Charting the Way Forward for Energy Efficiency

Energy efficiency policies elsewhere in the world have been used to stabilise developed economies, can Nigeria raise the stakes in energy consumption and conservation using global best practices? Godwin Haruna writes

Mr. Samson Tunji is self-employed with a well-equipped barbing saloon along Association Avenue, Oke-Afa area of Isolo, Lagos. He operates mainly using his small generator in the absence of public power supply. With about incandescent bulbs fitted in the small room where he operates, there were also three others fitted outside the shop. All these bulbs are normally switched on both day and night regardless of which type of energy he is on. Just like Tunji, most Nigerians do not appreciate the importance of conserving energy even with the little supply of electricity available.

It is said that the developing countries of the world including Nigeria have more than 80 percent of the world’s population but their energy consumption amounts to only 40 percent of the world’s total. This signals the need for creative methods of improving and optimising our energy potential. Energy Efficiency is the goal to reduce the amount of energy required to provide products and services. Energy efficiency is using less energy to provide the same service.

Speaking recently on this issue at a forum, Director General of Energy Commission of Nigeria, Prof. Eli Jidera Bala said the policy making process has yielded results that points foreseeable positive results in energy conservation. Represented by the Deputy Director/Head, Energy Linkages and Research, Mr. Okon Ekpenyong at a forum organised by the Commission, United Nations Development Programme (UNDP) and Federal Ministry of the Environment, Bala said, “The overall objective of this project is to improve the energy efficiency of a series of end-use equipment (refrigeration appliances, air conditioners, lighting, electric motors, fans etc.) used in residential and public buildings in Nigeria through the introduction of appropriate energy efficiency policies and measures (such as Standards and Labels) and demand-side management programmes. Other objectives of the project will be to strengthen the regulatory and institutional framework to promote energy efficiency, develop monitoring and enforcement mechanisms, provide training to appliance and equipment professionals, and launch a public outreach campaign to promote energy efficiency in Nigeria.”

According to him, the activities to achieve these objectives were designed to enhance the capacity of all relevant stakeholders at the national level of the concept, nature and potential of energy efficiency; develop policy and legal energy efficiency requirements of end-use appliances in Nigeria; train relevant professionals and carry out public outreaches; and conduct pilot project where one million compact fluorescent lamps (CFLs) would be distributed in residential and public buildings in Nigeria. Bala added that the project would assist the government to put in place comprehensive energy efficiency policy and legislation.

“It will help to minimise the building of power stations, helping to save money which will be invested in other sectors. This will consequently help in mitigating the emission of greenhouse gases resulting from generating energy. It will also help to increase Nigerian’s access to electricity. Managed by the UNDP, the project is funded with contributions from the Global Environmental Facility (GEF), Government of Nigeria, Government of Cuba and the UNDP,” he added.

Also speaking on Nigeria Lighting Compliance Study, National Programme Coordinator, Nigeria UNDP-GEF Energy Efficiency Programme, Mr. Etiosa  Uyigue stated that stakeholders complain that CFLs in the Nigerian market do not last as long as required and that proliferation of substandard CFLs have been identified in the preparatory stage of the project. “We did the study to identify CFLs and other EE lamps in the Nigerian market that do meet the newly approved lighting standards. To make available adequate data to the relevant agencies of government - SON & Consumer Protection Council (CPC) to properly inform consumers on the lighting equipment that meets the Nigerian standard. Our sampling method during the survey include; data collected in places where you have the major ports – Lagos and Port Harcourt, where you have the major markets – Kano, Onitcha, Aba, Abuja,” he said.

Uyigue stated that so far, the project has made significant achievement within the first two years; “Working in collaboration with the Standards Organisation of Nigeria (SON), it has developed the minimum energy performance standards (MEPS) for CFLs. The draft MEPS for lighting has since been approved by the Nigerian Standards Board and it is now enforceable in Nigeria. The process of developing MEPS for air conditioners and refrigerators is ongoing.”

He stated that various events had been organised to create awareness among stakeholders on the gains and importance of energy efficiency. The events, Uyigue added, also served as platforms for stakeholders to discuss ways and strategies to mainstream energy efficiency into national programmes and policy.

Also speaking at the forum, Mr. Jason Yapp stated that the current power generation is 2,500 mega watts – 4,000 MW with a deficit of 7,500-11,000 MW leading to frequent load shedding, poor access and energy poverty caused by inefficient generation, interruptions in gas supplies, high transmission & distribution losses and non-technical losses (clandestine connection). He said electricity demand is increasing at about seven percent annually. Focus on supply side management at the expense of demand side management, stranded electricity, which he put at 660 mega watts generated electric power that could not be evacuated into the national grid because transformers and transmission lines required for the task have not been constructed.

