Monday, 18 January 2016

CRUCIAL FACTORS THAT WILL SHAPE POWER SECTOR IN 2016

It is not a gainsaying that the nation’s power sector is on the right track to the proverbial Promised Land going by the recent development on electricity supply. However, the sector is still far away from its destination as several crucial factors that hold the key to the industry’s growth are yet to be fixed or strategically reviewed.

Indeed, for Nigerians to enjoy electricity this year, all hands must be on deck going by the experts analyses. The Federal Government, according to them, should urgently implement the power reforms and strictly monitor the operators (the Distribution companies, Generation companies and the service firms) to comply with the rules of the game. The consumers on their end also may need to endeavour to play their role by paying electricity bills promptly and discourage energy theft and meter tampering.

Available statistics from the Discos however showed that the government incurred the highest debt profile to electricity firms to the tune of N45 billion, as being owed by the Ministries, Departments and Agencies (MDAs).

Electricity consumers have been groaning under the new electricity tariff (MYTO 2015), but also believed that their power needs must also be met to justify the increase.
Besides, installation of prepaid metres is major area of concern of the consumers who have been largely extorted by some corrupt officials of the Discos. Meanwhile, the Discos are now worried that the present policy of the Nigerian Electricity Regulatory Commission (NERC) would not encourage investment and might jeopardise their prepaid meter installation plans.

The Executive Director, Association of Nigerian Electricity Distribution Companies (ANED), Otunba Sunday Oduntan, who raised hopes that the Multi Year Tariff Order 2015 (MYTO 2015) would herald positive development in the sector, said there are still some factors in the regulations that might hinder the desired level of growth.

He listed the challenges in the sector to included; inadequate generation, transmission and distribution capacity; poor and neglected transmission network, ageing distribution network; massive power theft; and vandalism; uneconomic gas prices and inadequate infrastructure for gas transportation, exchange rate factor and insufficient CAPEX, among others.

Justifying the need for NERC to increase capital expenditure (CAPEX) benchmark for Discos, Oduntan said the benchmark of N50 billion set for the Discos yearly is grossly inadequate to meet the expected improvement, because the Discos will need about N78 billion to meter about two million customers alone, not considering other areas of investment.

He also urged the government to create conducive environment for gas generation; fund useful TCN infrastructure projects that Gencos & Discos need; implement legal process to execute theft and vandalism sanctions with enforcement such as establishing fast mobile court and jailing of offenders.

To combat the problem of ageing and poor cultured workforce, he said the industry needs to increase capacity building; inject young new persons; training and equipments. Also he suggested that customers, public regulatory, legislative and government training should be given priority give better understanding of the new industry, while NERC and lawmakers should implement strong sanction and enforcement.

It is however on record that Nigeria is presently among the lowest power generation counties in the world and far lower than other African countries. The rule of thumb for any developing industrial nation stated that at the least of one gigawatt (1000MW) of electricity generation and consumption is required for every one million population.

Facts showed that other countries such as Algeria with population of about 40 million has about 11,000MW generation; Egypt – about 90 million population generates 24,000MW; United Kingdom with about 30 million population generates 80,000MW; Germany with 30 million population generates 120,000MW, South Africa with 60 million population has 40,000MW and Nigeria with 160 million population generates a paltry 4,000MW.

This shows that there is huge deficit. We have not yet started and that is why we have low customer satisfaction. With the ideal rule of thumb Nigeria with a population of 160 million should be generating about 160,000 MW.

A Power System Professional from the United Kingdom, Idowu Oyebanjo, said NERC was weak in its regulatory functions and has used wrong methodology in arriving at the new tariff.

“A significant portion for the charges paid by consumers is the cost for losses. Therefore one expects that the baseline values to be used would be determined as accurately as possible. However, in arriving at the charging methodology used for the Multi-Year Tariff Order (MYTO), NERC got it all wrong. Baseline levels of losses were wrongly determined leading to over/under estimation of charges to consumers. This is what happens when you put square pegs in round holes,” he said.

He applauded the abolition of fixed rate and the meter installation directive, which he called a ‘blessing in disguise’.

“This of course will force all distributors to aggressively pursue the metering issue (if NERC performs its duty),” he stated.

An electricity consumer, Muyiwa Adeboye, said the new electricity tariff is not justifiable, but enjoined the electricity firms to upgrade their service this year especially as the new tariff kicks of February, 1, 2016.

He decried the poor attitude of Discos to fault clearing and especially the need to replace the ageing transformers scattered around the country.

Adeboye said: “They really have a lot to do. I will be disappointed if at the end of this year, Nigerians are still complaining about poor power supply. The TCN should also brace up to meeting the prevailing challenges, the network capacity is too low and needed to be upgraded. All these should be given proper attention and not only electricity tariff at all time.”

The Director General , Bureau for Public Enterprises, Benjamin Dikki, decried the rate of power losses, saying until the Discos are up and doing and able to make their investment commitment to revive the ageing facilities, the losses will continue. He said the private sector cannot solve the problems overnight due to the level of rots over a decade, adding that government also has to create an enabling environment to make the business bankable and enable the operators access funds, which will in turn improve the functionality of the entire value chain.

There have also been allegations that many of the local meter manufacturers does not have capacity to produce the required standards of meter by the Discos, Dikki enjoined the manufacturers to upgrade their capacity and strive hard to meet the required specification of the Discos.

Minister of Power, Works and Housing, Barrister Babatunde Fashola (SAN), has declared that a major agenda of his administration is continuous public engagement on tariff collection and debts, power generation, maintenance, ancillary services, dispatch orders and discipline. (Source: Guardian)