Why I believe Power Sector Will be Fixed – Fashola

FASHOLA

The Minister of Power, Works, and Housing, Mr. Babatunde Fashola (SAN), has said the government is gradually, but sustainably, addressing power sector problems to achieve uninterrupted supply. In this interview, he explains how the government is resolving tariff issues, generation, transmission and distribution challenges, milestones achieved and consumers’ responsibilities in making the sector work. Editorial Page Editor SANYA ONI and Assistant Editor EMEKA UGWUANYI met him.

Tariff is a major problem of the power sector. What is the government doing to resolve the issue?

People must understand that the Nigerian Electricity Regulatory Commission (NERC) doesn’t fix tariffs. NERC approves tariffs.

How do you set tariff? Under the multi-year tariff order (MYTO), there are two broad tariff setting seasons – minor tariff review that must happen every six months, and major tariff review every five years. Minor tariff is just like the price of any other commodity that goes up or down, if it goes down, citizens must get its benefits, but if it goes up, the citizens must take the responsibility. Therefore, every six months, there is a threshold, that doesn’t mean that tariff must increase every six months, but there must be a review. You must look at the interest rate, inflation because you are buying a commodity and perhaps things have gone up, but not too high and not significant, it is within a threshold. The threshold, I think, is set at about five percent. If it doesn’t exceed five percent, you leave it. That must happen without anybody panicking, it happens as a normal event without any sensationalism, with people saying the government wants to kill the poor people. It must happen as a way of life and we must know that every five years, they will go to major review.

What is the process of carrying out major tariff review?

The process of a major review is that each DisCo must advertise in the newspaper, radio or television and none is compulsory, but it must advertise in at least one, the date it will hold a meeting to discuss the tariff with its customers. That meeting that held in 2014 or 2015. I saw all the records – people who attended, email addresses, telephone numbers, but people didn’t really understand what it was, so they discussed it generally and left. At that meeting, everybody is free to say I can pay this or I cannot pay that. They (DisCos) must send the results of those meetings to the NERC because NERC has a duty to stand between the consumers and the investors. The law says the investor is entitled to recover all of his investments and some profit. We assume it in economics, but this one is a matter of law.  But there is a difference between profit and profiteering and that is where NERC comes in and says no, this is too high, set it at this. There are different classes of customers. They don’t pay the same tariff.  Different classes of customers are R1, R2 and R3, maximum demand consumers. R1 was not changed, it is still N4. It is fixed. But everybody just went out to protest that they have killed me with tariff. In that exchange that goes on, NERC ultimately approves what it thinks is a fair tariff. With this, there is a band, so the tariff for an R2 customer in EkoDisCo is not exactly the same for an R2 customer in Ikeja DisCo even in the same city. There are variations, a few kobo here and there. This is part of the public enlightenment we must put out. If you go through the tariff computation, you see variations between the same classes of customers from DisCo to DisCo, changing between a band.

Let me tell you something that is related to that, metering. If you are an R2 customer, clearly you cannot use the same meter as an R3 customer. So to meter you they must come to each house and check your energy consumption. They cannot give R1 consumer R3 meter, you will be over-paying. If you give R3 consumer R1 meter, he will be underpaying and the system will collapse.

But most customers are not aware of the differences in metering categories. How will the DisCos address the issue?

That is the logistics of metering. If they don’t meet you at home and your wife and children are not around, how do they assess your home? These are the real problems apart from funding because they must actually come and do the energy audit and know what a customer consumes and that is why you have estimated billing. A customer is on R3 but has phase I meter, so he is clearly stealing energy because he is using more power than his meter records. When a bulk sells power to you (DisCo) and you bulk it to a feeder, to a district, and you just know how much energy you passed through. If you don’t have the right meters, what do you do? You divide the number of houses by the amount of power bulked and that is what is causing estimated billing crisis. Agreed, they haven’t captured everybody, some customers are rejecting metering and some are beating them (DisCo staff) up, I have evidence. “No, you cannot install a meter in my house”. The barracks are even a different thing. We are working now with the Minister of Defence, who said he is supporting us because the President has ordered that he must meter all the military formations because that’s where government’s debt is really coming from. This is what servicemen should enjoy for serving their country. So, it is a journey. That is why I have categorized it a roadmap. First, get incremental energy, get to stable energy and to uninterrupted energy.

