Power privatisation: Nigerians lament deteriorating power supply

Power privatisation: Nigerians lament
deteriorating power supply
on december 03, 2013 at 7:00 am in sweet crude
By SEBASTINE OBASI & KUNLE KALEJAYE
Yemisi Oyebanji, a widow, who owns a small scale
frozen food shop in Ojodu area of Lagos, has been a
sad woman in the last one month. Though her
husband died four months ago, her sadness
stemmed from the fact that her small shop, which
she started in early September may soon be closed
due to dwindling electricity supply.
Speaking to Sweecrude on her ordeal she said
“Since the first week of November, I have been
encountering losses on a regular basis, as the
products in my freezers easily get spoilt due to the
constant blackout in this area. I lost four cartons of
chicken and three cartons of turkey worth about
N40, 000 in the last three weeks due to poor power
supply. Not only do I encounter blackout, the bill has
increased. How can a small shop like mine pay as
much as N9,500, as against the N3, 000 I paid last
month?” She queried.
Oyebanji told Sweetcrude that the constant blackout
is threatening her means of livelihood and has put
her in a position that she would not know how to
take care of her five children who are below 11
years. Her condition was made worse by the fact
that she has no generating set as a backup, thus
leaving her at the mercy of public power supply.
Her story is not different from many other
Nigerians. Sule Ajiki, a welder in Ogba area of
Lagos, who set up his outfit in August this year, is
in a fix. Since he started his business, he is yet to
make a head way because patronage has not been
forthcoming due to acute instability in electricity
supply.  He told Sweetcrude: “Since I started this
business in August, I have not been able to find my
bearing. Patronage has been low, because power
has been unstable. But it became worse in
November. I used to have five hours of electricity,
but now I hardly get it for two hours. How do I
survive?” he asked.
Ajiki also stated that his worry borders more on the
exorbitant bill which he was given this November. “I
thought the handover of PHCN to the private sector
would bring change to my business. I am
disappointed because apart from the almost non-
existent electricity, the bill is scary. Can you believe
this (shows his last bill), I am required to pay N5,
400, whereas before now, I used to pay N2, 000.
Where do they expect me to get the money from? It
is frustrating,” he lamented.
For Sunday Effiong, a barbing salon operator in
Alausa, Ikeja, Lagos, the power situation in his area
has not improved since the handover  to private
investors in the sector. According to him, “We were
happy when we learnt that PHCN has given way to
private hands. Our hopes were raised. We thought
we were in for better days, but in the last one
month, we have not seen any improvement. We
used to have 8-10 hours of electricity daily, but now
we have about four hours, if we are lucky.”
To his surprise, the last bill he got in November
showed that his service charge has increased by
100 percent, from N750 to 1, 500. He is
contemplating “going without public power supply
for now until things get clearer. Effiong told
Sweetcrude that if not for his generating set, his
business would not have been functioning
effectively.
The experiences of Oyebanji, Ajiki and Effiong show
the growing concern of many Nigerians who had
looked forward to improved power supply, after
several years of power outage, blackout and
interrupted electricity supply by the defunct Power
Holding Company of Nigeria, PHCN. Since
independence in 1960, the issue of power outage
and blackout has become the norm rather than the
exception, such that some Nigerians believed that
uninterrupted electricity supply would never be
achieved in their generation.
The situation was not made better by successive
governments which promised to shore up the mega
watts so as to give the populace the much needed
regular power supply without success. Nigerians
have therefore looked forward to the day power
outage would be a thing of the past. It was such
hope that greeted the November 1, physical
handover of PHCN to private owners.
However, one month after the handover, the power
situation appears to have deteriorated, while the
bills have been increased drastically. Also, some
hidden charges have been introduced to the shock
of customers. For example, a resident of Ilasamaja
area of Lagos, who simply identified himself as
Victor, bought a recharge card worth N5, 000, for
his pre-paid meter. On getting home, he discovered
that the service charge has been increased by 100
percent, from N750 to N1, 500. He was more
annoyed by the fact that in the last three weeks, he
has not had three hours of power supply in a day.
He has relied more on his generating set on which
he spends N6, 400, a week for petrol.
He is not alone. Hugo, a resident of Okota, got his
shock when he discovered that his bill was
increased from N6, 000 to N7, 200. When he
complained at the Okota office of West Power and
Gas Limited, the new owners of Eko Electricity and
Distribution, he was told it would be rectified. “This
is a massive fraud. It is a transfer of fraud from the
public sector to the private sector. There is no
enabling law that protects the consumer. People are
given huge bills to pay without a commensurate
supply of electricity. It is unfair,” he said.
