Power Supply Remains Poor Two Years After Privatization

NIPP – Geregu Power Plant

Two years into the privatization of the power sector, electricity supply in the country continues to hover between 3,500 megawatts and 4,500MW, as was the case before the unbundling of the defunct government-owned Power Holding Company of Nigeria. The nation’s power sector, which was largely handed over to private investors on November 1, 2013, is still being affected by several old problems, including huge deficit of prepaid meters, estimated or ‘crazy’ billing, gas supply shortfall and weak distribution and transmission networks, among others.

As of Friday, October 31, 2015, exactly two years after the privatization, the total power generation in the country stood at 4,006.79MW, according to data obtained from the Presidential Task Force on Power on Sunday.

The Punch report continues:

Prior to the privatization of the sector, the country had on December 23, 2012 achieved a peak generation of 4,517.6MW, which was only surpassed on August 24 this year, when 4,748MW was wheeled by the transmission network.

The next day, August 25, electricity from the national grid hit a new record high of 4,810.7MW.

But the increase was short-lived as electricity generation plunged to 3,843.16MW on August 31, while 3,763.40MW was sent out, according to the PTFP.

Since then, power generation has been hovering between 3,500MW and a little over 4,000MW.

An energy expert and Technical Director, Drilling Services, Template Design Limited, Mr. Bala Zakka, told our correspondent that even the “little electricity” available was not being distributed effectively by the distribution companies.

He said, “And to add salt to injury, they are still coming up with crazy bills. It is becoming clear that they don’t want Nigerians to have prepaid meters. They prefer to give estimated bills, forgetting that estimated bills will create an avenue for corruption, and that is why if you go to residential areas, a lot of places where people have prepaid meters don’t enjoy electricity, because when the electricity workers go there, there is nobody to bribe them.

“An average investor, student, worker in a hospital or an industrialist will not be happy with the level of electricity because students need power to read and do research; hospitals need power to function; factories need power to be able to produce; and households need power to be comfortable.”

According to Zakka, both the government and the private investors are not living up to the terms of the privatization agreement.

He said, “Before the privatization, when the PHCN was to be unbundled, everything was predicated on the availability of sufficient gas. With this, the generating companies will be able to generate; then, the TCN will transmit, while the distribution companies will distribute.

“As we speak today, there is no enough gas supply, and the gas master plan has not been implemented. Before unbundling the sector, the government should have first addressed the issue of gas supply.”

An energy law/policy expert and Senior Associate at Banwo and Ighodalo, a Lagos-based law firm, Mr. Ayodele Oni, who noted that there had been a modest improvement in the sector, however, said, “A lot still needs to be done in terms of investments, regulation and attractiveness of the sector to especially foreign investors and foreign lenders who have much deeper pockets and access to funds, and provide much cheaper funds, respectively.

“There are still funding problems and insufficient incentives. There is a poor gas pipeline network such that gas cannot be easily moved from one area of the country to the other. The integration of the pipeline network really is key.”

Oni is also of the view that tariff is a challenge that needs to be resolved in terms of a fair tariff that will allow investors to make reasonable returns.

According to him, the Nigerian Electricity Regulatory Commission is slow in giving approvals to important projects and the licensing regime specified in the principal legislation (10 years) doesn’t give sufficient comfort to would-be investors.

“I also do not think corruption has reduced substantially in the sector,” he added.

The Managing Director and Chief Executive Officer, Transcorp Ughelli Power Limited, one of the electricity generation firms, Mr. Adeoye Fadeyibi, said, “It is a source of worry that we are not able to sustain increased level that was achieved recently. What is laudable is if we are able to maintain it and continue to increase.

“Two years later, we are still talking about the issue of gas allocation. Before last week, for the past three or four months, we had been dealing with load allocation, where the Discos had been dropping loads. We have stranded capacity of upwards of 1,000MW.

“We are having market industry issues such as contracts not being effective, intervention fund not being paid out thereby creating liquidity crisis across for investors, and we are still not at a point where we can say we have a cost-reflective tariff in the system. Also, we are still having transmission issues two years later.”

A Professor of Energy Economics and Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Adeola Adenikinju, said, “Overall, the performance of the sector, measured by the key indicator of delivered per capita electricity consumption, is still far below the expectations that Nigerians had when we started on the route of power sector reforms that culminated in the transfer of the generation and distribution assets to the private sector two years ago.”

He noted that the disappointing performance had made many Nigerians to call for a major review, and in some cases, a reversal of the privatization of the sector, saying he would, however, not advocate the latter route.

Adenikinju, who is the immediate past President of the Nigerian Association of Energy Economics, said, “I think the regulator should hold the new owners accountable to the performance contracts they signed with Nigerians.

“We should see more actions on the part of the regulator. Consumers continue to complain about slow distribution of prepaid meters, receipts of crazy estimated bills, unstable electricity supply, and relatively high tariffs. The fixed charges paid by consumers are high and do not provide incentives for efficiency for the distribution companies.

“There are currently a lot of challenges that have to be addressed. In my view, there is a need to review the enabling law guiding the sector, I mean the Electric Power Sector Reform Act of 2005. The Act needs to be amended to incorporate lessons learnt in the past 10 years, incorporate some of the best practices in other jurisdictions and provide for an electricity industry structure that is best suited for our economy.”

The Chairman, NERC, Dr. Sam Amadi, had recently pointed out that part of the challenges besetting the sector had to do with project performance management.

He stated this at a two-day workshop with industry performance management officers of the generation and transmission companies.

He said the need to take the sector to enviable heights that could stand international reckoning made it imperative to build a team of performance management officers, who would both monitor and report to the commission, particularly the activities of the generation and transmission companies.

“We cannot wheel out adequate power today because there has not been project management, which goes back to the PHCN before privatization,” Amadi said.