Getting the Nigeria electricity industry right
The ‘Recent future of energy series’ organised by BusinessDay Media Limited was an eye opener to those that are not properly in tune with what is happening in the power industry. It also shows an indication that the country still has a long way to go as far as her bid for having reliable, stable and efficient power supply is concerned.
Already, the sector has a shortfall of about N1 trillion that will be required to right and resolve the myriad of issue associated with it.
It is however cheering that the Nigerian Electricity Regulatory Commission (NERC) is stepping in and has unveiled a comprehensive plan to tackle liquidity gaps in the sector, which includes auditing the books of operators and providing credit advance system to perennial debtors.
The other thing the commission is also trying to do is to carry out a forensic audit of the Discos to determine their income as well as costs. The forensic audit of the Discos would be in terms of what they really collect, spend and save.
According to John Momoh, vice chairman of NERC, the commission carried out an open book review and discovered that it was imperative to actually carry out the forensic audit of the Discos.
Perhaps, this would finally put to rest the allegations and counter allegations between, especially management of Discos and the regulators over the level of revenue accruing to the Disco.
The Discos often say that they are not generating enough revenue because they are not allowed to charge reflective tariff. Through the planned steps by the NERC, it would be clear whether they are generating revenue or they are mismanaging the one they generate through spuriously paying board members huge sums.
The Discos settle as little of 15 percent of their market invoice. The audit will seek to determine what are the basic revenue baseline and the minimum they are allowed to remit, and develop appropriate basis for appropriation and disbursement of market funds.
These companies reported losses of over N196.23 billion to end the 2016 financial year. This compares with a loss of N104.69 billion they recorded the previous year.
The commission’s proposal to review the tariff methodology will be commendable. The current methodology has been in place since the last 15 years. The commission says it will revisit the methodology on which Multi Year Tariff Order (MYTO) is placed to determine if it is the best way to go in terms of tariff for the sector.
Other stakeholders in the power industry have also suggested solutions that can help move the industry forward.
According to Kola Adesina, chairman, Egbin Power plc, big economy needs big power, and that if the country truly wants to industrialise and also want investment in the power sector to create jobs, there must be enough certainty, and confidence.
Investors will come and invest in the power sector if they are given enough certainty and confidence, he said, saying if the fundamentals of the market were addressed the problems plaguing the industry would be solved.
Kolapo Joseph, general manager, corporate finance and corporate development, North South Power Limited, said the industry went into problems immediately the cost reflective tariff that was proposed by the NERC was frozen, stressing that cost reflective tariff must be immediately implemented.
In addition to this, he said the government must settle all sector debts, saying it was only after this that the sector could be revamped.
Joy Ogaji, executive secretary, Association of Power Generation Companies, said the state of the market should be thoroughly studied to know what was required, especially the demand side.
On what to do to find a lasting solution, she said in the short term the country should optimised what was available in the short run, while on the long run the generation capacity of the country should be increased.
Jamil Isyaku Gwamna, managing director/CEO, Kano Electricity Distribution Company, said metering the
customers was the solution to the sector problems, saying in ideal situation meter was suppose to provide solution to the problems of revenue generation.
Metering is good for the Discos, but the challenge they are facing is the cost of procurement, he said, saying, “With capped expenditure, Discos will not be able to procure meters and yet expand it their network. So, metering as proposed for solution is just one half of the issues.”
Meter Asset Provider (MAP), he said, will take the burden of the Disco as far as meter is concerned. MAP would be successful depending on how it is structured.
Chiedu Ugbo, managing director, Niger Delta Power Holding Company, said eligible customers would resolve the
liquidity challenge in the industry.
If all these are worked towards, it is possible to have very reliable electricity industry in Nigeria.