What is our road to incremental energy? Every existing power plant that is not producing power, must produce. We have an installed capacity of 12,000Mw.

Is it real that the country has that power production capacity?

Yes, it is. So, instead of seeking new power assets, we focused and said let’s make what we have work.

Nigerians have been fed with figures of megawatts over the years without light, so what’s the difference?

Precisely, that is why I changed the conversation. It is a journey – incremental power. Every one megawatt is defined. We cannot have 12,000Mw installed and be concentrating on new ones without optimising the existing ones– Egbema and Gbarain power plants are not finished. Olorunsogo, Omotosho, and Geregu are not optimising because gas is not enough. In some places, there is transmission problem. This is what the ministry is now saying, let’s focus. Which transmission project will we award?  Is it the one that goes to a power plant that is ready to deliver power? Some have gas and the power is there, but they cannot evacuate, so, let’s build the transmission line. Some have the transmission, but don’t have gas, so, let’s build the gas pipeline. So, that is what is happening in places like Omoku plant in Rivers State. We will complete Omoku by March next year and it will give us about 270Mw. We will finish Gabarain this year and it will give us over 115Mw and Alaoji by June next year.

Are these plants putting power into the grid?

Yes, they are putting, but it is their capacity design that is not optimized. When I visited Geregu, it has six turbines of 115Mw each, but only two were working because no gas to fire the remaining four. I also told you that Egbin now has its six full turbines running, so Lagos power plant that has 245Mw capacity is sitting there idle and there is no gas to power it because Egbin has taken all the gas available. So, why should we build more? Rather, we want to focus on how to provide this gas. Now we are continuously working on how to solve this gas supply problem with the Nigerian National Petroleum Corporation (NNPC), Gas companies and others. That is why I’m so clear in my mind that the power sector will turn around. The 7,000MW we produce now doesn’t come from the sky; we are only making what was not working to work. Sometimes just by completing a transmission line, you get more power on the grid. Sometimes just by doing routine maintenance as we did in Afam IV plant, you get more power. The transformer of Afam IV plant shut down in January of 2015 and nobody touched it. By repairing the transformer, we had 100Mw back on to the grid. By completing one section of Ikot-Ekpene switching station, we evacuated some stranded power from Ibom Power and Alaoji plant. By completing a transmission station at Magboro in Ogun State, we switched on power there.  It didn’t have power for 10 years. By December or January next year, we will finish the one of Mowe in Ogun State and it will have power. We will come to switch on transmission facility in Odogunyan by December or January next year and that will boost or wheeling capacity. When people say transmission system is the weakest link of the supply value chain, it is a lie. Any part of the value chain can be the weakest link at any time. The DisCos had more capacity when the generation capacity was between 2,000 and 2,800Mw, but now the power capacity has exceeded what the DisCos can carry. Now, we must help DisCos ramp up their capacity until we reach steady power, which is the middle of our journey. The end of our journey will be behavioural, conservation of energy and paying for what you use. Don’t steal energy because if you waste anything, it will never be enough no matter how much you produce. I have clarity because I have been to most of these power stations, substations and all the DisCos. So, I know what is going on and I’m educating myself and I have a great team working with me – the advisory power team in the Vice President’s office, my permanent secretary and directors, among others. The important thing now is that we are focusing on what we should complete. We will get more power from Kaduna. The story of Kaduna is interesting, 215 Mw because most of the equipment to complete the project were stuck at the ports for almost 10 years. So, we are just clearing them now because nobody budgeted to pay. The first time government budgeted to pay the shipping companies and warehouses was in 2016 budget. So, work has resumed in Kaduna and the project will give Nigerians 215Mw. We will get 10Mw wind plant in Katsina State maybe by early next year because it had a problem. We are paying for insecurity there because they killed the contractor and the worker and captured the main contractor handling the project, so when he escaped, he ran back to his country and refused to come back. So, the project stopped, but it is back on track now. Zungeru project will give us 700Mw, but was locked up in court for three years before we came. We have got the parties out of court, but have lost three years. It will deliver by early 2019 another 700Mw. Azura in Edo State, they refused to sign the partial risk guaranty, but Buhari’s administration signed it. Azura project is on track and will be finished in June next year. So, we have to prepare to evacuate Azura and that was the memo I took to the FEC. We have to quickly build a 14-km 330kv line so we can evacuate power produced there to the grid.