Highlighting some of the problems militating against energy efficiency in Nigeria at the forum, Benjamin Ogbalor and Kunle Odeyemi of Everlink Sourcing Limited said unstable and inadequate power supply is a major problem that could slow down the pace of achievement on the project. “The total installed capacity is 6,000 mega watts, Hydroelectric dams contribute 40 percent, Thermal stations contribute 60 percent and the total energy currently generated in Nigeria is far below 5,000 mega watts. In 2012, Nigeria attained the target of generating 6,000 MW while the current grid network could only carry 4,000 to 4,500 MW and in the course of evacuating the entire mega watts generated, the entire system collapsed. This is an indication that if Nigeria generates up to 10,000 mega watts, evacuation will be a problem since the current grid network will not be able to support the generated power to the end-users. It is therefore important that Nigeria invests in building its capacity to distribute with grid collapse – a feat energy efficiency can assist with,” Ogbalor said.

A number of people at the forum agreed that energy efficiency is one of the key drivers of sustainable development and economic growth of any nation and that the power currently generated in Nigeria is inadequate for the country’s population. They added that there is need for the government to put in place minimum energy performance standards (MEPS) for end-use appliances. The introduction of incentives to encourage Nigerians to buy energy efficient appliances is critical to the realisation of the objectives of the ongoing energy efficiency programme.

They also noted that there is need to institutionalise energy efficiency as a matter of national priority, adding, “Most of the renewable energy and energy efficiency programmes in Nigeria are not based on long-term vision. There is lack of synergy between government agencies embarking on initiatives and programmes to promote energy efficiency in Nigeria. Nigeria lacks a comprehensive policy on energy efficiency and there is conflict of mandate and responsibility among government agencies implementing energy efficiency programmes in Nigeria.”

They recommended that the National Energy Policy published in 2003, should be fast-tracked to reflect current trends and realities associated with energy efficiency and that a more thorough and effectual synergy between government agencies and relevant stakeholders should be fostered. Furthermore, the energy efficiency component of the National Energy Policy should be changed into a National Energy Efficiency Act and in order to ensure the smooth take-off and sustained drive for energy efficiency in the country, incentives should be put in place to encourage all and sundry to adopt energy efficiency best practices.

They stated that there must be a specific target year agreed upon by government agencies and relevant stakeholders, in which energy efficiency should be attained in the country. Statistical data should be used to show and prove to people that energy and monetary savings are achievable through the use of energy efficient devices. At least, to convince artisans in the ilk of Tunji to save energy while doing their jobs and also, local manufacturers of electrical appliances should be fully involved in the drive towards achieving sustainable energy efficiency.

Minister Urges Nigerians to Brace up for Increase in Electricity Tariff with PHCN Takeover

The Minister of Power, Professor Chinedu Nebo has pleaded with Nigerians to brace up for some initial hiccups that may arise after the hand-over of the Power Holding Company of Nigeria to its new owners.

The minister noted that one of the major challenges would be possible rise in electricity tariff which he, however, assured “will not last long. It will reduce to a manageable level over time”.

Prof. Nebo made this known at the handover of the Abuja Distribution Company in Abuja to the new owners.

He said with the handover, the Power Holding Company of Nigeria, PHCN, has ceased to exist.

Prof. Nebo also assured Nigerians that the new owners of the successor companies would improve the nation’s electricity situation.

The handing over ceremony took place in 10 different venues simultaneously across the country where other PHCN facilities were handed over to core investors and new owners.

PHCN: New Owners to Takeover on November 1

The Bureau of Public Enterprises (BPE) yesterday said new owners of successor generation and distribution companies of the privatised Power Holding Company of Nigeria (PHCN) would now take over operations of their respective assets on November 1, this year.

This is just as the Nigerian Electricity Regulatory Commission (NERC) also told the new investors in the power assets that it would  not allow operators to dictate the rules governing the electricity industry of the country irrespective of their huge investments.

The Deputy Director, Electric Power Department of BPE, Mr. Amaechi Aloke, made this disclosure at a public hearing cum workshop to update the new owners on regulatory issues regarding the draft interim market rules for the management of the electricity industry before the eventual declaration of a Transitional Electricity Market (TEM) by NERC in Abuja.

Aloke, who assured the investors of government’s commitment to hand over the assets to them by November 1, stated that before then, most of the verified workers of the defunct power utility would have been paid their severance benefits.

He, however, reminded them that the National Council on Privatisation (NCP), which is chaired by Vice-President Namadi Sambo, still maintains its stance that the workers must be given a six-month lay-off grace, following which the new owners can sack and recruit from among them according to their requirements.

The Chairman of NERC, Dr. Sam Amadi, who took time to explain the interim market arrangement, also had to defend the neutrality of the commission in discharging its statutory responsibilities in the sector.
The commission was accused of championing the interests of consumers by the new owners of the privatised power firms without adequate consideration to their business interests, but Amadi in his remarks, stated that the commission’s operational mode was in sync with global standard regulatory practices.

“In making rules, we need to listen to all stakeholders, operators, experts and those that will be impacted by the rules. We will not make rules without the inputs from those to be affected by the rules. We will write the rules; not the operators or Disco Roundtable but NERC will write the rules,” he said.

Amadi explained that the forum provides an opportunity for the new operators to understand the various regulations and benchmarks which NERC employs in its regulation of the market and give their inputs before the final rules become an order.
According to him: “We believe that the operators and consumers do not have irreconcilable interests. Our job is to converge their interests into a single commitment to provide to every Nigerian home and business access to adequate, reliable and safe electricity.”

