No Quick Fix for Power

Power-PHCNWith the many challenges facing the power reform programme, it appears Nigerians have to wait a little bit longer before they get respite from low generation of power and incessant power failure

On the surface, it sounded like an explanation from someone desperate to reassure his fellow countrymen not to lose hope in the power reform programme of government. But revelation by Andrew Yakubu, group managing director, GMD, Nigerian National Petroleum Corporation, NNPC, recently that pipeline vandalism was the reason behind drop in gas supply, which in turn led to a reduction in power generation and supply of electricity across Nigeria, cast doubts on the power sector reform of the government.

Yakubu had revealed that outright sabotage of some crucial gas pipelines is the reason power generation had reduced drastically in most parts of the country. Saddening as this revelation was, it brought to the fore the unpreparedness of those in authority to really take the bull by the horns in checkmating all processes that seem to be rubbishing the reform in the power sector. In his explanation, Yakubu claimed that over 30 per cent (480 MM sf/d) of the installed gas supply capacity was out, due mainly to vandalism and that the lost gas was equivalent to the gas requirement to generate about 1,600 megawatts, MWs, of electricity. That is enough to send jitters down the spine of Nigerians. In a country with a population hovering about 150 million, and electricity generation standing at between 3,000 to 4,000 MWs, losing 1,600 MWs can only compound the power situation. Little wonder, in the last three months, Nigerians have been groaning under worsening electricity supply.

More worrisome is the fact that gas pipeline vandalism is not a new phenomenon, and yet government seems incapacitated to deal with it. Last year, Chinedu Nebo, minister of power, also declared that the federal government was facing serious challenges towards improving the power sector. Some of the problems he highlighted include under-funding and under-development of the power sector, as well as occasional vandalism of gas pipelines and sabotage of its facilities.

But what he failed to explain was how government hoped to curb the menace. That year, two major gas pipelines supplying gas to the eight power stations were vandalised, leading to reduction in generation of power by 1,598 MWs. The power stations affected included Egbin/AES Thermal Stations, Lagos; Olorunsogo Power Station, Ogun State; Omotosho Power Plant, Ondo State; Geregu Power Station, Kogi; Afam IV and VI power stations, as well as Rivers State Independent Power Station.

Corroborating the minister’s theory of sabotage of the gas pipelines, Dave Ifabiyi, general manager, public affairs, Transmission Company of Nigeria, TCN, also said that due to the disruption of gas supply to the Nigerian Gas Company, NGC, it is unable to move gas to the aforementioned stations, thereby causing low level generation, which in turn has contributed to an unprecedented rise in the number of total and partial system collapse in recent times.

He has the support of Pekun Adeyanju, AGM, public affairs, Ikeja Distribution Company/New Electricity Distribution Company, NEDC, who claims that the situation in the power sector for a very long time has not been very good. “Our major challenge is the allocation of power. We get about 350 MWs when we are supposed to have over 900 MWs. It beats my imagination at times when customers harass our staff that we don’t give them power. They forget that it is what we get from transmission companies that we distribute. If transmitted power is low compared to what customers need, it will not go round,” explained Adeyanju.

Similarly, Tokunbo Peters, principal manager, (public affairs) Ibadan Electricity Distribution Company, while explaining the reason for poor power supply noted that, “the poor supply being experienced by customers is as a result of poor energy allocation from the TCN. This is predicated on the vandalism of gas pipelines, which transport gas to the thermal power stations spread across the country. This has led to sharp drop in power generation.”

It appears there is no respite in sight because apart from the loss of gas and its inherent effect on power generation, investors who had hitherto bought over the unbundled Power Holding Company of Nigeria, PHCN, are also complaining that they are facing more challenges in running the companies than envisaged. Sam Amadi, chairman, Nigerian Electricity Regulatory Commission, NERC, who appears to be speaking the minds of the investors, had stated that, “the initial challenges in the stabilisation of operations within Nigerian’s privatised electricity market were largely caused by the hostile reception of the new core investors by the market.” By this, he may be referring to the threat from the labour union who had earlier kicked against the privatisation of PHCN. According to Amadi, “The core investors did not have the time to access the operational status of the companies,” stressing that “they came into the scene a little frightened and the mode of entry was acrimonious.”

But be it as it may, the privatisation had been concluded since November last year, yet there appears to be no drastic change in the provision of electricity to Nigerians. Stakeholders in the industry say improvement in the generation of power will not happen immediately. According to Adeyanju, “The issue is that Nigerians expect everything to change as soon as there was a takeover but it doesn’t work like that. We need to give the government and investors time to turn things around. For now, there is not much difference between when the new investors came in and now.” Gabriel Idahosa, chief executive officer, CEO, Urbach Hacker Young International, a financial consulting firm, is also of the opinion that the new investors cannot perform magic overnight. According to him, the new investors are still understudying the environment, as well as strategising on how to go about running the companies, and this will take some time. What Nigerians should be asking from the investors is to reel off their plan in form of a timetable to intimate them on how they want to go about rejuvenating the power sector and how long the process will take. They should also be ready to give specific timeline to various steps taken in achieving such processes.

