Mr John Ayodele, Chief Operating Officer of Ibadan Electricity Distribution Company (IBEDC), speaks on conditions that must be met before stable electricity becomes a reality in Nigeria, among other industry issues. Sulaimon Oanrewaju reports.
WHAT are the challenges you face as a service provider?
Well, I’m sure the whole of Nigeria is aware of the turmoil that exists in the system. I’ll put them into three or four categories.
One is the regulatory environment. You know all along we’ve been clamouring for service-reflective or cost-reflective tariff; that one has never been and that has always left a lot of debt in the books of DisCos. There are shortfalls which arise from our inability to meet up with the cost of energy, there are also tariff short falls, because the tariff set does not reflect the cost of delivering the energy. So, as we speak today, there are a lot of meetings and processes that are being worked out for government to, once and for all, manage the situation so that DisCos will not have short falls again.
One of those things is what we call service reflective tariff. Service reflective tariff is aggregated into five and possibly it may be six bands. There are still some on the old R1 customer that the government insists must remain at N4. As we speak today, we buy electricity at about N24.85 per unit. So, if we sell what we buy per unit at about N4, you know there’s already a loss.
However, because it is service-reflective, those who we supply power for 20 hours and above will be on a different tariff plan as those who receive between 16 and 20 hours. And those who receive less than 10 hours will not pay the same price as the ones who receive power for 20 hours.
So, it is based on the service. And, as you know, we are also trying to improve on the service. So, you may be on service band A,B,C or D for two months. As soon as that changes, you’re bound to move to the next tariff band. So, that is the way the structure will be.
And of course we have government intervention. When it’s time to increase tariff the government would say maybe it’s an election year or things like that. So, I’ll group regulatory and government intervention as one because they are both on the government side.
However, the current tariff is not cost-reflective. That poses another challenge. As you are aware, what we have been doing is to make the higher class, industrial, to pay for the lower class; that is where cost subsidisation comes. But that one has not helped because we know the economic climate in Nigeria is such that many of the industries are not even functioning. And once they are not functioning, we are bound to take this power they were getting to the residential and this cost subsidisation becomes a problem. So, that is another problem.
There are problems of meter bypass. Our experience today is that if you install 10 new metres, if you go there in the next two weeks, four to five of them are already on bypass. And the bypass is not limited to the downtrodden. Even the rich also bypass.
There’s a problem of vandalism; people just willfully vandalise our systems. If you look through newspaper reports and what we get on a daily basis, people leave their transformers to be vandalised. Even when they see that people are vandalising their systems, they’d say don’t worry, the electricity company will come and fix it. We don’t have the money to fix every act of vandalism that takes place. So, there’s a lot of apathy by the public not trying to protect the investment that has been made in their network. They always assume that somebody will always come and change. It’s very difficult for us because we don’t have money to pay the market, where are we going to get money to replace assets as and when necessary. And that’s why sometimes it’s difficult.
I want you to understand too that the so-called R2 customers; the residential customers are paying less than the cost. For example, today, the difference between what we pay for electricity and what we charge residential customers is only about N1.50. That is where we are going to pay for losses because our customer is not at the generation station. He’s not at the point where we buy electricity. We buy electricity for example, in Ibadan and we have to move it to Lanlate. That loss alone is more than N3 per Kilowatt hour.
So, you discover that for every residential customer we supply, we are losing money and the people who should have been on the industrial and heavy commercial, who should have cross-subsidised that are no longer there.
Businesses are folding up and today we have even a more devastating one, COVID. People are not gainfully employed. Even the R2 customers, we have seen a drop of almost 30 per cent in those who pay; forget about those who bypass and not even pay their bills and find every means to disrupt a situation where they’d pay their bills. Because even those (R2 customers) who were paying before no longer pay.
So, we have 30 per cent loss even in that one. When you combine these factors, you know it’s a big loss to the system. We sell electricity for about N7 billion per month and only collect about N4.5 billion. Even as we speak, by February when COVID came up, we only collected N3 billion out of the N6.8 billion we sold. So, the business is tough but we are in it and we are working with the government to see how we can clamp down on some of the losses so that we can meet up our performance target.
So it’s not a viable business. Is it?
It would be viable if all these issues are solved. Presently people are complaining about estimated billing. Estimated billing doesn’t pay us, as people may want to think. Estimated billing is nothing; we are estimating customers. I understand there could be one or two issues of somebody that has been overestimated. Estimation is like a statistical thing and there is always error in it. But by and large, estimated billing is not the way out. It is metering. But metering requires investment. With all the losses that we are putting on our books, we cannot even go to the market to go and secure funds for the business.
So, it’s an issue for us. But it can be viable once we overcome all these challenges. We have been there for six years plus. So, we definitely know it can be viable but Nigerians must be prepared to pay their bills. If you don’t pay your bills, we can’t have money to improve services. A lot of areas that we go to, communities do not pay bills and some say until they get 24 hours of electricity they won’t pay. But we need money to improve services.