Hugo’s is not an isolated case. Sweetcrude learnt
that there has been no significant change since the
handover of PHCN to private investors. Bills are still
based on estimates. For one, the pre-paid meter
issue has been suspended, making it easier for
estimated bills to thrive. Also, no new equipment has
been installed to replace the old ones in the
GENCOS and DISCOS. Moreover, more than half of
the defunct PHCN workers were laid off without any
replacement yet. Consequently, things are still done
the old way in these successor companies.
Fundamental to the operation of the GENCOS and
DISCOS is gas supply. When the former President
Olusegun Obasanjo administration built some of
these power plants, gas supply was not factored in.
This has left them comatose. It has also
contributed to the low capacity production of the
companies, which culminated in power outages
being experienced always. The new investors have
to grapple with laying gas pipelines and signing
agreement for gas supply. This means that
Nigerians have to wait for a long time before they
experience uninterrupted power supply.
Last week when the nation experienced massive
fluctuation of electricity, it was attributed to
inadequate supply of gas to the various power
plants in the country and the non-payment of gas
fee by the new investors to Nigeria National
Petroleum Corporation, NNPC. Power supply was
said to have dipped by 450MW from the peak
generation of 4,500MW.
However, the Transmission Company of Nigeria
(TCN) said the drop in power supply occurred due
to reported vandalisation of the gas pipeline
supplying gas to Okpai power plant in Delta State,
which resulted in the shutdown of the power station
and unavoidable power rationing nationwide.
The General Manager (Public Affairs) of TCN, Mrs.
Seun Olagunju, said the repair of the pipeline was
been done, but it would take a while for power
supply to stabilise in the country.
According to her, “There has been about 450MW
reduction in electricity generation from Saturday,
23rd to Tuesday, 26th November, 2013 due to
reported vandalisation of gas pipeline supplying gas
to Okpai power plant in Delta State, resulting in the
shutdown of the power station, and unavoidable
power rationing nationwide.
“TCN is reliably informed that repair work is
expected to be completed within three days and
Okpai power plant will expectedly; resume
generation last week Wednesday, 27th November,
2013.
“TCN regrets inconveniences to the Federal
Government and our highly esteemed electricity
consumers nationwide and enjoined members of the
public to work with the government in protecting
installations and facilities meant for our socio-
economic welfare.”
Now that the GENCOS and DISCOS are in private
hands, what legal rights do the citizens have? Can
they be sued?
Julius Onyeokoro, a legal consultant on energy
matters told Sweetcrude that people have to look at
the enabling laws that gave birth to the new
companies before taking any legal action. According
to Onyeokoro, “The main argument they will put up
is that they are only distributing, while the
government transmits. They cannot give what they
do not have. However, they can be sued on
defective fluctuations, metering, non-maintenance
of wires, default of contracts signed with suppliers.
But in terms of transmission, government is still in
charge and cannot be sued.”
When reminded that the National Assembly is yet to
pass a law authorising the handover of PHCN to
private investors, Onyeokoro said, “The law
unbundling PHCN automatically repeals the law that
created it. Waiting for the National Assembly to pass
a law to that effect is like drawing back the hand of
the clock. You cannot put something on top of
nothing,” he said.
Similarly, Sam Amadi, Chairman, National Electricity
Regulatory Commission, NERC, the sector regulator,
said that the issue of enabling laws setting up the
new companies was taking care of by the Electricity
Power Sector Reform Act of 2005.
“The Electricity Power Sector Reform Act takes
care of that. The Act unbundled PHCN and gave
birth to the new companies,” he said. On the issue
of legal rights of the citizenry, Amadi said, “The legal
entity has not changed. They can be sued.” He,
however, reminded the people that the facilities
hitherto owned by PHCN now belong to the new
investors.
Sweetcrude was able to access the Electricity
Power Sector Reform Act, 2005. According to
Section 6, “All bonds, hypothecations, securities,
deeds, contracts instruments, documents and
working arrangements that subsisted immediately
before the initial transfer date and to which the
Authority was a party, shall, on or after that date, be
as fully effective and enforceable against or in
favour of the initial holding company as if instead of
the Authority, the initial holding company had been
named therein.”
