which eligible electricity customers not too far from the power plants can be supplied directly either with little or no investments in network. They are supplied power directly. This administration also stood up to instill best international practices in power business. One power sector business policy is that the tariff is always structured to see that the high-end customers who are few pay about 60 per cent of the total while the regular customers pay 40 per cent.

Certain understandable business factors have seen the discos wanting to serve more the high-end customers and relegate substantial part of the low-end customers. Part of this is reason for the systemic load rejection. The administration is ensuring that the discos have the capacity to take power to those low-end users. It has directed that the generation companies go serve the people that are underserved despite the loud protests of the discos.

X-raying the NDPHC model

Power generated by the NDPHC, is put on the national grid and later transmitted to the discos which sell to consumers. This flow of power from generation companies to the consumers ought to see money travelling the opposite direction. However the NDPHC have not been correspondingly remunerated for its services. One of its huge challenge is debts owed it by the discos.

The NDPHC said it has worked to ensure constant and enough gas for its power plants in Alaoji, Gbarain and Calabar. The Calabar plant especially has the most efficient gas delivery agreement with good pipeline. Yet as it meets its generation target, the transmission frequency has its peak. The transmission company cannot go beyond that. And when the discos don’t take up what is transmitted, there becomes too much power in the system. It gets heated up and trips off, hence, system collapse.

All these challenges are being confronted by the NDPHC board appointed by the Buhari administration.

In his comment, the Managing Director of NDPHC, Mr. Chiedu Ugbo, said “We don’t just sit back in our offices because we are not engaged to do that. When I came here, I had to let them know I was not sent to push people out of job but to give Nigerians light.”

The NDPHC sets for itself enviable goals. It wants to do more on transmission, even though it already has many distribution substation and huge transmission projects. It is working to optimize the 3000MW in its plants to get to end users. It is going the extra mile, finding out distribution challenges and areas where the Discos have aged infrastructure and to work with them.

The NDPHC is also on the front burner in energy renewables in areas too far. To drive this initiative it engaged Azuri Technologies Group/Azuri Solar Power Nigeria Ltd. It is already working to serve cluster communities. The NDPHC has commissioned 20,000 units of Solar Home System (SHS) and 1,073 solar powered boreholes across communities in the north which have no access to grid electricity supply. The NDPHC has deployed 200 units of the SHS as pilot programme in Wuna community with estimated population of 800 people, predominantly of farmers. Two of the boreholes are already located in Wuna community. They are the first to be repaired and have provided access to clean water for the community.

The way forward

The government, through NERC, must ensure the Meter Asset Providers (MAP) scheme works and make sure all Nigerians are metered within a specific time frame. When customers are metered, power sector liquidity will improve and debts owed by discos will be settled and gencos including NDPHC will get paid by discos and gas producers too will be paid and adequate gas supply may be guaranteed. Electricity tariff may be reviewed and Nigerians won’t bother because they can regulate their consumption pattern.