So, we need the fund. We are not even saying pay what you have not consumed but pay for what you have consumed. Communities that don’t pay their bills will say their transformer is damaged and I should come and repair it. That means we should take money from those who are paying to offset your own and yet you’ll still not pay. So you can see where the problem lies. But we are addressing that with the government. There’s a lot of work going on between us and the Central Bank of Nigeria (CBN), the federal Ministries of Finance, Power and the regulator. We are all working together to make sure that before the end of this year we can resolve these issues so that DisCos can be more viable. It will still take some time.
You have received funds from the government and the CBN, since the FG is a shareholder in the company, are the funds received loans or grants?
Since we started this business we have never taken any money from the government that is not a loan. The first CBN intervention was a loan. We are not just paying for it but also paying interest. So, there has been no government funding coming to the sector. Even the money they gave us, it’s only 26 per cent that got to the DisCos. The remaining 74 per cent was used to pay for legacy debt. Yet we are the ones bearing the responsibility of paying.
The government is trying to secure a World Bank loan for us. The only thing is that it’s not a commercial loan, so the interest rate is lower but we are going to pay. And that is to address metering. There’s a lot of metering gaps that we need to cover and it’s a lot of money. So, it’s not something DisCos can get from the small money that we have.
Secondly, we are asking CBN to give some intervention funds at a lower interest rate for
capital expenditure, so that we can improve on services. We are working on that and the government seems to be in line with that. And once that is done, I think you will see a lot of improvement in services.
How far with the MAP project?
MAP is Meter Asset Provider. It’s a brilliant initiative from the government. It was meant to allow third parties who have money to go into meter production but it was slowed down for many reasons. The first is that the process the government gave us was not sufficient to cover the meter cost. The second is that half way; they changed the tariff from 10 to 45 per cent. So, as we speak, many of our MAPs have their meters at the port but cannot clear. This is because if they clear at 45 per cent, they cannot recover their cost. Mr President has just approved a waiver to enable meters come in, subject to a maximum of three million meters because we need about six million meters to address the metering gap.
The metering gap is looking at those who don’t have meters. There are those who have meters that date back to 1965. There are people with damaged meters and those whose meters are not working. So, all these have been factored together.
As we speak today, we just sent all our meter requirements to the regulator because the government is asking for it and we are hoping that the funding from the World Bank which is being taken by the government would be allowed to be used for meter rollout so as to address the metering gap.
It seems NERC is cooperating with the DisCos?
Well, in the last six months, we have had a lot of cooperation. When I say cooperation, I mean at least they are listening to us and it looks like they’re getting the message right. And of course, COVID-19 came and people couldn’t go out to install meters. That’s why meter rollout is a bit slow. As we speak today, I think we have only been able to address about 25,000 meters. Yet we still need to ramp up because we are going to 1.3 million meters that we need to deal with.
The national grid, how do you see it? Is it helpful to us?
This is a country that expands from Lagos all the way to Maiduguri, Sokoto and others. We are talking about 1,900 kilometres. Take Sokoto and Maiduguri for example. If you say you’re not operating a national grid, where would they get power from? The resources to produce power are basically in the Delta and southern region. So, if you don’t operate a grid how do you expect them to get power? That is not to say there can’t be isolated power plants. Solar may be an answer in areas where solar is effective. But the cost of solar is heavy when it comes to night.
Solar can match gas turbines with today’s technology but only for daylight. So for the night, what would it be? Let us remember that solar has never been used as an industrial base for any country anywhere in the world.
So, if we are talking about industrialisation, renewable comes in when we talk about marginal pricing. But it doesn’t bridge the baseline. What amount of power do we need as a baseline that we can say for 24 hours these are basic? There are times when you need peak power; power that you need during, for example, Arsenal versus Manchester United football matches, that everyone would rush home and put on their television sets. We would have peak periods around there. And that one is only for three to four hours. So what would you do if you buy a power plant that runs for 24 hours but is used for four hours? Somebody has to pay for it. When it comes to marginal pricing, there’s a difference between that and getting alternative power in the form of solar or wind, then you can use that marginal pricing to determine if the investment would be guaranteed. Otherwise, other sources are not basic items to meet your base load. You need the gas turbine, the hydropower plants and others to actually meet up the need.
So, the grid is still essential to Nigeria, if the hinterland would still have electricity.
Why does it seem so difficult for Nigerians to have sustainable power supply?
People talk about that and I ask one question: are we ready for it? I just told you earlier about the number of bypasses and the many criminal activities that are in the sector. As long as those things are there, they are saboteurs. I lived in the US for a long time, I didn’t see a drunk driver hit an electric pole and then 10 to 20 polls would fall together and he would go scot-free. As far as I’m concerned, is there any investment in Nigeria that is moving well? The standard of living of Nigerians would dictate that. Look at our roads. If the standards of the roads have to be maintained at certain levels, then all of us would wake up. I believe that Nigerians have to agree on the minimum standard they want and in doing that it means you must pay your bills and taxes.
