The Managing Director and Chief Executive Officer, Ikeja Electric, Mr. Abiodun Ajifowobaje, in this interview with ‘FEMI ASU, says a chunk of the nation’s installed generation capacity of not less than 10,000 megawatts remains stranded largely due to gas shortfall.
Now 15 months after the power sector was privatised, has it been ‘so far, so good’?
Before I say anything on privatisation, I think we have to say something about what led to the privatisation in the first instance. As we are aware, 10 years before that privatisation, there had been little or no government funding in the power sector. Therefore there had been serious challenges in transmission, generation and distribution networks. For us to at least give minimum power supply to the Nigerian populace, conservatively we need nothing less than 10,000MW. At the time the privatisation was done, the highest we had reached was about 4,500MW, and that was briefly, not on a continuous basis.
As things developed, it became very apparent that government could not, with other competing areas like health and education, give adequate funding to the power sector, but to allow investors to come in and bring in technology, ready management and of course funding that were not coming from the government. So, about 15 months ago, November 1, 2013, the companies were handed over to the private sector after following a very rigorous bidding process, which was termed as one of the most transparent in privatisation history in Africa, and since that time, all the investors have been doing everything within their power to see that at least they do more to see that power gets to the people.
What are the challenges facing the private investors who bought the privatised firms?
The first challenge that the investors faced was that it was when we took over that we started analysing the problems in the sector. You will recall that during the privatisation scheme, there were a lot of union activities and they refused any investors from coming in to do physical inspection of the networks. For you to be able to plan, you have to know what is on the ground.
At Ikeja Electric, we had to start doing technical audit, customer enumeration for us to actually know what is on the ground, and this took time. Therefore, people have not seen improvement. What everybody wants to see is that before privatisation, we were getting 10 hours of power supply, now we should be getting 20 hours of power supply.
But what I want to say is that the power sector is not like any other sector. It takes a lot of time for anything you put on the ground to materialise. I know that Nigerians want to see things improve almost overnight. That is not the case with the power sector – after doing all the due diligence on the networks, we have to look for funds to do all the necessary corrections, we have to look for the money to do all the metering.
In fact, in Ikeja here, we just signed our own contract for the metering scheme and all that. We that bought the distribution companies, we meet on monthly basis and I know that people are putting in serious efforts at addressing all the issues that made the government to privatise the sector in the first place – power supply, transmission and distribution problems. If we are given enough time for us to realise all the things that we have put on the ground, the country will smile at the end of the day.
The country achieved the peak generation of 4,517.6MW of electricity on December 23, 2012. But more than two years after then, we are still struggling to reach 4,000MW. For how long must things get worse before getting better?
The capacities that were there at the time we attained the highest peak are still there. Not only that, the NIPP project has added between 3,000 and 5,000MW. So, when we are talking about installed capacity today in Nigeria, it cannot be less than 10,000MW. In fact, Transcorp in Sapele and Egbin in Lagos have added additional capacity since they took over. For Egbin, Unit 6 was already moribund but has added 200MW to that. So, as I am talking to you now, we have almost 10,000MW on standby. But why are we not getting it? Simply gas issues. Number one, we are not getting enough gas to power the power stations. Not only that, even the little gas that we get, every day, we see pipeline vandalism.
Early last month, we were giving our customers almost 12 to 15-hour power supply, but in the last one or two weeks, it has reduced to eight hours because they said the gas pipelines had been vandalised. Not only that, this is the time we have low water for the hydro power stations. So with the gas not getting to the thermal power plants, and the water at the dams at the lowest level, this is the worst period for power to come from the grid. Our average energy from the grid dropped to about 370MW last month, and it has not improved this month because of the situation that we find ourselves.
One of the biggest problem electricity consumers have is lack of prepaid meters. What are you doing to meter customers because Nigerians continue to complain about ‘crazy’ billing?
