Power
New PHCN owners talk tough on prompt bill payment
LAGOS – History was made on November 1, 2013 across the country as core investors in the power sector successfully took over the physical asset of both generation and distribution companies. The handover according to them has ushered in a new dawn in the sector as they outlined modalities in ensuring an effective and efficient power delivery to the last man in the electricity chain.
Chairman of the New Electricity Distribution Company/KEMPCO consortium, Mr. Kola Adeshina who took over from Ikeja Electricity Distribution Company in an interview with SweetCrude’s KUNLE KALEJAYE, urged customers especially government institutions to promptly pay their bills. He also bears his mind on some other issues his company is prepared to tackle in ensuring that they become the best electricity distribution company in the country.
How do you feel about the successful takeover?
I feel very proud and great of being a Nigerian that at least we’ve gotten something right for the very first time and this is a process that was transparent, the process that was not influenced by any selfish interest, the process that brought about the very best in terms of the performance that has been listed for each and every one of us to apply with.
So we feel happy being a Nigerian, that yes, Nigerians are can come together to make Nigeria greater and better. Nobody could do it for us. We have to do it ourselves. I feel very proud and great being a Nigerian.
What are your plans for the inherited workers?
What we have for them is first and foremost, we are going to do an assessment, an evaluation of each and every one of them; their competence level; their capacity and what they are likely to contribute. Base on that, what we intend to do is to expose them to new ways of doing things, that is new thinking, new processes and then ultimately increase their welfare because when you are motivated you will definitely give your best. The motivational aspect is something we are really going to deal with.
As a new owner, do you plan to end the CAPMI scheme?
No! what we intend to do first really is not to pre-judge the system. Part of what kills most system is when people, before they get into the system, they criticise it, they don’t know it. So we want to understand what is going on, understand how the entire system works and then proffer solutions to them. So we have the privilege of having an organisation that is doing exactly same thing elsewhere, generating, transmitting and distributing 82,000 megawatt, their experience will be brought to bear.
The technicality of the Nigeria situation will equally come in here. So these are issues we are putting into consideration in developing our final strategy.
We will access what is on ground because if you are going to improve you can only improve on something that you understand; you don’t improve on what you don’t understand. The entire process, the entire chain and service being provided currently would be evaluated by us. We have never had the privilege of pre-shadow management so we didn’t have the access to this premises of this company. Everything to the smallest would be evaluated against the global bench mark and then the upgrade would be done accordingly in those areas.
One of the things that you probably need to recognise is this, we have made pledges which have been embedded in the agreement that we sign. Those pledges can only be done when we make money. The more money we make in trying the best possible way we can in curtailing energy theft, in ensuring that those that use to get away with bills that are lower than normal gets appropriate bills, in ensuring that services are made available, reliability is guarantee then we will make money, when we make more money we will have to innovate the system and improving on the services standard.
Going forward, what are your plans for the asset and how you hope to finance your operations seeing as CBN is set to enforce lending limits?
Part of the challenge of our system in part is that everybody has a limited focus with regards to sourcing for funds. There are too many sources for funding, there are funding that you will get from operational income, there are other sources that you are going to look at, there are other strategy that you can use to fund your operations without necessary spending a dime.
I can tell the suppliers of services to me that I am not going to pay you today but I will do defer payment on the basis of the credibility that I bring to the table, quite a lot of people will be able to support the initiative knowing that I am in a service that is highly required and it is done in more sufficient and effective manner, they will support me. So there are a lot of collective ways of funding without necessary obtaining loans.
How do you intend to drive local content in the power sector?
One of the things I said on the onset is that nobody can come to our nation and develop us, we are the ones that will develop ourselves. So the primary requirement is for us to look at areas that have local capability and support those initiatives with local capability. Those areas that have local capability, if we know that they can enhance services, enhance benefits elsewhere, those benefit would be brought in ultimately because it is a global thing, it is not a Nigeria thing; electricity is global it is not Nigerian in nature.
If there is way that there are doing things elsewhere that we are not doing currently in Nigeria, some of things that we are going to do is to improve on the current standard by adding value elsewhere and most importantly we want to be as innovative as innovation permits.
One of the challenges in revenue loss is by-passed lines in the network, how would you cope with that?
