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4 power ministers, ailing sector
On 1st of November 2013, the Federal Government of Nigeria formally handed over acquisition certificates to private sector operators, marking the privatization of core assets in the power sector. That will be eight years on Monday 1st November 2021.
At least 18 utility firms were unbundled under the defunct Power Holding Company of Nigeria (PHCN) with all but the Transmission Company of Nigeria (TCN) given to private firms to manage and turn them around.
On that day in 2013, five Generation Companies (GenCos) with another transaction later in 2014, were privatised; among these, three of them – Kainji, Jebba and Shiroro hydropower plants were concessioned. Yet, 10 Distribution Companies (DisCos) with another transaction later in 2014, were also privatised, making it 11. TCN was given out as a management contract to Manitoba Hydro International Nigeria Limited (MHINL) for three years, extended for another year.
Indices indicate lull trend
All these transactions and change of baton have happened under four ministers of power. From Prof. Chinedu Nebo who handled the privatisation, to senior lawyer Babatunde Fashola who combined both power, and works and housing; to Engr. Sale Mamman who oversaw a return to the sole power ministry and to Engr. Abubakar Aliyu who just celebrated his 50 days in office, there’s still no remarkable milestone in the power sector.
The conundrum of inadequate power supply, claims of high and fleecing estimated billing system, yearns for proper metering to determine commensurate payment for energy consumed, are still dragging the power sector, worsened by apparent low liquidity to drive further investments, with over N1.7 trillion market shortfall so far.
According to a 2020 report of the National Economic Council (NEC) Ad-Hoc Committee on Ownership Review and Analysis of DisCos and Electricity Sector Reform, the states have an average of 27.3 percent shareholding part in the DisCos in line with what they invested before the privatisation of 2013. The federal government has 13.7 percent of the total 60 percent stake that was sold to investors.
Although the DisCos had promised improved investment when they took over in 2013, the report said between 2015 and 2018, DisCos under-collected N890bn below what their invoices were and that they also under-remitted to the electricity market, creating a N230bn debt.
An obvious pointer to the negative progress in the power sector according to the report is that the DisCos under-invested, deviating from their Performance Agreement targets by N164bn (67%). A breakdown of this shows that they were to have already invested N261bn as of 2018, five years after they took over the assets. Of this sum, N76bn was for metering, N95bn was to reduce Aggregate Technical Commercial and Collection (ATC&C) loss reduction and N90bn for other Capital Expenditures (CAPEX). However, only N97bn of this fund was raised and invested signifying only 37 percent performance of their performance agreement.
This is in spite of them benefiting from investments by the Niger Delta Power Holding Company (NDPHC) and the Rural Electrification Agency (REA) in their networks by N147bn.
A trend analysis based on national grid operational data obtained from the Independent System Operator (ISO) indicates that power generation – the upstream level, improved better than transmission and distribution sections of the value chain.
Available power generation grew from 4,214 Megawatts (MW) as of December 2013, to 6,154MW in 2014, to 6,616MW in 2015 and moved to 7,183MW in 2016. It however dropped to 6,999MW in 2017 and rose to 7,384Mw in 2018, slightly dropped to 7,381MW in 2019 but rose to 8,082MW in 2020 and around 9,000MW so far.
But unlike the growth in generation capacity, the average power generation has hovered from 3,183MW since 2013 to 4,000MW this year, indicating just 1,000MW rise in eight years.
Another negative trend in the sector is the stranded or unused power generation, often attributed to transmission line constraint and mostly energy load rejection by the DisCos. This grew from 1,030MW in 2014 and reached 3,971MW in 2020, so far this year, nearly 2,000MW of energy is stranded on a daily average.
Key milestones in the power sector this year, according to the ISO data, show that the all-time peak generation reached 5,801MW in March 2021; available power generation is 7,652MW and the validated transmission wheeling capacity is 7,300MW, but average power generation as at the weekend was around 4,100MW.