NERC’s Deputy General Manager, Market Competition and Rates, Abdulkadir Shetimma, had earlier stated in a presentation on the draft interim market rules which would guide the industry between, when the power firms were expected to be handed over to the investors, and, when the TEM was expected to fully commence that the rules were necessary considering that Power Purchase Agreements (PPAs) and vesting contracts cannot be enforced before TEM.

The draft rules fixed generation companies energy charge at 100 per cent and capacity charge, 45 per cent, while for the distribution companies, fixed charge and variable cost is 20 per cent, administration cost 100 per cent of MYTO 2 provision, return on capital 50 per cent and depreciation 10 per cent.

However, Robert Yates who spoke on behalf of the distribution companies argued that fixed variable should be fixed at 70 and return on capital 60 per cent, adding that they need more than NERC is suggesting to cater for salaries, interest to banks and other cash outgoings.

He also noted that arrangement suggested by NERC would result in their breaching of covenants with their bankers and that they should be allowed to keep cash covering allowable revenue before paying the rest to the Market Operator (MO) in addition to starting loss reduction timeline from, which is the agreed deal they signed with BPE as against, suggested by NERC.

They equally called for a more practical analysis on disco cash flow, adding that NERC was championing consumers cause rather than supporting everyone in the new interim rules.

FG to Finally Liquidate PHCN with Imminent Declaration of TEM

The federal government has said its final liquidation of the Power Holding Company of Nigeria (PHCN) will be achieved with its imminent declaration of the Transitional Electricity Market (TEM) in the next couple of weeks. It said PHCN has functionally seized to exist, following the privatisation of its successor generation and distribution companies, but will finally go into extinction when TEM is declared based on the anticipated advice of the Nigerian Electricity Regulatory Commission (NERC). Also, the Power Committees of the National Assembly have said they would invite the various preferred bidders of PHCN successor companies to a parley to discuss their plans on the expansion and sustenance of their acquired assets.

The Minister of Power, Prof. Chinedu Nebo, stated yesterday in Abuja, after inaugurating a 10-man management team of the newly-created Electricity Management Services Limited (EMSL) that the formal hand-over of privatised PHCN companies would bring the life of the state-owned utility to an end.

“We have come very close to the end of PHCN. Basically, almost all of the staff have been paid. What is left is independent retirement benefit that is going to be paid into their accounts. "We are actually ready to hand over and many of the companies are willing to take over. The only thing is that the minister needs to declare a transitional electricity market and that will be done when all the conditions precedent to that declaration have been put in place,” he said. Nebo further stated: “NERC will advice me when to do that, and NERC is actually having a retreat now to make sure that everything is in place, and that all the i’s are dotted and the ‘t’s’ crossed before the declaration of the transitional electricity market.

The minister explained that the newly created EMSL was one of the successor companies of the privatised PHCN, established to handle technical challenges that would arise in the post-privatisation era.

The company, he said, would among other functions, provide all the needed ancillary and support services previously offered by PHCN to the new Nigerian Electricity Supply Industry (NESI), adding that such services like engineering laboratory, meter testing, testing and certification of major electrical equipment in the sector as well as standardisation of equipment used in NESI would be the sole responsibility of EMS. “When you have a situation as we have in Nigeria now, privatisation is almost coming to a conclusion, but we realised that there needs to be a body to ensure that certification of all electricity equipment, whether they are in generation, transmission, or distribution, that equipment that are being brought into Nigeria and facilities that are going to be used in the electricity industry are all top brand, and not fake equipment that are injurious to the lives of people, and bring about danger in the entire community,” Nebo said in justification of the need for EMS.

He further explained: “You need stations, all over the country that are up and running. You don’t need to make it 100 per cent a private enterprise. It is going to be a commercial enterprise eventually where facilities that are being set up by these distribution companies and so on, whatever they are setting up needs to be certified because if they are doing expansion, they cannot expand in vacuum. “They are going to be bringing in equipment, and we want to make sure that the equipment meet global best standards in regards to efficiency and proficiency.” The Chairman of the Senate Committee on Power, Senator Philip Aduda, said in a related development that the National Assembly had deemed it necessary to invite the preferred bidders of PHCN to a parley in view of the importance of their acquired assets to Nigeria.

But dissatisfied with the suggestion that PHCN workers be disengaged forthwith, the organised labour, who are also  staff members of the PHCN headquarters, Abuja  has berated the NERC for the suggestion, noting that the regulatory body lacks the power to do so. Speaking under the umbrella of National Union of Electricity Employees (NUEE), the union contended that the Power Sector Reform Act 2005 that established NERC did not confer on it the functions and powers to recommend the stoppage of payments and disengagement of PHCN employees.

Responding to the NERC’s memo to the Minister of Power, the union’s secretary, Joe Ajaero, urged the management of NERC to concentrate on its assigned roles of monitoring and regulating the electricity industry rather than the advocacy of disengagement of gainfully employed workers. It noted that the utterances of NERC contradict the policy of President Goodluck Jonathan’s administration, which has employment generation as one of its cardinal objectives. It suggested that rather than sending the employees into the oversaturated labour market, the affected staff should be posted to NERC and the 11 distribution companies. Besides, it emphasised that the staff members of PHCN had not been paid off, adding that there were unresolved issues agitating their minds. The letter read: “We have noted with dismay your call for the disengagement from their legitimate employment, members of staff of PHCN. One then wonders why you should be at the vanguard for the advocacy of disengagement of workers already gainfully employed.