What went wrong with the planning? First, Nigerians were told no gas and why should gas-powered plant be built where there is no gas and what has changed?

I wasn’t there then. Those, who were there then would probably be the best persons to answer the question. One thing that I can tell you that has changed is that we asked some of these questions and they said they told them and they were asked to shut up and they didn’t want to lose their jobs and we said no. This is different and you should debate us on this issue, tell us why we must go left or right. I ask questions and that’s why you see me take my staff on retreat. It is team building because we are a team. You cannot be a part of the team and not contribute to it. So, I’m not a minister, who gives directives, I’m a minister who builds consensus with my team this is the best decision we should take on behalf of the government and you see that in all our correspondence going forward. I disagree with them and they disagree with me until we reach a consensus that this is best for Nigeria.

Are you saying no more new project, but to fix existing facilities?

That is contextual, let me explain it. We have privatized generation and distribution. So, no new thing is coming from there except two projects we met on ground and you will see why I need to qualify it. Afam 1V, there is a fast power programme there. It was built before this administration came, but the turbine had shut down but there are gas and transmission there. So, General Electric (GE) came with a proposal to finance the project and we will pay 80-85 percent and deliver it. We make turbines and there is gas. Ultimately give us some counterpart support. When we finish, you sell it to the private sector because people don’t want to take the risk of construction, so it is not as if the government is building it. But we have already told the National Council on Privatisation (NCP) to start looking for people to buy it. It should be finished by December, that’s 240MW because there are gas and transmission there and that sits well with incremental power. The other one is Mambilla, which has been in the pipeline. Except for those two in the ministry, we are not doing any new generation. We are completing Kaduna, Kashimbilla, Guarara, Dandikowa, Katsina windmill, among others that we met. That’s part of the capacity that is not yet giving us what they are able to give. We are also completing transmission lines, using Transmission Company of Nigeria (TCN). We are also trying to complete some rural electrification projects, using Rural Electrification Agency (REA). There are many rural electrification projects from 1999 including various constituency projects. All of that will translate to more power.

Mambilla is a huge project, considering the size, does the government consider bringing in private participation in its construction?

Ultimately yes because it is consistent with the policy of private generation capacity, but let me say that this is where the role of my ministry becomes even most defined in terms of policy. Mambilla represents a policy, a policy of renewable energy, using water, a policy of energy security for the country that gives us 3,000Mw as a balance so that we are no longer solely dependent on gas. This is part of what the ministry’s work should be. If you want a comparison, look at the UK they are building a nuclear power plant that they have privatized, but the government is still actively saying energy for the future, we must believe it. When it is fully developed and ready, how many individuals have $5billion? Does Nigeria even have $5 billion? So, that is where the government must lead, on the back of our sovereign credit rating. We borrow this money and deliver this power and someone can come and manage it. If you look at Kainji, Jebba, Shiroro, they are big dams. It is the government that built them, but they are now being managed by private hands. So, these are some of the things the government must de-bottle in order for them to happen. If there is an opportunity to do the same with solar, we will do it. If we had invested in solar 10 years ago, this is the right time to switch to solar as the rainy season is ending, where your hydro is not as prolific anymore and the sun is now prolific this is what you move to naturally.

On other sources of power generation, what is the government doing?

One of the things I did was to develop an energy mix for Nigeria and we discussed it at our council on power in Kaduna in 2016. Our target is that by 2030 Nigeria should generate 30 percent of its total energy production at any time from renewable and that is why we are focusing on finishing Katsina wind, launched the mini-grid regulations largely targeting solar and that is why we are working with Jigawa State government, trying to do a solar village in Jigawa because they have land. That’s why we signed PPAs with 14 solar developers. We are just trying to close the last mile of the financial transaction for the agreements, which are the guarantees against failures. The argument has been whether we should pay in dollars or Naira. We want to pay in Naira, but they are saying they want it in dollars. That’s what energy mix means to us. We have shown them all of the areas of the country where solar radiation is at its most prolific and we want people to go and invest more in solar in those areas. So that people will now know that this is the best place for gas and the best place for coal. We are working with someone, who wants to develop coal. He already has his license and coalmine. We are just trying to conclude the PPA and price of coal so he will start developing his coal. Nigeria will never again have to rely on a single or two sources of energy. We must be able to use as much nature’s gift as possible. So, it’s just a journey for me. We see where we are going and the more members of the public understand these things, the more consensuses it is to get there.