Siemens intervention hangs
In 2019, the federal government announced a deal with AG Siemens to reset the power sector as part of the Power Sector Reform Programme (PSRP). The deal had targeted revamping the DisCos and TCN networks such that Nigeria can attain on-grid energy of 7,000MW shortly and 25,000MW in five years but power supply average is below 5,000MW daily and the practical Siemens upgrade has not started. However, minister Aliyu in his 50-day score-card on Wednesday, gave fresh assurance.
“This first phase started in earnest this year, with the ongoing pre-engineering phase. The selected EPC Contractors will soon be contracted officially so work on the project implementation can commence,” said Aliyu.
Over 6m registered customers without meter
“In 2013, there were 4.5 million unmetered customers when the estimated registered customer number was 6m, but that has grown to over 6m unmetered customers of the 11 DisCos at a time when the captured customer figure has reached over 10m,” said Engr. Ahmad Rufai Zakari, Special Adviser to President Muhammadu Buhari on Infrastructure, on Friday.
Government since 2013 has attempted to tackle the metering hurdles but results are far below expectations; from the Credited Advance Payment for Metering Implementation CAPMI) when customers buy meters, to Meter Asset Providers (MAPs) when customers pay for meters and can’t get them to the current ‘free’ National Mass Metering Programme (NMMP) that is being reviewed in less than one year.
Zakari, who spoke on Channels TV, said of the estimated 6 million metering gap, 1 million has been done between December 2020 and now. He assured that the gap will be closed with a new scheme under way that will combine the MAP, NMMP and a 1 million meter funding to the DisCos from the World Bank.
Power projects on the radar
There are several power projects that have not been delivered. One of such is the controversial ‘3050MW’ Mambilla hydropower plant in Taraba State. Former minister Mamman said he had progressed works to survey stage but the capacity was dropped to 1,500MW, and for now, its process is in limbo again. There is the Project Delivery Committee in the ministry which must be made to act towards delivering on this project.
The 700MW Zungeru hydropower plant in Niger State was slated for delivery this year but there is a shift. “Zungeru Hydroelectric Power Project is progressing towards completion next year to deliver another 700MW of renewable power,” said Minister Aliyu in his latest scorecard.
Engr. Aliyu also said “40MW Kashimbilla power station has already started generating power into the national grid.” “Katsina Wind farm with a full capacity of 10MW is already generating part of its full capacity on the grid; Dadin Kowa 40MW power station started generating power into the national grid.”
However, checks on the ISO’s real-time national grid monitor as of Saturday shows that these three hydro and wind power plants are not listed among the over 23 GenCos currently servicing the national grid and delivering a cumulative 4,000MW daily average.
The tariff nooze on consumers
In the face of this drop in expectations, the Nigerian consumer is faced with rising cost of energy without improved service in spite of a new tariff nomenclature – Service Reflective Tariff (SRT). In November 2020, the DisCos increased SRT for customers they said have over 10 hours daily supply both on estimated and metered; they also added the new 7.5 percent Value Added Tax (VAT) to all customers, including those with less than four hours daily electricity.
And although the Nigerian Electricity Regulatory Commission (NERC) – the sector regulator and the 11 DisCos have denied any increase this year, evidences from meter vending customers show that there is about N2 increase per kilowatt hour (kwh) of electricity being purchased since September 2021.
A new dawn for the power sector?
As the sector looks to the ninth year of the privatisation, key recommendations from the National Economic Council (NEC) of last year have not been implemented.
One of such is that the federal government will have to recapitalize DisCos by shareholders (states/FG, core investors) and encourage GenCos to bring in capital and management expertise.
However, the new Minister of Power, Engr. Abubakar Aliyu, said “We have put in place goal delivery machinery which is operational. With this in place, many of our lingering challenges in the power sector are now being addressed in a methodical, systematic, and proactive manner.”
The minister, who seems to be fully aware of the power sector challenges, also said, “Reforms take time and require patience to implement, especially in a highly regulated sector like the power sector. I am confident that these reforms, when fully implemented, will bring about the transformational change that we all desire to see in the sector.”