NERC is equally operating contrary to the policy of Dr. Goodluck Jonathan’s administration, which has employment generation as one of its cardinal objectives. “NERC has equally advocated for increase in tariff which the poor masses may find very excruciating to bear. “We are undoubtedly irked by this seeming callous act and demand the retraction of this memo and advise that you should concentrate on your assigned roles.”

Latest on the Nigerian Power Sector Reforms

Going by government’s time schedule, the Nigeria Power Sector Reform Roadmap is set to enter the next crucial phase — the Transitional Electricity Market (TEM) stage — for the commencement of a fully contracted electricity market mode under an anticipated robust commercial and technical regime. As at Wednesday night, there has been substantial compliance in payments by Preferred Bidders for the sale of unbundled companies of the Power Holding Company of Nigeria PHCN, under the power privatization programme.  By the close of transactions Wednesday night, all Preferred Bidders had paid up, except the Enugu Distribution Company, while the preferred bidder for Sapele Power Station had made substantial part-payment. The completion of payment now entitles the preferred bidders to take full possession of the 15 PHCN unbundled entities (10 Distribution companies and 5 Generation companies).

In preparation for the TEM, the Nigerian Electricity Regulatory Commission (NERC) has commenced the process of constituting the Dispute Resolution Panel (DRP) for the Nigerian Electricity Supply Industry (NESI). The constitution of the DRP is a condition precedent for the new private sector led electricity sector. The Electric Power Sector Reform (ESPR) Act 2005 empowers the Nigerian Electricity Regulatory Commission (NERC) to issue licenses to persons who wish to participate in the electricity market. Pursuant to Section 71 (2c) of the Act, disputes arising from the market are to be referred to arbitration or determined by the Commission. The DRP is to resolve disputes that arise between Market Participants, namely the System Operator, Market Operator and the Transmission Services Provider and licensed distribution and generation companies, thereby providing regulatory, technical and commercial certainty in the fair and speedy resolution of disputes that may arise out of market rules.

However, emerging realities seem to put a lie to government’s ability to resolve all pending issues and herald a privatized power sector. Statistics from the Presidential Taskforce on Power indicate that, by government calculation, 2013 would witness the commencement and conclusion of payment of Labour severance packages to former PHCN staff. “There will be enhanced capacity of the Nigerian Bulk Electricity Trading Company (NBET) to sign and execute PPAs for existing FGN assets and the first wave of new IPPs. Bidders of privatised assets will complete full payment and handover of such assets will be completed.  The capacity of NELMCO will be enhanced to deal with liabilities pre and post privatisation.  The announcement of the commencement of the Transitional Electricity Market is expected in 2013.”

While government insists that it is on course to meeting its 2023 obligations, concerns have continued to mount over what the Minister of Power, Prof Chinedu Nebo has described as ‘ slippages’. For instance, despite repeated assurances for payment of severance package for workers to be disengaged from the system to enable new owners take over, payment only commenced less than three weeks ago, without evidence that the settlement would be completed before August 21, the Long Stop Date. Three condition precedents are still pending. These are metering of the grid interface points, testing of the Market Operators Settlement Systems and processes; and the constitution of a dispute resolution panel. Without completing the CPs, according to new plant owners, the Nigerian Electricity Regulatory Commission (NERC) cannot advice the Minister of Power to declare the Transition Electricity Market (TEM). According to the Chairman of the Roundtable of Distribution Companies, Dr. Ransom Owan, “the industry agreements (power purchase agreements, vesting contracts and the transmission network agreements) which underline industry revenue would be deemed illegal and a nullity until the declaration is made by the Minister of Power. This government policy risk makes it very challenging for the capital markets inside and outside of Nigeria to support our efforts financially.”

Speaking further on behalf of the new distribution company buyers, he said: “As at now, the Discos operate at a loss and buyers would quickly deploy their respective turn- business around plans. However, a cost reflective tariff, which guarantees a regulated return and covers all I dusty payments is not yet producing the desired results due to systematic and structural problems. If the Discos are unable to cover the cost of energy deliver them, the Bulk Tracer, Transmission Company and Generating Companies will be adversely affected.” With some of the new utilities owners sounding the alarm, there is little evidence to prove that the process is still on course. The process has previously met with delays and postponements. For instance, in 2001, the Bureau of Public Enterprises (BPE) drew up a tentative time table for the privatisation of the National Electric Power Authority (NEPA) slated for the next year, 2002. This followed former President Olusegun Obasanjo’s directive that NEPA and the Nigerian Ports Authority (NPA) be privatised by the end of 2002.

Last June, the Bureau of Public Enterprises (BPE) warned that investors, who fail to pay the balance of the 75 per cent of offer value of their bids for the successor companies carved out of the Power Holding Company of Nigeria (PHCN) within six months from the date the mandatory 25 per cent bid payment was made, would be penalised. BPE’s Director General, Mr. Benjamin Dikki, said investors were expected to fully take over the power assets after paying the balance of 75 per cent bid price since they had made the mandatory 25 per cent payment assured them that power supply would improve when the private investors take over. He, however, expressed the confidence that all the investors were serious businessmen who have the required financial muscle to pay the bid price. 

