Electricity market seen running before it learns to walk

Amaechi Aloka, a deputy director at BPE, during the 8th edition of the PwC Nigeria annual power and utilities roundtable held in Lagos on last week, made an interesting observation about the electricity market.

He said Nigerians were essentially asking the sector to run before it learns to walk.

“Our power situation today, is like someone who enters school late and has to start from primary one, he is so frustrated that those in primary one are like 10-15 years younger than him and he wants to go to primary six immediately because that is where his mates are, but unfortunately, it is not possible for him to move from primary one to six. There are issues that he has to go through, and that is where the current power sector reform is,” said Aloka.

“The power sector reform is designed to go through three stages: pre-transition, transition, medium term and long term. But today, we want to move up pre-transition, because really when we say we are in
transition market, we all know we are not really there, because transition market can hardly carry contracts, unfortunately we are not in any contract market today. The fact that those contracts are not effective means that transition is in the ‘hope’. So now, if we begin to take actions that are like in the medium stage and to the final stage of the market, we will have to struggle,” said Aloka.

These issues highlight the challenges with the sector. While the government successfully privatised power distribution and generation, it could not find buyers for the Transmission end of the business.

The DisCos were allowed generous concessions to enable them recoup investments but they began to default and the government took no action. Gas suppliers were owed because GenCos were owed and shortfalls began to accumulate.

Yet the government cannot hold it to account because it was also partly responsible for the shortfalls in the sector by interfering with pricing even when components of tariffs changed, it refused to bulge on pricing. This contributed to worsening the shortfalls in the sector.

In the light of these, operators are faulting the government for taking actions as if the electricity market has advanced into a contracts market. They cite the declaration of eligible customer declaration.

However the government argues that such actions are needed to rescue the sector.

“There is no problem that we are facing today, in this sector, that has not been with us for the last fifty or more years. What has happened is that the reform and privatization programme has thrown up these problems for the general public to now see what has been hidden and going on,” said Aloka.