Sunday Oduntan is the Director of Research and Advocacy for the Association of Nigerian Electricity Distributors, the umbrella body of the 11 Discos. In this interview with Chineme Okafor, he spoke on how the electricity distribution companies are performing.
Excerpts:
The poor state of power supply is profound now, how are the Discos taking it?
Power supply has not been good of recent, but it is not the Discos’ fault. I apologise to Nigerians particularly those paying their bills and those who are willing to pay, because there are those that are not even paying at all and there are some that are not willing to pay.
But for those patriotic Nigerians, I apologise to them for being taken into this stress of not having power. I appeal to our people to be patient as we are all in it together. It is in the Discos’ interest to supply power and the more we supply the more money we will be able to collect from people anywhere.
The fact is that we have to take it that we are on a five-step journey, where we are today is just step two. However, by the time we get to the final step, it will be a total reformation of the power sector.
We will get to a point where one could choose his own power distributor just by a phone call. In England where I lived for 26 years, I lived in the South of England towards the coast and I was using Scottish power which is far from England. With just a phone call, you can change your service provider just like the telecommunications firms now, but that is a long way off.
Our challenges are primarily because the country is producing far less than a quarter of what it requires. With a country that has a population of over 160 million, and going by the rule of thumb for electricity provision all over the world, we need to generate 1000 megawatts (MW) per one million citizens.
This means Nigeria needs about 160,000MW to have 24 hours uninterrupted power supply across every nook and cranny of the country but that is a distant target so we have to go back to the reality.
If we exclude those who generate power for themselves like some churches and other big companies – if they continue to generate for themselves and do not depend on the national grid and if some other big companies can also emulate that – for us to have uninterrupted power supply or at least guarantee 18 hours every day of power every day to those who are currently connected to the grid, we need 20,000MW.
To attain this, we need a lot of money and investment. It is not cheap but it is attainable.
Does this suggest that President Buhari’s 10,000MW target in three years is unrealistic?
He mentioned 10,000MW by 2019 and I say, yes it is very attainable. In fact, we achieved 5,074MW several weeks ago.
But in terms of capacity to do more, we have some scattered assets all over the country, which if we put them together can give us another 5,000MW. In addition, for us to get to 20,000MW, we need to construct brand new plants to generate another 10,000MW which will cost about $12 billion and the good thing here is that government don’t have to put down the money.
Those funds can come through Foreign Direct Investments (FDI); the only problem is that for that to happen, we need to assure of our integrity and that Nigeria has changed, and that government can give the investors Sovereign Guarantee so that they can be sure that they will be able to recoup their investments. I believe that it is possible, I have no doubt that we will get there.
Can the Discos distribute what the president wants to be generated?
The Discos in this country are capable of taking the 10,000MW, and I think you have to direct that question to the TCN.
I know that for a system that was neglected for 50 years, you cannot expect it to be alright immediately. TCN was given to Manitoba in 2012 to manage because of the weak system.
They have being doing a lot of work and expanding the network, strengthening and refurbishing it. How much of it they have done or how far they have gone on it, I wouldn’t know. But I know that they are also aware that they are targeting the same thing.
For generation, I have no doubt that they are prepared to do that. For us as Discos, with our existing capacity in this country we will be able to do more than 10,000MW.
We found that out of the $40 billion required to reach the 20,000MW generation target for 2020, the Discos require only $2.5 billion to fix the networks including the cables and pole.
What are your current most pressing challenges in the sector?
The Ministries, Departments and Agencies (MDAs) of government owe us about N60 billion. As at the end of December 2015, it was over N58 billion cutting across federal, state and local governments.
The Nigerian Military particularly are owing us more than any other group, especially the Army. I will also like to talk about beating up of our staff by the military; it is totally unacceptable and it has to stop. We are calling on the President who himself is a retired General of the Army and the Commander In Chief of the Armed Forces to call his boys to order.
There is this current case of the Army Brigade at Abeokuta, in Ogun state. The incident happened on the 6th of March between 10am and 12pm when one Major Musa led other soldiers and they went to an injection substation at Rounder in Abeokuta. They beat up the guy on duty, Mr. Salawu. They said they had no light and for that reason they went to the control room in the injection substation to harass him. Meanwhile they have had light for the eight hours prior to when they were switched off and they were switched off because there was need to do load shedding for other customers.
The army all over the country have turned themselves to oppressors and we will not let this incident go just like that. We have made attempts already. A letter has been sent to the Commander but no response has been gotten yet. The military should stop beating Disco staff or any civilian for that matter, we are not in the politics of electricity; we are all in the business of electricity but some people have become very political especially when we talk about the issue of tariff.
There’s so much finger pointing in this sector, how can we get out of this?
I just want to let you know that out of our total generating capacity, we can only distribute what we are given.
Once there is vandalism and not enough gas to fire the power stations and there is no light, the Discos are called names but when we collect the bills, only 25 per cent of it belongs to us. 60 per cent goes to the generation companies who also pay for the gas supplied, 11 per cent goes to the Transmission Company of Nigeria (TCN) while 4 per cent goes to the other stakeholder including NERC, the regulator.
But of course, when there is low distribution there will be low collection and there will be no money to pay the gas suppliers. Everybody needs to play their role, once the chain is broken, the system suffers.
For instance, if we have 5,000MW and people are not paying as we experienced recently when we had it, our losses increase. With higher supply, we expect that there should be an increase in our revenue having given more light but it is not so.
Those who are metered are now bypassing their meters; so many with prepaid meters are bypassing it and every such act affects all parties.