To boost confidence in the process and set the tone for the unfolding era, the Federal Government, early in the year, signed market making and largely private –sector led transactions across the power value chain. This, stakeholders say, showcase the increasing confidence in the reform agenda. The agreements and transactions completed at a Presidential Power Reform Transaction Summit held in Abuja included the handover of the payment certificates to the bidders that have successfully paid down the first 25 percent instalment of the purchase price for the PHCN successor companies.

A fact sheet from the Power Ministry listed the following as the success recorded in the reform so far.

   “The major achievements to date are as follows:

i. Bidding and selection of preferred bidders for the 10 Distribution Companies and the 5 Generation Companies was concluded in November 2012, contracts have been signed and bidders have already made initial payments of 25 percent of the bid price.

ii. Presidential Power Reform Transaction signing and presentation of certificates for payments of initial deposits to successful bidders of the DisCos and GenCos by Mr. President was performed on 22nd April, 2013.

iii. Handing over of TCN to Manitoba Hydro International for management contract concluded. Schedule of Delegated Authority (SODA) give to Manitoba

iv. The Nigerian Electricity Regulatory Commission (NERC) has been reconstituted, strengthened and now is fully operational.

v. NERC launched MYTO 2 cost-reflective tariff in June, 2012, which is now operational.

vi. Nigeria Bulk Electricity Trading (NBET) PLC was incorporated in July, 2010 and is now in operation as a credit-worthy off-taker.

vii. The Nigeria Electricity Liability Management Company (NELMCO) was established in 2010 to assume and manage the assets, liabilities and other obligations that could not be earlier transferred from PHCN to any successor company.

viii. Resolution of Labour issues is almost completed and payment of severance package to commence this week.

ix. Investor confidence evidenced by increased investment and signing of MoUs. Most recent being the MoU signed with Power China Corporation to develop 20,000 MW of Thermal Power Plants with associated substations and transmission lines up to 10,000 km

x. Sale of Ten (10) power plants built by the Niger Delta Power Holding Company Ltd commenced.

The document stressed: 

  “All power reform institutions are established and in operation 

• FGN/Labour signed agreement and its implementation is at advanced stage 

• Privatisation of 10 DisCos and 5 GenCos at advanced stage

•TCN management has been handed over to Management Contractors(Manitoba of Canada) and TCN Board Inaugurated.”

On why it is reviewing the Roadmap on power, the Ministry noted: “Let’s face it, with our population of over 160 million people living in over 25 million households, the current available peak power of 4500MW is just a tiny drop in the ocean. This is why we are having the blackouts. The load shedding, which is increasing lately, has its origin in the fact that once consumers witnessed increasing supply and reliability, previously suppressed or migrated demand started returning to the grid. People who used to only put one air-conditioning unit at their homes when using their small generators now put on all units at home.  Our grid operators and the National Control Centre are doing their best to reduce incidents of system collapses arising from unplanned sudden ramp up of grid load from returning suppressed or migrated demand.” Dagogo-Jack said government was not discarding the original Roadmap, noting, rather, that  all the benchmarks of the original one would be retained, while the ongoing review would capture the missed targets, review outstanding ones and re-evaluate scopes, while also addressing issues of fuel diversity, impact of technology on pricing of renewables, and developing long-term financing models for transmission investments. He said the new edition of the Roadmap would outline a workable strategy for closing the gap between the projected sector expansion and the required technical manpower capacity to operate this growth.

According to him, “we have been tasked by President Jonathan with the very tall order of giving Nigeria adequate electricity through the development of a sustainable and properly regulated power market in the life of this administration. This is the biggest power sector reform exercise in Africa by a very wide margin and ranks amongst the top five in the world in terms of the sheer size of the market and process complexity. Therefore every step is a learning curve for us. “He described the roadmap review exercise as a fundamental technical requirement any responsible reform driving agency must embark on, emphasizing that the 2010 version remains the anchor upon which everything so far achieved in the reform has rested.

The proposed Roadmap 2.0 will retain all the benchmarks of the original one, will capture the missed targets, review outstanding ones and re-evaluate scopes while also addressing issues of fuel diversity, impact of technology on renewables pricing, developing long-term financing models for transmission investments, and a strategy for closing the gap between the projected sector expansion and the required technical manpower capacity to operate this growth.

Dagogo-Jack remarked that “for anyone to describe such a technically sound and judicious initiative as tantamount to policy reversal or somersault, is not only mischievous, but is a calculated attempt to denigrate the offices and persons of those of us working so tirelessly to overcome where several have failed in the past. Nigerians should please exercise restraint and resist the urge to cheaply politicise developments in a sector as basic and critical as electricity.”

Stakeholders say they are watching, hoping for the best as the privatisation process continues on thorny road to end of 2013.