Interestingly, part of the things that you really need to understand is this: whatever is happening currently in Nigeria in the electricity sector, most especially in the distribution aspect is synonymous with what is happening elsewhere or what has happened elsewhere before. Most of the nations that has done so well in terms of generation, distribution and transmission, they have had similar challenges that Nigeria is going through.
Some of the strategies and technologies that they adopted in resolving those challenges will be brought to bear. Because we are Nigerians, we can find a way of resolving some of those crisis we’ve had internally. The critical factor is this, in Korea they’ve had similar power theft and they were able to resolve that challenge. We are going to definitely going to replicate that and improve on whatever they did in their country.
How much are you investing because your counterpart in Eko is thinking of investing over $50 million
You see one of those things that we don’t do as a company is that we would not buy any fish in a river. We are not just going to pick on a numbers; we are not going to do that. Everything that is required to make us the best electricity distribution company in Nigeria would be done.
What about estimated billing?
The life span of estimated billing is coming to an end. Once the services that you are rendering is measurable, then payment should be determined, it should be fixed. If you know that there is X quantum of kilo watt of electricity that am consuming and there is high rate attached to that electricity, X multiply by Y will give me XY but if XY is giving me XY race to power what ever then something is wrong.
I want to be a responsible organisation because whatever services that am rendering I must receive payment for those services that I have rendered. I’m not going to receive any payment over and above the services that I have rendered because that means am stealing from the system. That is part of the things we are going to be doing in this organisation, the value system which is ultimately require as a nation would be driven down to the last man in the chain of this.
– VANGUARD
According to reports, Nigeria’s population may face more challenging times ahead as electricity tariffs are projected to increase by over 40 percent in the near future.
This rise in tariffs could ultimately result in the elimination of all energy subsidies in the country.
Currently, the electricity sector relies on a monthly subsidy of approximately N50 billion, stemming from a shortfall in revenue.
The tariff hike, scheduled to take effect from July 1, will pose another significant test for President Bola Ahmed Tinubu’s administration and its ongoing market reforms.
The government has already taken steps to remove subsidies on Premium Motor Spirit (PMS) and implemented a floating exchange rate for the national currency.
These decisions have added complexity to the price-setting process of the Nigerian Electricity Regulatory Commission (NERC) and its 2022 Multi-Year Tariff Order (MYTO).
Despite power sector players failing to meet the target of supplying a minimum of 5,000 megawatts, even after signing contracts with the Nigerian Electricity Regulatory Commission (NERC), the current Service Based Tariff (SBT) is based on an exchange rate of N441/$ and an inflation rate of 16.97 percent.
According to NERC’s directives in 2015, the average tariff for distribution companies (DisCos) and different categories of end-users was N25 per kilowatt, as per Order 198/2020, which came into effect on September 1, 2020.
However, in the MYTO for 2022, the average tariff increased to N60 per kilowatt across all customer categories, and in the most recent update, it stands at N64 per kilowatt.
The determination of the 2015 tariff relied on a foreign exchange rate of N198.97/$, which increased to N383.80/$ in 2020 and further to N441.78/$ in 2022. In terms of inflation, the 2015 MYTO utilized an 8.3 percent rate, which rose to 12 percent in 2020 and reached 16.97 percent in 2022.
Currently, the inflation rate stands at 22.41 percent, and experts predict it could reach 30 percent by the end of June, considering the floating of the naira and the removal of subsidies on Premium Motor Spirit (PMS).
The tariff determination process takes into account various factors, including the significant metering gap of over seven million, gas prices, losses within the system, and the actual generation capacity. These elements play a role in determining the final tariff.
As anticipated, NERC had projected that the tariff for July 2023 would eliminate subsidies and introduce increases to the previously frozen tariff bands D and E.
These adjustments were intended to raise the bands from N54.59/kilowatt to N62.16 for band D and from N48.37/kilowatt to N61.16 on average. Moreover, the average increase across all bands was expected to reach N67/kilowatt.
However, due to the ongoing floating of the naira and the significant inflationary pressures, it is now projected that the new average tariff will need to be approximately N88/kilowatt for the power sector to recover its costs.
According to energy lawyer Madaki Ameh, the continuous and frequent increases in power tariffs are akin to a form of blackmail against electricity consumers.