Also, the Act, in sub-section 7, stated, “Any cause
of action or proceeding which exited or was pending
by or against the Authority immediately before the
initial transfer date shall be enforced or continued,
as the case may be, on or after that date by or
against the initial company in the same way that
might have been enforced or continued by or
against the Authority had this Act not been passed.”
While Nigerians have been complaining of the
shortcomings in the new dispensation, the new
investors appear to be overwhelmed by the
challenges confronting them since the handover. At
the just concluded first general meeting organised
by NERC, in Abuja, Mrs. Funke Osibodu, Director,
Benin Electricity Distribution Company, said, “There
is so much confusion in the public and we need to
look at how to address this. For instance, the public
believes they are not supposed to pay anything until
January; that they should not be disconnected until
then; and they believe they can come and stand in
front of you and collect pre-paid meters just like
that.”
She explained that many electricity consumers are
yet to understand that power system consists of
generation, transmission and distribution. According
to her, “Anything that happens anywhere, even if it
is not your concern, it is assumed that it is your
doing. The public believes that the lack of power is
because the new owners in distribution companies
do not know what they are doing.
“But in reality, it is a GENCO problem as a result of
gas shortage. At one point, we were about going on
air to make people know the true position.”
Also speaking, Dr. Jamili Gwamna, Managing
Director/Chief Executive Officer, CEO, Kano
Distribution Company, said that the power allocated
to his company has been below capacity and as
such has reduced the DISCO’s revenue expectation.
According to him, “Our power allocation has been
low in recent times. How on earth will customers
pay me and how will I pay money also? There has
not been power and when you threaten to
disconnect consumers, they tell you to hurry up
with the disconnection process.”
For Mr. Adeyemi Adenuga, Managing Director/Chief
Executive Officer, CEO, Geregu Power Plc, the
challenge borders more on the system operator in
the sector, whose activities do not go down well
with his company. “The system operator that is
supposed to know that capacity declaration is, what
they should use to measure capacity continues to
use another thing outside what is in the Multi Year
Tariff Order 2 agreement and outside the interim
rules that have been provided. “We are not happy
and I think that the regulator, apart from coming up
with all these beautiful rules, should make sure that
the people who are there are actually keeping to
these issues,” he said.
Though the new investors did not talk about
funding, it was learnt that huge investment would be
needed to put the GENCOS and DISCOS on track in
order to meet the aspirations of Nigerians.
Recently, the Bureau of Public Enterprises, BPE, said
that the electricity distribution companies handed
over to private investors on November 1, would
require about $1.8 billion (about N288 billion) as
capital expenditure over the next five years to attain
efficiency and meet the required capacity. The
Director-General, BPE, Mr Benjamin Dikki, said the
Discos would be required to spend a total of $357.7
million within one year.
According to the DG, out of the $357.7 million, Abuja
DISCO would be expected to invest $36.6 million;
Benin DISCO, $24.3 million; Enugu DISCO, $27.2
million; Ibadan DISCO, $43.86 million; Jos DISCO,
$22.75 million; Kaduna DISCO, $29.96 million; and
Kano DISCO, $30. 38million. Others are the Eko
DISCO, $45.2 million; Ikeja DISCO, $58.74 million;
Port Harcourt DISCO, $25.5 million; and Yola
DISCO, $13 million.
In addition to the above investment, Dikki said
$357.7 million was expected to be injected into the
distribution networks annually between now and
2017, which would amount to about N1.8 billion.
Such capital outlay would be challenging given the
Central Bank’s directive that banks should scale
down funding in the power sector, while
international lenders are said not to be favourably
disposed to lending to Nigerians due to what they
described as volatile polity
But Bekuochi Nwawudu, Director, CBO Capital, an
investment advisory and project development firm,
who is also an energy expert, said that the power
companies would get the money to fund their
projects. He said, “Telecommunications companies
found the money and expanded. Oil companies have
borrowed significant amount. Power will be the
same. The question is will people pay their bills and
thus will revenues/profits be generated? If this
happens, then in addition to banks, Pensions funds
have capital and bonds can be issued, the banks do
not need to do it all.”
On the issue of gas supply which is central to firing
up the power plants, Nwawudu said,” The
companies should take a partnership not ownership
approach. They should sign advance contracts that
pay a fair price – to support gas capital sourcing
and they should focus on the power margins/
volumes and not necessarily backward integration.”
Nwawudu explained that the privatisation of the
power sector has thrown up opportunities in the
economy, “The impact is huge. Cheap power
improves our manufacturing competitiveness.
There are opportunities for electricity generation
using alternative fuels and there will be
implementation of smart grids.