Sometimes power from the grid will be so weak to carry water-heater in the house, what is the government doing to reduce grid load?

That is the basis for the mini-grid we are building, disaggregate the power, reduce the dependence on the grid, especially for long distances. People must understand the nature of the grid, I have heard people say why not dispense with the grid? Show me one country that doesn’t have a grid. None, what we must not do more is try to connect small communities to the grid. Major load centers such Port Harcourt, Aba, Kano, Kaduna, Lagos, Abuja and big populous centers, the grid is still the most efficient way to feed such centers. But for smaller communities, it is not profitable to build a grid of 200kilometres of wiring to go and serve one small community. If the investor must recover his capital and make profit, the cost of power will be too high. So, that is why we issued regulations for the mini-grid. This is the first time we are having those regulations in the country. Will the result happen three months after the regulations were issued? Certainly not and that again is part of the incremental power journey. So, we have clarity where we are going.  As Nigeria’s population began to grow from 1985-86 when was the last time we built one big power plant? When was the next power plant built? Until Mobil, Agip and Shell were forced, under a gas flaring reduction programme, to build power plants, after that population went up again. Those are the gaps. The National Integrated Power Project (NIPP) by former President Olusegun Obasanjo followed. The NIPP started around 2005-2006. What additional power had we put on the grid and has population remained the same? So, those are the realities. Back to the question of planning, those are the things that must never happen again. Those are the things the power sector recovery programme wants to address; compulsory enumeration of consumers, we have to know how people are consuming energy.

Maybe the name we call it, that is what it means to us, we want to recover power, that is our focus but that is not our end goal. You cannot have something that is not giving you results and go and buy another one. Make that one work first. So, what are the problems, equipment stuck in ports? Go and get it out, contracts that are in court, negotiate and compromise, contracts that need to be finished, who is finishing them, Niger Delta Power Holding Company (NDPHC) or REA, get everybody back on track and that is where we are now. Which projects are you doing, why are you choosing this instead of that, these questions must be asked, So, if Azura is coming in six months time, the priority project must be the one that will evacuate Azura. Target your investment to give you the most optimal results. From where we started, is it something to hold on to? Certainly yes because we have clarity where we want to go, so it is not a story about megawatts anymore, it is a journey with milestones. When we just tell you that we have 7000Mw generation, it is a milestone. We are not asking for our plus, we know our work is not finished, but we are telling you that compared to yesterday you will just notice that there is a difference. Now that we have 7000Mw, a new problem has occurred. We cannot sell all of it because the DisCos are behind us.

Why are the DisCos behind?

The problem is that they don’t have the capacity to expand the way it is expected. We have talked about their challenges – exchange rate and liquidity, among others. The rollout that was expected has happened in the way we expected it. Some have happened. Secondly, problem is that most of the equipment they bought was old enough, nobody can dispute that. That equipment must be changed. Some of that equipment had original manufacturers’ rating on the day they bought them. Does your 10-year car run at the same speed after 10 years? No, those are the realities. So, that equipment has been de-rated. Even in transmission, sometimes all we need to do is add a new transformer to double the capacity. Those are the things they supposed to do. In the area where the equipment is not de-rated, the population has grown, more people have built houses. So they must expand, that is the problem. How do we solve the problem? We have asked the DisCos to give us the number of transformer you need and their ratings, give us the number of lines – how many kilometers, how many volts? They are doing that work now. How much does it cost? When it comes, we have to take it and ask how we fund it. In a company where the government owns 40 percent, is that company losing money? I don’t have an answer to that question. But we will be able to know what each DisCo needs and what it costs. When we dimension that, who are the suppliers, we are not awarding the contract to anybody. The way my mind is working currently but I still have to get FEC’s approval and buy everybody’s idea. That is what we must do. So they will inject 2000Mw we are generating into the grid immediately.

Source: IWIN

 

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