Though not wanting to sound pessimistic, Joe Ajaero, general secretary, National Union of Electricity Employees, NUEE, told the magazine that with time, Nigerians themselves will find out who got it wrong as far as privatising PHCN is concerned. According to him, labour initially kicked against the privatisation of PHCN because of its belief that the provision of power to the generality of Nigerians is a social service and not one to be commercialised. He said unbundling the company gives room to investors to want to think of recouping their investment first, and then making more profit from their investments. “The investors are not Father Christmas, people will definitely pay for services rendered to them, and I bet with time, tariff will go up. So what is the rationale behind making Nigerians pay more for what is not readily available and affordable?” he queried. He also claimed that some of the investors who bought over the companies were among those who years past condemned PHCN as a dead horse, with obsolete facilities.

So according to Ajaero, many of those who bought over the components were Nigerians who had earlier condemned PHCN as an obsolete and weak company, and then turned round to invest in it because of what they stood to gain. He also noted that because the investors were purely out to make profit from their investment, it behoves them to want an increase in tariff, a move which may not go down well with Nigerians. “Most of these investors borrowed money from the banks and are under pressure to start paying their loans. How they will get their money back is what will be paramount in their minds, not if Nigerians are getting power or not. Moreover, power not available cannot be affordable,” he opined.

This view tallies with Amadi’s who maintained that “the problem we had was also compounded by the mode of privatisation. The fit and proper guideline also has to do with financial strength. So we expect them to acquire the assets with their shares corresponding to the amount of equity they have. But unfortunately, many of these assets were acquired with debt, borrowing from Nigerian financial institutions which may not be convenient for them. The money was paid in August and takeover in November, so apart from the agitations for interests, by the time they took over, the terms for the money was due to service the loan and that put pressure on the investors.”

With the challenges faced by the investors, as an aside, there are fears that the federal government still needs to do more in finding solutions to the poor electricity supply in the country. One of the things the federal government needs to do is to checkmate the vandalism of gas pipelines. Ajaero wondered why the federal government is not deploying massive security operatives to man the gas pipelines as it is doing for the oil pipelines. He was emphatic that this is what the federal government should have done initially before even thinking of privatising power infrastructure because we know our electricity is greatly powered by gas.” Earlier, the general secretary had queried the rationale behind the country’s sole reliance on gas to generate power, while neglecting other sources which include hydro, solar and coal. Citing examples of what obtains in other climes, he pointed out that coal and hydro are major sources of power, whereas in Nigeria gas constitutes about 70 per cent.

Several industry watchers had also condemned government’s inability, or rather unpreparedness, to pursue the generation of power using solar, hydro or coal which, apart from being readily available in the country, are also cost effective. Idahosa is of the view that there is no reason government is not thinking of encouraging the development of other sources of power to generate electricity. While citing examples of wind being used in Katsina and solar in some other areas, he said with the development in those areas, there will be less pressure on gas-powered plants. He, however, said for now, engaging in solar could be highly expensive since we do not have any factory producing solar panels, but that government should intensify its effort towards establishing such factories around the country. “It is worthy of note that there are plans to set up a factory to produce solar panel in Abuja, so with that functioning, it will be cost effective to use solar to power electricity,” he said.

Aside from developing the use of solar to power energy, many industry experts are of the opinion that hydro and coal could make a lot of difference in power generation. Not a few of them are surprised that government is not enthusiastic about developing the coal sector, since we have abundance of it in Nigeria, especially in Enugu.

Aside government’s inability to fashion out other means of generating power, it also has to contend with checkmating corruption in the sector. One of the areas where corruption appears to be rearing its head is in the provision of pre-paid meters. Many Nigerians have complained over their inability to collect pre-paid meters years after they paid for them. It is no gainsaying that with the pre-paid meters in use, officials of PHCN who hitherto give customers estimated bills, in order to make them pay more for services not rendered, or rather for more than they have consumed, will be checkmated. But in a quick reaction, Adeyanju said, “There is nobody that has paid for the pre-paid meters that has not collected it. What we are doing now is to ensure that those who paid before NERC suspended the process in 2012 collect their meters. We have told them to come with their receipts and they will get it immediately.”

He however reiterated that the new management is still understudying what is on ground and putting finishing touches to its plan to turn the distribution of power around. “We will ensure that metering is properly done. We have a technical partner (KEPCO Consortium) that is working on our distribution network and the metering system to advise us on how best we can please our customers. The company will soon come up with the best metering programme.” He added that “our plan is for every customer to have a meter because we have realised that the only way we can have a mutual relationship and to enjoy our service is to ensure that you pay for our services. The estimated bill will be in the past. We will ensure that our meters are credible. I cannot tell you the type of meter we will use but I tell you the pre-paid meter will be part of it.”

No doubt, corruption has been fingered as the bane of the power sector in Nigeria. Its impact, according to Martin Onovo, executive director, Movement for Fundamental Change, can be seen from a comparison of money spent and achieved results in Nigeria and Brazil between 1999 and 2011. Within the period, Brazil spent $10 billion on a power project and secured additional 10,000 MWs, whereas Nigeria spent over $25 billion on power and secured additional 1,000 MWs.”

Much as what Nigeria spent within that period remains contentious, Onovo also compared the power situation in Ghana and South Africa with that of Nigeria, noting that Ghanaians enjoy good power supply. Whereas South Africa with a population of about 50 million people boasts of 36,000 MWs of public power, and Nigeria, with a population of over 150 million people, now boasts of less than 3,000 MWs. How soon such a situation will change remains to be seen.

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