Idowu Oyebanjo
The event was a sure
delight and the organizers, SPintelligent, did a good job but the most
regrettable part was the conspicuous absence of representatives of NERC, the industry
regulator, and members of the newly formed Nigerian Electricity Consumers’ forum.
To say the least, this was disappointing as most of the discussions centred-on
and around matters relating to these two entities. However, it was nice to have
other key stakeholders like NBET, CBN, local Banks, the Ministry of Power and
representatives from network operators.
A major drawback of the
privatisation process according to fresh claims by the investors is the fact that they were unable
to have access to the asset before taking ownership. This simply means they
were unprepared for the job. No one will invest huge amount of money in a
business of this scale (going by the amount of money they had to pay) and not
insist on carrying out due diligence. This is why the process is facing many
challenges from network delivery point of view. Discos especially have claimed
that the network asset are largely dilapidated than they ever imagined and the
inherited staff lack requisite skills and attitude to turn the situation
around. Enough of rhetorics! we must say. Government no-doubt will have to
provide intervention as recommended in part 1 of these series. A key highlight
was the acceptance by the network operators of responsibility of failing to
meter customers who have paid for such under the CAPMI scheme.
It is important for all
customers to be metered in line with earlier suggestions. The networks need
rejigging to be able to consolidate the gains of the reform process. As we
speak, even if we have increased generation, the transmission network is unable
to carry the electricity produced successfully. Technically speaking, this
leaves no room for discussions around cost reflective tariff (CRT).
Representatives of TCN lamented the spate of bureaucracy and cutting of
“transmission” budget by the National Assembly as the root cause of the
problem. In general, inefficiency, corruption and lack of skilled manpower have
made it practically impossible to improve the net transmission capacity of TCN
network in the last 2 decades. In this regard, Dr Reuben Okeke, DG NAPTIN,
reiterated that the structured training program within the former PHCN was
stopped 22 years ago until government revamped the department in 2009 by
establishing NAPTIN, the national power training institution.
However, some of the
trained personnel from NAPTIN are yet to be given employment by network
operators. Speaking on what the DISCOs in particular can do before asking for
increases in tariffs, Engr Okeke opined that much more needs to be done in the
way of addressing technical losses. Discos need to replace feeder pillars which
currently dissipate significant amount of losses , embark on significant
investment in technical loss reduction and general network reconductoring.
Speaking at the technical workshop entitled "localisation and capacity
building of the power sector workforce", he praised the achievement of
NAPTIN but expressed concern that the Nigerian 20GW project requires at least
6,550 engineers and over 12,000 artisans to be trained. Government, he noted,
has provided support by means of the sure-p programme but a lot more still needs
to be done by all stakeholders including individuals who benefit from training,
companies looking for skilled staff, network operators, and other training
organizations, especially with regards to payment of tuition for trainees.
A key discussion at the
event was the issue of cost reflective tariff (CRT) and this was brilliantly
anchored by Dolapo Kukoyi, a leading commercial solicitor with significant
experience in the legal aspects of the developments within the Nigerian power
sector reform. She agreed that the issue is no doubt contentious as key
stakeholders disagree on what a cost reflective tariff for electricity should
be. Power experts reiterated the need for transparency and accountability in
the process for determining CRT. What are the basic elements considered in
arriving at the cost?, What is the actual cost or price of gas?, What is
government's policy on coal and energy mix for power and how can this affect
the interpretation of a CRT?, What impact does operations and maintenance
costs, age and depreciation of assets have on CRT? There are lots of questions
to be answered.
In general, conference
delegates agreed that the subject of tariff needs to be well understood by all
stakeholders. I will be providing insight on this in separate articles. It was
found that the discussions around CRT held with investors by BPE was hazy and
at best inconclusive as the country hurried into the privatisation of the
sector. This is a lesson for other developing nations to avoid this kind of
hullabaloo. For example, consideration was given to an aggregate technical,
collection and commercial (ATC&C) losses of 30% in the reform process
whereas investors now claim on receipt of assets that losses could be well
above 50%. The question is how have they arrived at this value and how are we
to be convinced that this is not an attempt to ask for an increase in tariff
willy-nilly? A more worrisome question is when will they ask for another
increase in tariff or another "cost reflective tariff" if this subject
is not robustly tackled?
The initial optimism
shared by network operators in the power sector relating to CRT with the
revision of the Multi-Year Tariff Order (MYTO) - 2 was doused by the reversal
of decision by NERC early March 2015. This left network operators with great
uneasiness as customers who have been at the receiving end of increased costs
for no electricity consumed since and before privatisation remained in
confusion. Banks and lenders on the other hand are not comfortable with such
trends and will as a minimum like to know how costs are determined. They will
want to have a cost regime that reflects flexibility and simplicity, that can
be modelled financially with the ability to respond favourably to micro and
macroeconomic shocks in the larger financial market. Also, they will like to
see major reviews provided for every 5 years with bi-annual reviews of tariff
regime. The inconsistency on the part of the regulator with regards to 5 or 10 or 15-year tariff path is causing a
crisis of confidence in investors who may be left with no option soon than
declaring a force majeure. Already, the liquidity problem in NESI will mean the
electricity market will remain grounded.
The disbursement of the
Nigerian electricity facility stabilisation fund of 213 Billion naira commenced
but now stopped by CBN was to address this shortfall but it was only in part
able to alleviate cost of legacy gas debts owed to Gas providers, and monies
owed Discos by government ministries, departments and agencies (MDAs). The
general consensus was that MDAs in particular need to change from the culture
of not paying for electricity consumed if the power reform process will make
any sense. The position of network operators is that they are running out of
cash flow and the business is clearly not profitable in the short term. While
one feel great pity for their situation, it confirms however that these guys
are not investors but opportunists as proper investors look at profit over the
long term. The lacuna already created by the incompetent and shoddy manner of
privatisation of the electricity network of the largest economy in Africa will be with us for a long time to come.
As a summary, it is
believed that Discos can do more with the current tariff if they meter all
customers, collect payments of outstanding debts from MDAs, operate more
efficiently, reduce staff and overhead costs and proof their credibility to
investors.
Sincere gratitude to
the organisers and sponsors of WAPIC 2015 as we look forward to an equally
rewarding experience at the 13th edition in the future.
*Idowu
Oyebanjo MNSE CEng MIET
RELATED POST
No comments:
Post a Comment