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Funding, infrastructure, gas supply problems plague power sector

By BusinessNews Staff on December 30, 2013

In this concluding part of a report, DAYO OKETOLA examines the long journey to stable power supply in Nigeria

Efforts to modernise the Nigerian power sector is being threatened by multiple problems such as lack of fund, poor gas supply to power plants and weak infrastructure. Other challenges hindering the quick turnaround of the power situation are poor technical competence of the new owners, obsolete metering system, poor customer service and inadequate manpower.

The new investors that took over 15 companies owned by the defunct Power Holding Company of Nigeria on November 1, 2013 inherited a total installed generation capacity of 10,396 megawatts, available capacity of 6,056MW, and actual available capacity which fluctuated between 2,000MW and 4,200MW throughout 2012 and 2013 due to inadequate gas supplies to the GENCOs and electricity infrastructure vandalism.

Though the Federal Government has set a target of over 10,000MW generation capacity for 2015 and 40,000MW for 2020, experts say if gas is not adequately provided, it will make this target a mirage.

NIPPs and gas supply challenge

The Federal Government conceived the National Integrated Power Project in 2004 to stabilise electricity supply in the country. The Niger Delta Power Holding Company, the special purpose vehicle for the NIPP assets, had successfully built 10 power plants which comprise Omotoso, 450MW; Sapele; 450MW; Geregu, 434MW; Olorunsogo, 750MW; and Ihovbor, 450MW. Others are Gbarain, 225MW; Alaoji, 450MW; Calabar, 561MW; Egbema, 338MW; and Omoku, 225MW.

With 5,000MW installed capacity, the three tiers of government have reportedly invested over $8bn in building the plants. To increase generation capacity, therefore, the NIPP plants are being put up for sale and their privatisation is expected to be completed in the first quarter of 2014. But experts again warned that inadequate gas supply could pose a great hindrance to maximising the capacities of the plants because they are all gas-powered.

Already, about 1,761MW of NIPP capacities are said to be unutilised due to gas shortage. “There is an unutilised generation capacity of 1,761MW which is off grid due to gas and transmission constraints from the NIPP power plants,” the Director-General, Bureau of Public Enterprises, Mr. Benjamin Dikki, said.

An energy law and policy expert, Mr. Ayodele Oni, who is also the Senior Associate at Banwo & Ighodalo, said, “The grid is a weak link in the value chain and a chain is usually only as strong as its weakest link; therefore, to the extent that gas supply is not strong or the grid is not substantially enhanced, not much can be achieved. To improve on all aspects of the value chain will, thus, require some time and substantial efforts.”

In view of this, the Chairman, Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, Mr. Mark Ward, said a $25bn gas-to-power infrastructure deficit existed in the country and called for the review of the Petroleum Industry Bill to encourage oil companies to fund more gas projects.

He insisted that $25bn investment must be pumped into gas-to-power infrastructure for the country to sustainably up its power generation.

Of the $25bn, he said $10bn was needed to be invested in the development of gas fields, as well as processing and transportation network. Another $12bn would be required for power generation and $3bn for transmission and distribution, he added.

Electricity supply worsens

Consumers expect private sector’s takeover of the power plants to immediately translate into improved and stable electricity supply, but this is not so as electricity supply went from bad to worse in the last two months of 2013.

While system failure and power outages continue to bug down power supply in the country, consumers continue to register their misgivings.

For instance, the Principal Associate, Mobile Money Africa, Mr. Emmanuel Okoegwale, whose office is located at Ogunlana Drive, Surulere area of Lagos, said power supply was very erratic after private investors took over.

“Power supply situation has gone from bad to worse since the private investors took over,” he said. “I use inverters to supplement what I get from the PHCN and I use that to tell when public power supply is stable or not. In view of this, I can tell you that power supply in my office has been particularly erratic lately.”

The Chief Executive Officer, Royale Prestige Properties, Mr. Seun Akinyele, who lives in Ikeja, decried the poor electricity supply. “We have not been enjoying electricity supply since these new owners took over. I don’t know what is happening,” he said.

Mr. Shakirudeen Folorunsho, who runs a barbing salon in Ikeja, expressed disappointment with the abysmally poor power supply in his area since the new investors took over.