NERC AND PHCN ARE USING THE MONTHLY ELECTRICITY FIXED CHARGES TO IMPOVERISH NIGERIANS AND RESIDENTS

A media release issued on 27^TH August, 2013, in Owerri, by Citizens Centre for Integrated Development and Social Rights – CCIDESOR, in response to the fixed charges on electricity consumers in Nigeria

Dear compatriots, it is time to get counted or get thrown into perpetual darkness and hardship by the ugly development in the electricity reform agenda currently being superintended by Nigeria Electricity Regulatory Commission - NERC. It seems that the reform agenda has been hijacked by those who don’t mean well for Nigerians. The latest antics to rip-off unsuspecting Nigerians, whose oil resources have been corruptly mismanaged,  is the 419 like fixed electricity charges endorsed by the NERC. Nigerians should recall that, so far, the only visible achievement of NERC and the entire electricity reform agenda is the regular increase of electricity tariffs. This exploitative increase has impacted negatively on over 150 million citizens since its introduction, with millions of families preferring to stay in darkness than pay for electricity they did not consume.

It will be recalled that the idea of fixed charges was introduced after the prepaid meters regime came into existence. Before, PHCN has been exploiting citizens through the monthly unmetered estimate billing system, until the prepaid metering regime, which insulated the citizens from the open and age long fraud against citizens came into existence. This confirms the position of CCIDESOR that Nigerians are being impoverished through all government monopolies like the power sector. It is something that did not start today.  In other to continue with the exploitation of Nigerians, the monthly fixed charge for metered customers was introduced through the back door, with the plausible reasons of trying to make the sector “attractive” when Nigeria already has a huge market that is more attractive than free “revenue” for new owners who appear incapable of satisfying the energy needs of Nigeria. This increment coming on the heels of selling the investment of many communities, philanthropists and individuals, who decided to fund the purchase of facilities to ensure that their communities get the epileptic power supply that government was unable to get to their communities, without offering them any stake to the tune of their investment, or asking them to withdraw their investment.    This is happening under the noose of an experienced and revered human rights activist who is the current chairman of the electricity reform agenda of Government.

It is important to note that since the commencement of the electricity reform agenda, the quality and quantity of electricity delivered to the helpless and hapless Nigerians remains perpetually and abysmally poor, while the level of hardship and impoverishment is on a steady increase. The latest increase of misery of Nigerians, in form of fixed monthly charges of N750, whether electricity is supplied or not, is regressive, ignominious, and an open day rip off of the already bleeding Nigerians. The introduction of this monthly fixed charge is an indication that the NERC has no new ideas to drive the electricity reform process. At this point, they need to pack their bags and go, than to remain in existence to inflict more pains on Nigerians and residents.  Now is the time for Nigerians to see the electricity reforms for what it is and what it has been – perpetuating the pain of Nigerians through high cost and exclusion. What is the rational to charge a consumer a fixed rate of N750 when NERC know that PHCN have not offered any service to the person? How would the electricity reform empower Nigerians when the philosophy behind it is total exploitation and enticing of investor with increased charges and not the potential population of electricity consumers? It is therefore time for EFCC and ICPC to probe the electricity regulatory agency because what they are indulging in is not different from economic crime against citizens. Making a consumer of PHCN electricity to pay for services that are not rendered or received is akin to economic crime against citizens.

An inquiry over the fixed charges increment alleges that it will be used to repay the cost of recently installed prepaid meters. This plausible explanation, which has not been confirmed by NERC or PHCN, clearly indicates that they may inflict more economic and social injuries on Nigerians if this trend of using electricity monopoly to impoverish Nigerians continues. The following issues should be considered if the electricity reforms means well for Nigerians and electricity consumers:

·         All consumers are not using the same capacity of prepaid meters. While some have “three face” meters, other have either two or one face meter. How can all of them be made to pay the same fixed monthly charge?

·         What is the cost of the prepaid or regular meter and who fixed the rate? Why was Nigerian electricity consumers not consulted on the price of a meter?

·         After paying off the full value of a prepaid meter, who owns it, the consumer or the future private owner PHCN?

·         If a consumer leaves a particular house for another, is he/she entitled to leave with is meter, how will the transfer of ownership take place, particularly if the new apartment has no prepaid meter?

·         Can someone who is not producing any product entitled to any revenue other than a philanthropic gift?

·         Does it mean that Nigerians are not good enough to receive detailed explanation on this demonic fix charges or has electricity consumers been censored from negotiating a product that they want to purchase?

·         What is the rationale behind making the sector attractive only by exposing Nigerians to exploitation and rip-off by prospective investors instead of ensuring that they sale whatever energy they produce?

·         Why is the population of Nigeria not enough to make the price of electricity low and the sector more attractive?

There are so many questions begging for answers to clarify the longsuffering Nigerians, who have remained exploited since the establishment of NEPA now PHCN and NERC. The reform has just shown that it is not meant for 150 million poor Nigerians. This increase is an invitation of more poverty to unsuspecting Nigerians and should be totally rejected. It is more shocking that this anti-people electricity charges is being endorsed by a commission headed by a renowned and well respected “former” Human Rights activist. It is unfortunate that it is perhaps only in a country called Nigeria that a Human Rights Activist who knows the implication of this injustice by his commission takes undue pleasure in inflicting needless and huge economic pains on Nigerians.

