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Adewale Sanyaolu
These are certainly not the best of times for Nigeria’s power sector as it is currently on life support over issues threatening its survival.
The near death of the sector is taking a toll on the nation’s industrial sector with activities of over 20 million Small Medium Enterprises (SMEs) on the virge of extinction over rising costof generating alternative power.
Indeed, the entire value chain of power sector which included; transmission, distribution and generation are plagued with one problem of the other.
More than five years after the privatisation of the sector, the investors who took over the assets of the six generation companies and 11 Discos that emerged after the unbundling of the Power Holding Company of Nigeria are still grappling with the old problems in the sector.
Though, experts and even the government have claimed the challenges confronting the sector were not rocket science its shortcomings are surmountable.
But curiously, government’s statement and those of its stakeholders do not in any way match some of their actions given thatpower supply situation in the country has gone from bad to worse.
Though, the immediate past Minister of Power Works and Housing, Mr.Babatunde Fashola, tried to resolve some of the contending issues in the power sector, his best was, however not enough as he left a plethora of problems unresolved. No thanks to his constant friction with the electricity distribution companies
It is for this reason and many more that the incoming Minister of Power should be one with knowledge of the industry and a team player that should be ready to collaborate with the sector to resolve some of the contending issues.
Some of the challenges in the sector that the new Minister should strive to resolve included; gas supply shortages, limited distribution networks, limited transmission line capacity, huge metering gap, capex, electricity theft, and high Aggregate Technical and Commercial losses (AT&C) among others.
Cost reflective Tariff
Director, Eko Electricity Distribution Company( Eko Disco), Mr. George Etomi, had in a recent interview said that, some of the promises made by the Federal Government prior to privatization were never kept, citing a cost reflective tariff as an instance.
He, however,charged the incoming Minister of Power, to ensure that a cost reflective tariff was in place for the sector.
He said energy theft and metering were still major issues Discos are contending with, adding that the failure of government to institute a cost reflective tariff informed the decision of NERC to come up with MAP because they have realized that the Discos don’t have the required resources to meter consumers under the current regime.
He regretted that because Government has decided to make tariff a political issue, it has failed to take the bold step by ensuring that what the Discos charge can take care of their cost of producing power, adding that in this instance, the cost of production is more than the tariff, a development that has led to liquidity gap.
‘‘By regulation, distribution companies are not allowed to charge above N29 per mega watt hour at the maximum and the cost we buy electricity is around N55 per mega watt hour. By this, you can see there is a shortfall. It is this shortfall that has led to liquidity gap which the government tries from time to time to bridge up.
Government was also meant to review the Multi Year Tariff Order (MYTO) which is a minor review that ought to take care of inflation every six months while a major one takes place once in 10 years. Even though the MYTO review has been done since privatization about six years ago, it was yet to be implemented.
Foreign exchange has also gone up. Remember, when the assets were bought, exchange rate was N190 to $1 today, it is N360 to $1. And yet, we are replacing equipment and carrying out procurement with the new exchange rate without a review of the tariff to take care of this new rate. This and many more are some of the constraints.’’
Capex
The Association of Nigerian Electricity Distributors (ANED), said a Nigerian Electricity Regulatory Commission (NERC) regulation that bars electricity Distribution Companies (Discos) from investing above $150 million yearly was killing the industry
Executive Director of ANED, Mr. Sunday Oduntan, had in recent advertorial said Discos as regulated entities are not allowed to invest more than $13.6 million per Disco per year.
‘‘A recent study published by the AFD/EU indicated that Discos should be investing $10 billion in the next five years or almost $181 million per Disco per year. However, this cannot happen unless such related funding is allowed in the regulatory framework.’’
ANED noted that, following the NERC guidelines released last month, the Discos are working on their Performance Improvement Plans (PIP) for 2020 to2024, as required by the Power Sector Recovery Plan (PSRP) approved by the Federal Government in 2017.
He stated that once the PIPs are approved by the commission, it was the Discos expectation that the regulatory framework that will be established will determine a new CAPEX and OPEX allowances that are fundamentally necessary to allow the sector to improve.
‘‘We believe that it is only when all Nigeria Electricity Supply Industry (NESI) stakeholders decide to work together that we will be able to anticipate and solve all these unfortunate events. Distrust among all NESI stakeholders and an avoidance of responsibility has also been part of the problem.
For us in ANED, our members are committed to working in partnership with all stakeholders along the value-chain, as necessary to ensure that we meet the Government’s privatization objectives of 24/7 power supply to our valued customers.’’