How many Nigerians pay taxes outside those who work for the government and agencies like us? People are not paying taxes and they want the government to look for money anywhere and fix things. It won’t work. So, for us to have sustainable development, people must be committed to paying their taxes regularly and then decide that the public supply system must be maintained. And when they find anybody who wants to sabotage the process they attack the person.
In Ghana, they have a system called the whistleblower policy. This is how it works: When you see someone who has tampered with electricity, you report. They take the person to a tribunal. The tribunal has only seven days to determine the case, there’s no waiver. If the person is found guilty, he pays a fine. Out of the fine he pays, the whistleblower gets a percentage, the solicitor or lawyer and the judge also get some money too. The remaining one is given to the electricity company. Are we ready for that?
If we are ready for that it’s the beginning of wisdom for us. But we are not ready.
Some people are calling for the review and probable reversal of power sector privatisation. What do you say to this?
I believe this is borne out of people’s frustration. Those of us in the sector are also frustrated, not to talk about people that use it. We want to do better than that because that is not the essence of privatisation. But the issues are there and I believe that it’s a journey. People you want to compare yourself to have been on this journey for over 200 years and we are just like six years into the journey. I’ll give you an example. Since we came in, despite all the odds, we have bought well over 500 transformers. If you go to most of our injection substations, we have modernised them. We have spent more than N10 billion to modernise our system. These things you can’t see. But they help us in managing our network. There’s a lot we are doing. Even in our billing system, we have invested about N1.2 billion on creating a new billing arrangement because the one we inherited from PHCN will not do.
Today, we have billing systems where you can vend and pay online and have your balance online. There’s so much we can do today which we were not able to do before. All these cost money. And of course, we have to take care of our staff because they are the bedrock of the development we need. So, all these things we are doing together. There’s a lot of work to be done. We have not reached there. We have not even gone halfway. But there’s a lot going on that was not there during PHCN time. Even in terms of power supply reliability, if not for occasional disruptions and things like that, a lot of people would tell me there has been improvement in supply. However, if some Nigerians don’t have power for two hours, they’ll tell you they haven’t had power for two months. That’s a natural consequence. But we know that in their mind they know that there have been some improvements.
So, I can forgive those calling for privatisation to be reversed, because like I told you, we are discussing with the government. When we started, it was as if, ‘oh go and kill DisCos’ but when they understood all the dynamics, even the Senate President changed his mind and said he didn’t know that those were the issues that needed to be resolved. The challenges we face are impediments that won’t allow cash flow. When the government is able to resolve all these issues, I’m sure by next year people will be singing new songs.
YOU SHOULD NOT MISS THESE HEADLINES FROM NIGERIAN TRIBUNE
TOUGH POLICIES: IMF, World Bank Take Over Nigeria’s Economy •More Pains Ahead For Nigerians
ALTHOUGH this seems a difficult period for Nigerians, Sunday Tribune investigations have, however, revealed that it could actually be a signal to the beginning of more unbearable pains in the form of economic policies as the Federal Government continues to implement the stringent conditions of its international creditors…
What I See Around The Villa — Primate Ayodele
In this interview by KEHINDE OYETIMI, founder of Inri Evangelical Spiritual Church, Lagos, Primate Ayodele speaks on both global and local issues…
High Cost Of Fuel, Electricity Will Ruin Our Lives — Market Leaders, Business Owners Lament
CONDEMNATION of the hike in petroleum products and electricity went notches higher at the weekend as more Nigerians flayed the decision of the Federal Government to take such a decision not minding the fatal blow dealt the economy by the coronavirus pandemic…
No Govt Has Raped Nigeria Like Buhari’s — Labour Leaders
WITH last week’s increase in the pump price of fuel, the organised labour has warned President Muhammadu Buhari against pushing Nigerians to the wall, saying no government has raped the country like the current administration. The labour leaders, in separate interviews with Sunday Tribune, said Buhari has lost touch…
P&ID $10B Scandal: How Govt Officials Frustrated Nigeria’s Case — Shasore
FORMER Lagos State Attorney-General (AG) and Commissioner for Justice, Olasupo Shasore, a Senior Advocate of Nigeria, at the weekend opened up on the salacious scandal trailing the controversial contract crisis between Nigeria and an offshore Shell company, Process and Industrial Development Limited…
What Caused My Rift With Oshiomhole — Obaseki
THE Edo State governor and candidate of the Peoples Democratic Party (PDP), Mr. Godwin Obaseki, has said that one of the reasons his predecessor, Adams Oshiomhole is against his re-election bid is his reversal of the sale of Edaiken Market, which Oshiomhole sold to his friends…