To confirm our position, the history of power sector fixed charge increment since the power reform started shows the steady increment has been worse than what has happened in the petroleum sector, yet NLC has not gone on strike.  The economic burden of fixed monthly electricity charges is presented thus - N120 in 2008, N85 (the only reduction) in 2009, N245 in 2010, N300 in 2011, N500 in 2012 and now N750 in 2013. This is a clear testimony of lack of ideas to wake up the dead sector. With this new fixed charges of N750 per metered consumers per  month,  PHCN wrongly generates over N360 billion Naira annually for providing no light to about 40million estimated electricity consumers. This is millennium impunity by NERC that should be stopped without thinking twice. Sad enough, while the crazy fixed and its increment is going on, the national Assembly that is supposed to protect Nigerians against any form of exploitation are busy voting to award themselves life pension and the fattest salary any legislator can earn around the world.

The fixed charge and its increase is simply another way of sustaining the ripping off of citizens by the old electricity regime which Nigerians hoped that the prepaid meter system would have wiped out. Ever since the government announced that they are embarking on electricity reforms as a solution to the identified economic woes Nigerians suffer due to inadequate power supply, the commission and its agenda have been suspicious because of the negative history of that sector, which has been adjudged as the most corrupt sector in Nigeria. The myriad of corruption scandals that have trailed the power sector from inception of Chief Obasanjo led administration till today testifies to the fact that corruption in the electricity sector is beyond appreciation.

In line with the recent MYTO, the government is supposed to subsidize the cost of electricity; but what we have witnessed over a sad period of time is that the subsidy has been phased out and replaced with official exploitation. It was based on this reasoning or initial explanation that the initial amount of N110 billion provided by the government for onward disbursement to the eventual operators through the Central Bank of Nigeria before the Yar Adua regime halted the privatization process.   This did not correspondingly stop the exploitation of Nigerians through incessant electricity price increases which has risen to over 600% since four years now. With this effortless and fraudulent way of generating revenue as well as the new tactics of fixed charges, there is certainly no hope for improved electricity delivery to Nigerians. Rather, there is confirmed fear of increased poverty, unemployment, insecurity and lower standard of living of Nigerians. Prepaid metering, which could have cushioned the consumers against this unbridled rip-off, seems to have been completely abandoned, thus leaving electricity consumers in the lurch. This sad situation is against the intentions of government which motivated the injection of over $4.billion into the power sector in the last nine years.

 The new traffic regime and fixed charges have clearly shown that such huge expenditure of about $40billion in the sector is simply fraud, waste and abuse of public resources. While every public expenditure is meant to benefit citizens the expenditure in the power sector has caused more pains to Nigerians than can ever be imagined in any sane society.

We are aware that most of the unbundled components of the electricity sector, particularly at the distribution level, have been finally sold by outright confiscation of the investment of many communities (particularly in the southeast) in the purchase of transformers, poles, wires, etc., the electricity commission do not think that such sacrifice is enough to attract investors and make the sector viable. It is also only in Nigeria that  with the pretense of electricity reform,  community efforts and properties can be easily and safely handed over to a private investor with the additional penalty of crazy fixed charges, yet it has been difficult for the private buyers to take off. For example, a recent rapid response survey of communities in the southeast conducted by Citizens Centre for Integrated Development and Social Rights – CCIDESOR, reveals that over 80% of distribution facilities that most communities use to supply of electricity are purchased or funded by either the communities or a philanthropist.  It is therefore unfair to punish the communities further with fixed charges.

It is on the above premise that we state as follows:

1. That the fixed charges per meter per month should be stopped immediately and victims of such rip-off refunded whatever they have paid to PHCN.

2. What is required to truly reform the power sector is to remove electricity monopoly from the exclusive list and put it in the concurrent list so that states that want to move faster can provide their people with twenty four hours electricity.

3. That NERC and PHCN should explain to Nigerians why over $40 billion expenditure in the power sector can only lead to increase in power tariff and fixed meter charged instead of lower tariff and improved power supply.

4. That the EFCC should intervene to protect Nigerians from this economic exploitation being perpetrated through the instrumentation of government commission. PHCN and NERC should immediately be charged of economic crime against Nigerians.

5. The National Assembly should also direct the discontinuation of that fraudulent practice to save Nigeria from impoverishment and other economic woes

6. NERC and PHCN should only generate money from power that the produce and not to make money out of nothing.

7. That NERC should be disbanded since their idea of improved power sector does not go  beyond increase in power tariff and monopolistic exploitations of citizens without delivering any improved service for the  years they have been in existence.

8. Unless this monthly fixed meter charge rip off is stopped and victim refunded, we shall commence the mobilization of Nigerians to reject the current exploitation embedded in the energy reform process.

The true economic reform of Nigeria can be achieved when those federal government monopolies that directly impact on the lives and livelihood of Nigerians are distributed among federal, states and Local Governments. 