Amen said “Indexing the cost of electricity on the dollar is a huge mistake because most of the inputs for electricity supply are local. The DisCos are also holding Nigerians to ransom by failing to increase the supply base, thereby spreading the tariffs across a broader spectrum of consumers to reduce the unit cost of electricity.”
He insisted that as long as there remain many unmetered consumers and many others not connected to the grid at all, the few consumers on the grid would continue to be subjected to unjust tariffs, which are not reflective of the quality of service delivered.
Ameh hoped that the signing into law of the new Electricity Act would mark “the beginning of light at the end of the long tunnel of inefficient and epileptic power supply in Nigeria.”
Segun Ajibola, the former President of the Chartered Institute of Bankers of Nigeria (CIBN) and a professor of Economics at Babcock University, highlighted that there remains a gap between the cost of electricity and the value it provides in exchange.
“Nigerians are still struggling to keep pace with the cost of energy for business and household use. If the electricity tariff goes up as envisaged, the question remains if there will be value for the quantum of electricity so paid for.
“The truth remains that if electricity supply is constant, of the right quantity and quality, the envisaged upward review in the tariff will be gladly absorbed by the populace,” he said.
Lanre Elatuyi, an Electricity Market Analyst, expressed that the recently implemented tariff rate would have significant implications. He emphasized that the devaluation of the Nigerian currency poses a major challenge for companies with dollar-denominated loans to repay.
He said “They will need more naira today to buy a dollar. They need to manage their exposure to foreign exchange risk. Even operators of hydro plants pay their concession fees in dollars. So, wholesale electricity price will be adjusted upward and this will get to the end users’ tariffs too.”
Senator Shehu Sani, a prominent Nigerian lawmaker has accused President Muhammadu Buhari’s government and state governors of secretly selling five power generating plants without disclosing the utilization of the funds received.
He disclosed this in his Twitter handle on Monday.
Senator Sani, known for his outspoken nature and activism expresses his concerns over the alleged undisclosed sale of the power plants.
He claimed that the government, in collaboration with state governors, had carried out the transactions without informing the Nigerian public about the purpose of the funds acquired from the sale.
The post reads “Buhari’s Government in collaboration with the State Governors quietly sold the five power generating plants without telling the country what the money was used for.
The Vice President of Nigeria, Prof. Yemi Osinbajo, has inaugurated the Afam 3 Fast Power 240-megawatt turbine project in Rivers State.
The project, which is a subsidiary of the Transcorp Group located in Oyigbo, on the outskirts of Port Harcourt in the state, was unveiled during a ceremony that took place on Tuesday.
The event, which was attended by several dignitaries, including the Chairman of Transcorp Group, Tony Elumelu, and other top officials, saw the Vice President arriving at the venue in a chopper at exactly 11:35 am.
Upon his arrival, he was escorted into the premises where he officially inaugurated the project.
During his speech at the event, he disclosed that the acquisition of the project was approved by the National Council on Privatisation (NCP) and the acquisition cost was ₦105.3 trillion.
Osinbajo further emphasized that the successful completion of the project is a significant breakthrough in Nigeria’s power sector.
In his address, Osinbajo said, “In 2020, electricity subsidies reached N584 billion, but service-based tariffs have led to a doubling of collection in the Nigeria Electricity Supply Industry from N40 billion in 2020 to N80 billion in the first quarter of 2023.
“If this trajectory continues, the Nigeria Electricity Supply Industry will be able to pay for itself. Our administration has also created programs for off-grid for electrification. Rural Electrification Agency now has the capacity to provide electricity supply on a first-class basis.
“We are on track to electrify all Nigerians in the next decade. However, we will not make progress if our gas supply does not improve. The gas supply challenges are hampering improvements.”
He further lauded General Electric, the National Council on Privatization (NCP), and the host communities for their contribution to the completion of the Afam 3 Fast Power 240-megawatt turbine project in Rivers State.
Osinbajo highlighted that the successful completion of the project will significantly increase the country’s power supply capacity, leading to a better quality of life for Nigerians.
In November 2020, the federal government and the Transcorp Power Consortium signed a share sale and purchase agreement in relation to Afam Power Plc and Afam 3 Fast Power Limited.
The National Council on Privatization approved the privatization of the Afam Power Plant back in August 2017, which triggered a competitive bidding process involving 12 prospective investors.
After careful consideration, Transcorp Power Consortium emerged as the preferred bidder with a combined offer of N105 billion.
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