Corporate customers are also not left out while manufacturers have continued to rely on generators to power their operations.

Nigerians have resorted to generating electricity themselves using diesel and petrol-powered generating sets.

The Ministry of Power estimated the total electricity generated through these methods as accounting for up to about 6,000MW, more than the total commercial power

generated and supplied to the grid.

Global Business Intelligence estimated that Nigerians spent about $455m on generators in 2011. This has since skyrocketed over the years and is expected to continue if power supply is not quickly improved.

But Dikki said, providing stable power supply in the country might not happen until three year’s time and stressed that investors would require two to three years to bring in the machinery to revamp generation and transmission infrastructure.

He said, “They (investors) will, after the takeover, re-tool and bring in new machinery like turbines, which are not easily bought off the shelf to put power on proper footing.

“They will need time to re-tool after the takeover and between two and three years to bring in the required machinery after which the country would witness increased and steady power supply.”

“Expectations will need to be managed for the public to understand that power sector cannot be built overnight and that this country is recovering from decades of underinvestment and corresponding crumbling infrastructure,” Dikki further said.

Oni, the energy lawyer, also said, “I do agree that there are no quick fixes to the power situation as power upgrade or development issues have long lead times; so, whether it is the purchase of new turbines or refurbishment of existing infrastructure, it takes time. For example, you cannot purchase turbines over the counter and you will need to order ahead of time.

“The last time there was a grid enhancement was in 1987 and as it is often said, it is easier to destroy anything than to build it. Several years of neglect means that the private sector does need time to put things together.”

Poor metering system

One of the greatest pre-privatisation legacies of the Nigerian power sector and the main reasons behind most electricity consumers’ complaints is poor metering. Bridging the huge metering deficit posed a serious challenge to the government, hence, the Credited Advance Payment for Metering Implementation initiated by the Nigerian Electricity Regulatory Commission with the aim of making pre-paid meters widely available for Nigerians.

At the introduction of the scheme in March 2013, the NERC Chairman, Dr. Sam Amadi, had noted that the scheme would curb ‘crazy billing’ (estimated billing) in the system. But so far, none of the DISCos has taken any serious step about CAPMI scheme and pre-paid meters are not adequately provided.

Consumers have threatened not to pay their electricity bills if the DISCos fail to provide prepaid meters. They decry the inability of the DISCos to issue customers with the meters.

A consumer, who identified himself as Omotola Araujo, said, “How can you estimate what you cannot measure? Estimates are done when it is impossible to read meters due to weather conditions. No prepaid meters, no payment.”

A resident of Egbeda-Idimu area of Lagos, Mr. John Adegbola, said, “It is appalling that these people still serve bills in areas where they have not got power supply for a whole month. We even have people who have paid for these prepaid meters for months or even a year now and haven’t received them.”

Another consumer, who identified himself as Mr. Femi Bosun, said, “Whether the DISCos like it or not, the prepaid meter scheme must work. We consumers of electricity will not pay for what we did not consume; so, all complaints about estimated billing must stop, and the prepaid meter scheme must survive.”

Bosun explained that if the power requirement of the over 600,000 customers under the Ikeja DISCO had been put at 900MW and the DISCo was getting only 300MW from the Transmission Company of Nigeria, customers would likely be made to pay for the 600MW through estimated billing.

Though the NERC said it had accredited nine pre-paid meter manufacturers, 15 importers, 38 vendors, 11 individual installers and 61 corporate installers to implement the metering scheme to usher in a modern metering system, metering problems remain at the heart of the power sector.

Inadequate manpower

Inadequate manpower, according to analysts, can also be a major problem the private investors will contend with as time goes on. About 50,000 workers of the PHCN were laid off at the end of the privatisation of the successor companies, thus leaving a huge manpower vacuum in the sector.

It thus appears that the private investors are sailing in troubled waters, having realised the enormity of the problems in the power sector. Though both the investors and the regulators already know that the journey to stable power supply is long, consumers are not so aware.

Investors are, therefore, urged to engage more with the consumers in order to ensure harmony in an industry battling with funding, infrastructure, gas supply problems among other issues.

[Punch]

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