For every one that bypasses his meters, it means they are using electricity free and it is affecting whoever else is on that transformer with them that is on estimated billing.
How are the Discos trending with their metering plans?
The current economic reality has made this task even more difficult. There are many factors that determine its success. The exchange rate is one of them as well as bank interest rate and others.
What it means is that if before you could buy a dollar for N200 and you have N200,000 you will be able to buy $1,000 but today if you have N200,000 you can hardly buy up to $500 to $600. As the rate fluctuates, so does your purchasing power.
We have a new tariff now but the naira has gone worse against the international currencies like the dollar. However, we cannot increase tariff just because dollar has gone up and when dollar has gone down we are not going to reduce tariff.
Some Discos are doing their job and we have to praise them that in spite of all those challenges, they are making serious effort to meter customers. In Abuja, it is being done cluster by cluster but unfortunately the issue of meter is very emotional to people.
Everyone is entitled to meters and I apologise that it is taking so long. It is so because we met a missing gap of 5 million. For more than 32 years, NEPA and PHCN just ignored the job of providing meters.
Some communities have also refused to be metered. There is a community in Akwa Ibom state, Ikot Abasi that refused to be metered by the Port Harcourt Disco. The Disco staff were beaten and their vehicle seized by the community when they went to meter them.
The same thing occurred in New Bussa in Niger state, the Disco went there and offered them meters, they refused and vandalised them, saying they don’t want meters. These are the kind of challenges that we face in the sector. It shows that there are some Nigerians that don’t like to pay for electricity bill.
Have the Discos all gotten their share of the CBN intervention fund?
People have being talking about the bailout, but there is none for the power sector. The CBN fund was an intervention loan given to Discos at 10 per cent interest rate payable over a 10 year period.
That was what they called bailout but it is a loan. On handover in 2013, they even promised to give the sector an initial fund of N50 billion for each of the first two years, but government never did that.
Was that promised N50 billion every year supposed to be a bailout?
No. Again the method we have used for the privatisation has been used in other countries like Kenya and Uganda in Africa and places like Chile and India. When you privatise using this model, you have to cushion the effect.
There was no cost reflective tariff as at November 1, 2013. What we got in. February this year was the tariff that was supposed to have been there since 2013.
The N50 billion was supposed to cushion the tariff shock if the tariff had gone up then as part of subsidising it for the consumers.
So, are you now asking government to subsidise power consumption?
We are not. The government knows the fact and that is the true position of things, but I know that the government does not have money, so we are not asking government for subsidy for now.
What we are asking is that we should have an enabling environment such that other foreign investors can come into the system and that can only happen if we have appropriate pricing.
What were the Discos expected to do with the CBN loan?
First of all, it is not all the Discos that have accessed it. I think about five or six so far have taken it. It is tied to CAPEX expenditure and other investments including the cost of bridging the gap for our payments for legacy debts.
All the Discos today are in deficit. No Disco is making profit because we are not getting 100 per cent of our bills. People are not paying their debts. We are not saying those debts are even coming to our pockets. We need to get them so we can pay our creditors. The NBET stands between us and the Gencos. NBET is like our guarantor now.
But the NBET wants Discos to do 100 per cent remittance, is this comfortable with them?
All I can say is that the issue regarding our payment is an on-going issue and for now I would not want to comment on it. Discussions are all going on.
Our objective is to pay all our bills to the best of our ability. What I want you to understand is that the generation companies will generate electricity and the TCN wheels it to the Discos. If a Disco buys N4 billion worth of electricity in a month and you produce your bill and it comes to a total of N3 billion because some people are stealing and using electricity free, the Disco is already running into a loss of N1 billion before they even started collecting their bill.
They will now distribute the bills of N3 billion. If the Disco is fortunate, maybe it will get N2 billion or N1.8 billion back because if you give a customer N5, 000 bill, he may only pay N2, 000. That means that if your total intake is N2 billion and you receive N4 billion worth of electricity, you still have N2 billion credit left.
You still have some other operational expenses to pay, you have CAPEX (capital expenditure) waiting and still need to repair and buy transformers, and pay salaries. If they said we should pay 100 per cent of energy bill, we can’t pay even if we want.
What strategies have the Discos devised to reduce their collection losses?
Our strategy for reducing collection loses is to bring in more technologies to our system, to roll out more smart meters and to monitor those meters that we rolled out and to also ensure that more customers are captured.
We are doing this by engaging customer enumeration. When we do the customers enumeration we are going to capture more customers’ data and we will have all the information that we need to make our plans.
There are allegations that Discos have been lazy in their revenue collection, is this true?
The solution to it is very simple. What you can also do for us, as a journalist is that if you see this, you will just make it known because if they are not giving people bills and people are using electricity and you don’t say it, it will affect all other customers. If my electricity is going to your neighbourhood and I am not going to collect their money and you are using it, well it is all our problem because what it means is that my debt will grow and the system will shut down.
If forex impacts on your metering plan, why not patronise local vendors?
The issue is that of capacity. Meters are not just things you can pick from the shelf. We are willing to patronise them.
It will be more convenient that I can buy my meters in in Lagos but there are issues. Right now, most of the metering we are doing under the CAPMI scheme are supplied by the local meter assemblers but there are still issues on their ability to meet the quantity needed.
Also, to buy from them, you have to check your costs, of course, if it is more expensive than the imported ones, then we have to import because we are also into business.
You also have to consider when some other manufacturers are offering to supply us meters through vendor financing and repayments over three years, we will take that option.