The two greatest challenges that are facing the Distribution Companies today are power supply (inadequate power from the grid) and metering of customers. In the case of power supply, if I want to give all my customers 24/7 power supply today, I need 1250MW, but the average I am getting from the grid is about 370 to 400MW, less than a third of what I need.
But what are we doing about it? Like all other Discos, we are looking for ways of getting power from other sources like embedded generation. There are some people that have captive power that will sell the excess to us. We are doing all that in Ikeja, Eko and other Discos are doing the same because we don’t know when we will get enough gas to get the adequate power from the grid. We don’t know when transmission, which is another problem, will improve. So, we are not in this business to say we are not going to power the consumers.
On metering, we do what we call estimated billing when people don’t have meters or when customers have obsolete, faulty or burnt meters. If you go to NERC website, there is an estimated billing methodology, which is what we are following to the letter in Ikeja. We try as much as possible. I am not saying that thing is perfect because no matter how well you give somebody estimated billing, what he wants is a meter.
Like I said earlier, we didn’t have the opportunity of studying the system by the time we took over, so it took us a lot of time for us to look at the metering types that we needed that would suit our type of environment and our type of customers. We have concluded that now, and we have signed an agreement to the tune of almost $100m for us to meter all our customers, starting from the first week of June. We are going to bring in smart meters. When we present them to the customers, everybody will be happy, and we are going to roll them out massively over the next three years.
According to our purchase agreement with government, we are supposed to meter all our customers within five years, but at Ikeja, we have decided that we are going to do that within three years at no cost to the customers. We are not going to collect money from customers and pay them back over time. We are going to issue the meters free of charge.
I would have said we are going to start in May, but in May, it is going to be pilot scheme, which is about 2,000 meters. By the time we get to June, when we will roll out massively, we are going to start with 5,000 and every month we are going to be installing 12,000 to 15,000 meters.
The latest announcement we heard from the Nigerian Electricity Regulatory Commission is that tariff will now be fixed by the Discos, although the regulator will approve it, what is your take on this?
The normal thing is for the power utility company to look at its environment, look at its cost of operation, the cost of expansion, all variables and the type of customers that it has and determine what rate it can buy and sell electricity. So, the regulator is to say, “All these indices that you have stated, let me go and check whether it is true or not”.
Presently, most of the inputs for determining or making of tariffs are got from distribution, customer numbers, loss levels, and the other ones are those controlled generally by the market like inflation rate, exchange rate and cost of gas. So since all these are obtained from the Discos, what NERC is saying now is that ‘let us go back to basics. Since you are the ones supplying us the information before, make all the information and make out your own tariffs and bring them to us’. But the only addition is that before we submit it to NERC, we must carry the customers along.
Recently, the NERC announced the removal of collection losses from the tariff, which it said would affect all classes of customers, but it later said residential customers would not benefit from it. Was it the outcry from the Discos – because we learnt they weren’t happy about the tariff reduction – that led to the exclusion of the residential customers?
It appears there is serious misunderstanding on the new tariff. When all other tariff classes were increased, R2 was not increased. The reduction is for what was added, not on the old tariff. What happened was that people were not patient enough to hear the explanation. There was even a time they said the tariff had been reduced by 50 per cent, whereas the collection losses vary from one company to another. While it may have reduced by 50 per cent in some places; in most cases, it is just 10 or 15 per cent. There is nothing like residential consumers are being cheated. It was because the increase in their tariffs was not made effective, until June 1.
What investments or projects should customers expect from your firm, apart from the embedded generation and smart metering?
As I said earlier, If I want to give my customers constant power, I need 1,250MW. But the question is can the network carry that? From what we have on the ground now, I will say ‘no’. But before the takeover, I think the highest we have ever attained here was about 650MW. But today, all the little problems that used to disturb operations have been addressed; so that if power comes now, I can assure you that we can take 1,000MW. Based on the study that we are carrying out on our lines immediately we finished that, we will come out with a programme on how to expand the system.