3 Years After Power Privatisation: The Gains, Pains


It is over three years since the federal government sold the major stakes in 16 power firms to private investors.Many electricity customers in the country expected more than just instant turnaround of the facilities described as rotten under the defunct PHCN; they expected a relatively consistent and rising power supply nationwide. Our reporter sought some customers and experts’ views on how the sector has fared thus far.

The atmosphere was warm when former Vice President and Chairman, National Council on Power (NCP), Namadi Sambo handed over 60 per cent control of 10 Distribution Companies (DisCos) and four Generation Companies (GenCos) on November 1, 2013 to private firms. The Transmission Company of Nigeria (TCN) was not privatised, and became the sole critical utility manned by public personnel.
The four GenCos are Ughelli, Geregu I, Kainji/Jebba Hydropower and Shiroro Hydropower. Sapele GenCo was handed over later. The 10 Discos were Ikeja, Eko, Ibadan, Jos, Kano, Yola, Abuja, Benin, Enugu and Port Harcourt. Kaduna Disco was handed over the following year.
The initial utilities were taken over after the investors, comprising Nigerians and their expatriate technical partners, paid about $3billion (N480 billion – valued at N170 to one USD) bid price to the federal government.
The GenCos, and the 11 DisCos which interface with electricity users directly had a Capital Expenditure (CAPEX) and deliverables of five years. The GenCos assured of maintaining their plants and expanding the capacity.
The DisCos were expected to provide meters for most customers who are anxious to be freed from the alleged arbitrary estimated billing system where users feel they pay more than the power they consume. Each of the DisCos was also to reduce its Aggregate Technical Commercial and Collection losses (ATC&C) which was over 40 per cent under the defunct PHCN the first two years in electricity business.
A month after the takeover, power supply rose to over 4,000 MegaWatts (MW) with many customers having 18 hours supply daily in large cities and towns. Although they were elated at this, customers said their estimated billing hurdles doubled as there was no sign of metering.
The improved power supply was short-lived when in February 2014, spates of gas pipeline vandalism brought the national grid lower to less than 3,000MW.
Former President Goodluck Jonathan directed the now private firms to improve their businesses but the firms said they were still grappling with revenue shortfalls on their collections from electricity consumers. The sector regulator, Nigerian Electricity Regulatory Commission (NERC) also wrote to warn the DisCos in March on lack of improvement in their supply services and the consequences.
In spite of the supply challenges and the outright failure to roll out meters, there was  progress in policy directions. NERC started the Interim Market rule to guide the market participants; it reviewed the Multi Year Tariff Order 2 (MYTO 2), a tariff consumers criticised for the Fixed Charge (FC) component that compelled users to pay a certain amount monthly whether they got supply or not.
In January 2015, gas suppliers got a reviewed price to encourage more gas supply to the 23 gas-fired plants and generate more electricity. The price was moved from $2.50 to $3.30/Million British Thermal unit (MMBTu).
Months after, operators of the GenCos said they had improved their plants’ capacities after three years. Egbin thermal power plant in Lagos State raised its output from 300MW to 1100MW after it took over. Operators of Transcorp Ughelli said the capacity rose 370MW to over 600MW.  The hydro GenCos too have gone up. Mainstream Energy which operates Kainji and Jebba Power said there was turnaround maintenance that doubled the plants’ capacities.
For the DisCos, they claimed to have spent billions of naira in investments since they took over to install transformers, repair lines, establish call centres and roll out meters. Throughout last year, the situation of epileptic supply continued with rampant load-shedding (rationing) and system occurrences where the entire national grid went on blackouts.
Daily Trust on Sunday reported the views of some customers who had rated the privatised sector in two years. At Life Camp area of Abuja, a residential customer, Onyeka Agu, said while supply improved reasonably in two years, “the bills are going much crazier and that is a challenge if I pay N10,000 for just a single bedroom house.”
In Mararaba, Nasarawa State, some customers commended Abuja DisCo for installing pockets of transformers and erecting new poles between August 2014 and February 2015.  “They installed some new transformers around and changed bad cables but we are still being over charged,” one Mr Abu Apeh, a welder said. The chairman of the Nigerian Electricity Consumers Advocacy Network (NECAN), Mr Tomi Akingbogun, in November 2015 told our reporter that the power firms, especially the DisCos, should not expect a pass mark yet. He said the major thing they were to do was to meter customers aggressively to reduce power loss and raise revenue, but that they were yet to do that significantly.
What has changed!
