Crucial Issues in the Power Sector in the Last 12 Months (May 2015 to June 2016) -Concluding Part

We had commenced this piece in the last edition and this week, we conclude same with a number of issues which are crucial for the development of the power sector in Nigeria and ought to be given some thought.

Some of the issues that had been raised in the last edition included issues such as the emotional yet erroneous outcry for the new owners of the formerly government-owned generation and distribution companies to divest their interest in those companies to people who can better run same. The writer’s view is that there are fundamental matters outside the powers of these new owners making the profitable running of the companies almost impossible and that the solution is not divestment. In fact, it would be unlikely to find buyers.

Another issue raised in the last edition concerns matters such as the expiration of the tenure of the last set of commissioners of the Nigeria Electricity Regulatory Commission (NERC or Commission) led by Dr. Amadi in December 2015 and the non-appointment of new commissioners since then. Furthermore, transmission has remained a big problem with some claiming that the members of staff of the TCN have no clue or depth of knowledge and that the management contract is not achieving much.

Finally, there have been issues around liquidity in the electricity market and the ability or rather the inability of market participants to pay their bills or settle invoices.

We complete this series this week, by looking at a number of other issues in the power sector that are quite germane, from appointments to issues to the Minister’s roadmap, to gas matters, amongst others.

Insurgency and the Virtual Pipeline Approach

The electric power sector is contending with gas supply issues and gas production appears to have reduced by as much as fifty per cent (50%) of its peak. The gas industry, arguably, produced the lowest supply from its key pipelines in the last four years in May 2016.  At the core of the gas crisis is the on-going pipeline vandalism due to militancy and insurgency in the Niger Delta Area of Nigeria, a region where much of Nigeria’s gas is produced.

A key solution to this problem may be to diversify gas supply from the Niger Delta by considering production from frontier areas and by looking at places like Lagos where the Aje Field was discovered.  Furthermore, support should be given to virtual gas pipelines and mini-liquefied Natural Gas projects, where gas may be compressed and ‘shipped’ via trucks or where same may be liquefied, moved via cryogenic tanks/ trucks and then re-gasified at the point of utilization. 

Added to the foregoing, is the uncertain state of the domestic gas supply policy which seeks to assure gas security, cheaper prices and the potential of gas producers to reduce the availability of domestic gas for the more lucrative gas export.  It is pertinent that an updated policy is issued, to ensure that gas availability to the power sector is not further hampered.

Fashola’s Roadmap

By way of response to challenges in the sector, the Minister of Power recently presented ‘A Roadmap for Change” in the power sector. There are three segmental stages to be attained as represented in the roadmap consisting of ‘incremental power’, ‘steady power’ and ‘uninterrupted power’.  According to him, the intention is to get incremental power, then stable power, before then having an uninterrupted power supply. To achieve that foregoing, the starting-point is that the country must ensure that every megawatt of power currently stranded is harnessed and made available to the nation.

The writer understands that the concept of incremental power involves improving on the things we had done poorly in the past. These range from improperly erected distribution poles, utilization of poor quality materials, poor workmanship, and poor standards by local and foreign contractors employed to deliver the services.

To reach our end-goal, we need collaboration by the ministry of power with the ministry of petroleum resources to provide gas, the ministry of water resources to provide access to water from the dams and river basins for hydropower, and the ministry of solid minerals for Coal data to assist in reviving some coal power initiatives. It is also essential to have collaboration with the ministry of environment which is a regulator, to ensure that our mix of power is clean enough not to damage the environment or hurt people.

Furthermore, it would appear that power cannot be steady unless same is enough. Not only must it be enough, we must create excess capacity. It is pertinent that regular maintenance, repairs and replacements in places like Kainji, Jebba and other plants take place. Other countries with a steady power supply tend to have more than enough, so that while they repair damaged, broken or aging plants, they switch to reserves or excess capacity.

The construction and delivery of the Mambilla Hydro power plant in Taraba state is pertinent to steady power supply. This project which has been in conception since 1982 has suffered delays due to disputes in the court of law. If same is constructed it will be the single largest power plant in the country, with over 3000 MW in one place and it could potentially take us close to steady power.

To commence the country’s quest for steady power, the ministry of power, works and housing has also sent letters to universities to conduct energy audits and supply results to them. This will enable them to determine their energy needs and hopefully provide dedicated power to these learning institutions and affiliate teaching hospitals. The ministry of power is similarly reviewing data collected by NERC, in respect of industries and factories with the hope of facilitating similar solutions.

Further, for sustainability of the sector, particularly financial sustainability, everyone who provides electricity must also be paid, so that they can continue to do so. But more importantly there is the need to conserve energy. It is the writer’s view that it is not sufficient to merely state these suggestions, it is more important to ensure that sufficient action is taken by the right persons in the right places.

Of Removals and Appointments in the Sector

Rumundaka Wonodi, popularly known as Rumu, the pioneer Managing Director and Chief Executive Officer of the Nigerian Bulk Electricity Trading Plc. (“NBET”) was recently removed from his position. There have been debates about the appropriateness or other of that removal. However, the writer would not like to join the debate but would like to state that Rumu did perform exceptionally well and anyone replacing him must also be exceptional and should not be appointed simply due to political patronage or such similar reasons.

Chiedu Ugbo who was also recently appointed as the acting Managing Director of the Niger Delta Holding Company of Nigeria is a consummate professional and lawyer. He has rendered excellent legal and policy services to the federal government of Nigeria and he really does, to my mind, deserve the appointment even as a more substantive head of the institution. The writer believes that more persons with the pedigree of Chiedu should also be appointed to such important positions in the sector.

The writer understands that commissioners will soon be appointed at the electricity Regulator- NERC. It is germane that the persons appointed are the right mix of people and the government should ensure that professionalism and not political patronage drives such appointments, and similar ones, in the sector.

Customer Payment Failure and the Concept of Mass Disconnection   

A number of electricity distribution companies have been quite disgruntled with the manner and approach of many electricity consumers towards the settlement of invoices which invariably affects their own ability to fulfil obligations as market participants. As an example, many of them have complained that in many large communities, only a few people pay their bills and if they seek to disconnect those persons who do not pay their bills, their officers are maltreated.

They have then sought to disconnect whole communities remotely. However, this is also quite problematic as NERC Regulations do not allow distribution companies to disconnect paying customers. Hence, to the extent that one member of a community is not in payment default, it would be difficult to disconnect the entire community. The writer lives somewhere in Surulere and it is possible that such an approach is already being adopted as the writer’s home never seems to have electricity supply. 

Whilst mass disconnection is illegal and a breach of extant Regulations, the frustration of the electricity distribution companies is understandable; particularly when one considers all the other challenges in the electricity sector.

The writer, however, believes that the optimum solution is to properly meter consumers and also find more acceptable and valid means of reducing electricity theft.

For more information on the power sector financing, read the text, “The Nigerian Electric Power Sector: Policy. Law. Negotiation Strategy. Business” by the writer.

Ayodele Oni (ayodeleoni@outlook.com), a solicitor, specializes in international energy (oil, gas and electric power) investment law and policy.

Ayodele Oni