Options for curbing electricity losses in West Africa

On the sidelines of the recently concluded United Nation’s meeting in Washington DC, US, Babatunde Fashola, Nigeria’s minister for Power, Works and Housing, said Nigeria lost 3,000 megawatts between April and September this year alone to various factors including generation losses and destruction of critical power infrastructure.

The spectre of electricity losses hovers around every area of the power value chain in West Africa. According to the World Bank, electric power transmission and distribution losses include losses in transmission between sources of supply and points of distribution and in the distribution to consumers, including pilferage.

An electricity distribution company based in Southern Nigeria, Port Harcourt electricity distribution Company (PHEDC) in July said it loses about $750,000 monthly to electricity theft. The company further said that available statistics showed that about 7.19 per cent of consumers indulge in electricity theft.

Ghana’s Electricity Company has estimated a loss of over 30 percent of its revenue through systems and distribution losses and is now intensifying moves to cut down on illegal connections and theft to shore up revenue.

“Today we have signed this MoU between ECG and Korean Electricity Company, and they are rated as the number one utility company in the world and their transmission and distribution losses is about 3.6 percent,” said Robert Dwamena, managing director of ECG when he signed an agreement with the Korean firm recently.

Nature of losses

Experts say three major types of losses are encountered in the utility business: technical, commercial and collection losses. A methodology used for assessing the overall health of a utility, is termed the Aggregate Technical, Commercial and Collection Loss (ATC&C).

Technical losses arise from the physical equipment used in the transmission and distribution of electricity. Industry watchers say that though this type of energy loss is not abnormal but it becomes problematic when values recorded are above prescribed thresholds. It is attributed to ageing or sub-standard equipment.

Commercial losses stem from sub-optimal billing process which fails to capture or account for all billable energy. This could be due to incorrect assessment of the energy consumed, human errors, theft or internal collusion.

In West Africa, commercial losses are largely due to pilferage. Some fraudulent individuals have devised nifty methods of tampering with electricity meters. Some insert needle pins into holes in the meter box slowing down the recording wheel to give a flash reading or even zero usage.

Small magnets have also been reportedly attached outside the meter casing which will stop the meter from registering or slow it down. Meters are sometimes bypassed and power is sourced illegally from underground cables and overhead wires.

Collection losses occur when utilities fail to collect revenue in consonance with billed quantities. There are still many people who believe that power should be given free or subsidised and this complicates revenue collection for distribution companies. Accounting errors are also frequent and complaints of crazy billings do not inspire confidence of consumers.

According to Thomas Dada, managing director of Frontier Oil and Gas Limited, 40 percent of generated electricity in the country is lost to theft and a lot of people who use electricity do not pay for it.

Harsh effects

“Technical losses represent an economic loss for the country. Optimization of technical losses in electricity transmission and distribution grid should be performed from a country perspective, regardless of the institutional organisation of the sector and ownership of operating electricity utilities,” stated Joseph Tsavsar, a certified PPP specialist and a consultant on Public-Private Partnerships.

This situation discourages investments and impedes the sector. Tsavser further noted that non-technical losses represent an avoidable financial loss for the utility in the sense that it should be paid for by the consumers.

“Non- technical losses have several perverse effects in the society. Customers being billed for accurately measured consumption and regularly paying their bills are subsidizing those users who do not pay for electricity consumption; this include case of electricity theft through an illegal connection to the grid or tempering of a consumption meter, also include unmetered consumption by utility customers who are not accurately metered for a variety of reasons, which in most cases is due to inefficiency of the operators to manage its operations.

Curbing the trend

Experts say the peculiarity of operations of a utility may warrant the recognition of these losses and hence will be incorporate into the tariff design as a way making the utilities whole as if the losses never occurred. But in West African economies which are all developing, the key to delivering value is to keep losses as minimal as possible because raising tariff and achieving consumer buy-in is a recurring challenge.

Also many tariff systems do not recognise collection loss placing huge responsibility on the shoulders of power distribution companies to improve collection.

Tsavsar proposed that government should be actively involved in supporting the utilities in improving collections. He advocates the introduction of the measures practiced in India to address revenue collections problem faced by the Discos, particularly to recover the huge accumulated bills owed by the MDAs. In India government intervene through special courts to address power theft.

“The recognition of these debts and electricity theft by government and enacting a Law to try offenders through a tribunal will ensure speedy trial of defaulters including utility staff who collude with the public to perfect this criminal act. This will help the Discos in reducing collection losses,” he stated.

Dwamena highlighted some areas targeted by the company to improve upon including strategies to identify and check illegal connections and power theft. He said the company’s engineers through modern methodologies under the agreement are working to reform operations.

“We should be able to understand why they have been able to achieve a loss figure of 3.6 percent; we should be able to understand why they are the number one company in the world,” he said.

He further said, “Under this arrangement we are going to look at a number of areas, including the system loss, metering, geographic information system, distribution asset, management and capacity building so that at least we can use this opportunity to develop our staff,” he said.

Further actions that could help curb the practice according to Dada is instituting a regional distribution system, saying that part of the problem of the sector is that there is huge amount of power loss due to the centralisation of the grid system as well as transmission.

“If we can address the centralisation of the grid system, by decentralising the transmission system to be regional rather than central, we should go back to regional distribution system and people can offload to another system if they got excess capacity in their region. Again, we need to stop electricity theft by prosecuting those who steal electricity, those who by-pass meters, and those who use it without paying for it,” he said.

ISAAC ANYAOGU