Power:  New Regulations To Come In October -Fashola

 

By John Okoh, Lagos

 

Nigeria Minister of Power, Works and Housing, Mr Babatunde Raji Fashola has said that government will unveil new regulations in the month of October to address observed challenges in the generation, distribution and consumption of electricity to sustain the current policy of evolutionary growth of the sector from incremental to steady and then stable supply of electricity in the country.

Fashola who was guest speaker at an event on Policy Dialogue on the Power Sector, organised by the Lagos Chamber of Commerce and Industry, LCCI, at the Eko Hotel and Suites, Victoria Island, Lagos on Thursday listed the areas the new regulations would affect to include metering, tariff, eligible customers, enlightenment and outsourcing among others. He expatiated on the areas, thus:

On Capacity and Delivery:

“On the day that President Muhammad Buhari was sworn into office, May 29, 2015, the country’s power supply was 2,690 megawatts: Transmission was reputed to have capacity for 5,000 megawatts, Discos had capacity for 4,000 megawatts. So there was more capacity than the ability to sell power. But few days ago we now have a total of 24 power stations, and capacity to generate 6,911 megawatts. So the capacity to transmit power has added 1,000 megawatts, Discos have added over 2,000 megawatts. Unlike in the past the power available has exceeded what we can sell. So the government has demonstrated capacity to solve the problem.  6,911 is the amount of power we could put in the national grid if there were distribution capacity to get to power to the consumer.

 

 

Fashola

 

Challenges:

But there are problems with liquidity, debt owned the Discos and unbelievably, consumers who are resisting metering. So when we called for review of contract with the Discos, we did so to send positive information that we honour contracts. The idea is to renegotiate and not cancel contracts and my employers have agreed to it. People thought that once we privatised the sector, the challenges plaguing it were over. It is not true. One of the initial problems was that a privatisation audit was not done before the process was carried out so that we could have a correct consumer base, not the seven million consumer base that was reported.

On liquidity, the payment system had to carry guaranteed. And here, the Discos are the hardest hit. Gencos want to produce electricity and go away, leaving Discos to sell what was generated and of course, they began to shot collect and short pay as you and I began to bypass meters. This is why the Federal Government has to guarantee the system with N700 billion; it is a loan, not free cash. It is  a transitional mechanism for two years and the improved 6,190 megawatts you see is a result of that, which will affect the private sector eventually.

 

Fashola

 

MDAs Debt Profile:

The MDAs will pay their debts owed the Discos. At the Federal Government, we will see what the Discos are owed and get the Federal Executive Council to validate and pay. Everything is regulated, there is no exclusivity with Discos or Gencos and the National Electricity Regulatory Commission is the regulator. It consults with stakeholders often because energy itself is regulated and currently the officials are going round discussing with Discos on metering, so in October we will come out with some new regulations on :

(1) Meter service providers (2)  Eligible customers who can afford to buy directly from Gencos. I have issues a directive to NERC on it. Power can be sold to three classes of people, eligible consumers, Discos and general consumers. This business model will not affect the business of Discos because they are there to sell power and not meters. The problem with metering is lack of correct data base. People do not want to supply information, just like the hesitation they display with registration of more than one phone or many bank accounts under the BVN registration scheme. This attitude affects the operations, for example, of the Power Consumer Association Fund, which has been in place since 2006 but was not implemented until now that we are working on it. Meters last 15 years on the average, so the recovery threshold on investment on it is high (3) Outsourcing. Under it the consumer will be empowered in the metering system. The problem with the consumer payment system, CAPI, which government initiated but unfortunately does not control because it is Gencos that control supply of electricity, is that consumers pay for meters and do not get it. We have told Discos to meet with such consumers and sort things out. That is why consumers currently do not pay fixed charges anymore. (4) Tariff. Everybody wants to get more for less.  Even if the current tariff is N30 per unit, if it is true, my own argument is that even if you peg tariff at N1,000, I do not see how we can recover debts without metering.

People give examples with Ghana which has a higher tariff than Nigeria. What is the population of Ghana compared to Nigeria, 30 million to 150 million. Why can’t we enjoy economics of scale in this matter? I haven’t taken a conclusive position yet, but we are still considering it. This, in short, is the power recovery programme; payment of debts, metering, liquidity.

 

Fashola

 

At a recent conference in Jos, I told state governments to explore Article 14 of the Constitution where the Concurrent list gives state governments power to set up their own grid and transmission facilities. Lagos has done so. Sokoto  and Plateau are doing so and Jigawa had started funding solar energy projects and others are following suit. So if we follow the regulations from October, our policy model for incremental power to steady and then uninterrupted power supply will be achieved in the long run.”

Earlier, the captains of industry and private investors present at the occasion had tasked the government on on the importance of the power sector in development and growth of the economy and support of the operating business climate.

President of the LCCI, Dr Nike Akande in her welcome address said power has become a key feature in every programme of the organisation because members agree that it is key to ease of doing business in the country.

She said, among others, “Currently, there country has 6,100 megawatts with 2,000 of it wasted daily because of problems associated with transmission and distribution, hence there is need to tackle the power chain to promote ease of doing business and also take the high in the next World Bank ranking on ease of doing business in Nigeria”.

On his own remarks, Eng. Effiong Edet, Chairman of the Power Sector Group of the LCCI, highlighted issues on power system collapse, gas transmission and refinancing to improve liquidity problems to attract core investors and need for incentives for SMEs.

For Mr Kola Adeshina, Managing Director of Egbin Gas Plant, once the country stops what he calls the politicisation of power production, supply and distribution, develop its comparative advantage in gas production, a key element in power generation and adopts a correct power pricing model, things would be fine.