Year 2016 began with mixed reactions from electricity consumers over the reviewed tariff but the private operators lauded NERC for raising the tariff by an average of 60 per cent in February. They said it was cost reflective for their businesses. Many consumers felt short-changed because the tariff was rising, when power generation crumbled by 50 per cent from 4,000MW in December 2015. The implication, they said, was protracted power outage with attendant high bills. The rebate customers got this year was the payment of Fixed Charge only when they have supply (built into the new rates) which never existed earlier.
The national grid hit 5,074MW for few hours in February, shortly after the new tariff was implemented. Generation crashed speedily with many system collapses and less than 2,000MW to supply to over 170 million Nigerians and a captured six million registered electricity customers.
The blackouts continued intensely till July as government blamed incidences on the spate of vandalism of oil and gas assets by militant groups in the South.
Generation improved from July but even as at this week, peak generation statistics as supplied by the Nigeria System Operator (NSO), hovered around 3800MW. The deficit in power generation has resulted in huge collection losses and about N809 billion shortfall in the sector, the operators said. This is because the 2016 tariff was projected on a 5,000MW generation and supply to customers which is quite far from the market status.
The liquidity crises have worsened such that the DisCos only pay about 30 per cent of their monthly energy bills. The Market Operator – MO (an arm of the government owned Transmission Company of Nigeria – TCN) that pays other participants including gas suppliers and the GenCos said there are huge gas debts by GenCos and other bills caused by the poor remittances from the DisCos.
MO’s acting Head, Mr Moshood Saleeman shortly before the private-led sector clocked three years on November 1, at a participants’ workshop in Abuja said, “The remittance we get from the Discos is about 30 per cent and that is not good enough. It is not too impressive. We believe if we can do higher than that it will be better for the industry.”
For the public firm, TCN, it said the wheeling capacity had risen to 5,500MW after a four year management contract by Manitoba Hydro International (MHI) which ended in July this year. The acting Managing Director, Engr. Atiku Tambuwal Abubakar, projects a raised capacity of 6,000MW by December and 20,000MW by 2022.
There are many calls to undo the privatisation. The Bureau of Public Enterprises (BPE) which supervised the privatisation transaction and continues to monitor the sold-out utilities said the private investors have a pact that allows them to invest in the utilities for five years to enhance the network.
Its acting Director General, Dr. Vincent Akpotaire, who flagged off the metering of large power users under Abuja DisCo said the sector was just starting the issue of loss reduction,adding that, “I am confident that in the next few years, most of the results as to performance will be better checked.”
Rating the sector in three years, Managing Director of Abuja DisCo, Ernest Mupwaya, told newsmen recently that the sector has performed fairly.
What Nigerians say!
Speaking on the status of the sector and calls to reverse the privatisation, some customers and analysts told Daily Trust on Sunday that there should be a full scale audit of the private firms with a view to making them viable.
An Abuja-based power sector advocate and president, Power Consumers’ Advocate of Nigeria, Kunle Olubiyo, supported calls for the reversal and an audit of the firms to determine their viability. He noted that power supply is still epileptic, slow metering persists, among other challenges.
Another energy analyst, Engr. Elijah Abu, however expressed a contrary view. He said the call was belated as the investors had already spent three years in the sector. Abu urged the federal government to divest the remaining 40 per cent of its shares to bring in more fund and competent hands into the sector.
In her view, Madam Funmi Adeleke, a cold room chain owner in Mararaba, Nasarawa State, believes nothing has changed except the estimated billing document. She said: “Even when it is clear that we do not have supply for days here, the marketer will still come with a bill of N10,000 or more for giving darkness every month.”
Engr. Bello Olaniyi, an electrician in Nyanya, Abuja, blamed government for freshly increasing the woes of customers by banning the Credited Advance Payment for Metering Initiative (CAPMI) from this month. The scheme, created by NERC, ensures willing customers could pay and get meters before the massive installation by DisCos, to curb estimated billing. “There is poor generation, high bills which may be increased soon and the outages continue. NERC knows that these DisCos are not serious with the metering promises, yet they choose to suspend the scheme. We are now at their mercy,” he lamented. Another power expert and electrical contractor, Gabriel Oche in Kaduna justified the decision, saying government only suspended CAPMI to force DisCos to meter their customers massively.
“Before now, most of the meters DisCos said had been installed in their networks were actually procured by customers, and it’s supposed to be free,” he said.

Source: IWIN

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