Influx of Imported Prepaid Meters Threatens Local Manufacturing

Moman Meter Manufacturing Company Limited (MEMCOL) has warned the federal government about the influx of imported prepaid and postpaid meters, noting that the move is threatening investment in local manufacturing of all meters in the country. The Chairman of the company, Mr. Kola Balogun, explained that the despite the huge N8 billion invested in the manufacturing of quality and world class standard prepaid and postpaid meters to meet the local consumption in the country, the federal government still threw its borders open to foreign prepaid and postpaid meters discouraging investments in local production of meters. Speaking during the launching of MEMCOL ultra-modern electricity meters manufacturing company by the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, Balogun stressed that the company has the capacity to provide prepaid and postpaid electricity meters and other metering solutions and applications.

He also decried the lack of patronage by the federal government, saying that the company is yet to receive the desired patronage from the federal government. “We have not been able to meet our dream to be less dependent on importation of prepaid and postpaid meters. Nigeria is currently occupying the fourth position in meter manufacturing, but if this unfavourable importation of meters continues, we would be misplaced in the global market,” he said. He therefore called on the federal government to implement policies to protect the local industries, saying that this is the only way Nigeria can achieve industrial revolution and ensure economic growth. “I want to appeal to the federal government through the ministry of industry trade and investment to ensure that whoever has invested in Nigeria must not have any cause to regret. We have good product that we can showcase to the rest of Africa,” he said.

Aganga, in his remarks, said the launching is coming at an auspicious time when the current administration has made industrialisation top priority and is making concerted efforts to ensure that the power sector is totally revitalised to lift the industrial sector to the desired height. “This is a very high technology company that has keyed into the value chain in the power sector to produce all the meters we need. They have the capacity to produce smart prepaid and postpaid meters and I am very impressed with the quality of the meters I have seen here today. I am also excited about the future of this company and the federal government will make sure that we create the enabling environment for them to do extremely very well,” he said. In his words, “You will agree with me that Nigeria is an endowed nation with abundant human and natural resources. However, to place Nigeria among the top 20 economies in very good time, in line with the goals of this administration, all hands must be on deck to ensure that this country has a vibrant industrial base.”

He said no nation has moved from being a poor nation to a rich one by relying on exporting raw materials without a vibrant industrial sector stressing that this is why the ministry has been working hard to ensure that the nation’s industries are positioned well enough to drive the much-needed industrial growth. He said based on the desire to create an inclusive economic environment where jobs and wealth will be created through the process of intense industrialisation, the federal government has already developed the Nigeria Industrial Revolution Plan (NIRP) based on sectors where the nation has comparative and competitive advantage. “It is hoped that the launching of this factory, which specialises in the production of prepaid and postpaid meters, will contribute to the growth of the power sector and by extension, the success of IRP. I charge the management to work assiduously in ensuring that this project contributes significantly to inclusive economic growth and development through job creation and wealth generation,” he said. “I wish to congratulate MEMCOL for this achievement and also ensure both and local foreign investors that returns on investment in Nigeria are among the highest in the world. In this country, the case for investing is compelling,” he added.

The General Manager, Operations, Bank of Industry ((BoI) Mr. Joseph Babatunde, said the role of the BoI as a development financial institution is to empower private sector investments geared towards industrialisation by taking bold steps to provide long and short terms loans to developmental projects. He said the BoI got approval by the federal government to invest heavily in the plastic casing for the company’s meters, maintaining that the aim of this move is to develop the value chain in the power sector. He therefore called on Nigerians and the federal government to patronise the company’s product pointing out that the success of this company would go a long way in driving the industrial sector and creating massive employment opportunities in the country. The quality of this product can measure up to standard anywhere in the world. We believe in this company and we hope it will get the necessary patronage and support from the federal government to make the company competitive in the global market,” he said

Nigeria's Epileptic Power Sector under the Spotlight, as Private Investors Take over PHCN

Nigeria's epileptic power sector has come under the spotlight, following the conclusion of the sale of the assets of the Power Holding Company of Nigeria (PHCN) to private investors.

Analysts have come unwavering with the type of regulatory actions required to make a success of the electricity market, few days after all but one of the 14 preferred bidders for the successor companies of PHCN paid up for the electricity company’s assets. “We need a regulator that is independent and has experts in various areas including engineering, law, among others. We also need a regulator well equipped for the future. Further, we need one, which would continuously co-operate with the gas regulators as you can hardly speak about electric power in Nigeria without making reference to gas. Issues relating to adequate staffing should also be given the care it requires,” Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo, said.

That will be the focus, because from August 21, 2013, the country’s electricity sector becomes fully deregulated, and electricity deliveries consequently have been opened to competition. Finally buckling to pressure, Nigeria has become of the latest emerging market economy to undertake this step, but the long era of government control has left the sector very vulnerable. “High level of regulation needs to follow this development. We must avoid a situation where the regulator becomes subservient to the operators. I therefore suggest further strengthening of the regulatory authority,” according to Bola Osunsanya, managing director, Oando Gas and Power, saying that regulator must also be on top of situations so that no operator is allowed to short-change the Nigerian public.

While it is given to assume that the onset of a private sector driven electricity industry in the country will usher in an era of better efficiency and responsiveness, experiences across sectors of the economy have shown that the new dawn of electricity supply that Nigerians have yearned for, over decades, will only come if the new generating and distribution companies (gencos and discos) are properly regulated, ensuring that there is a balance between their activities and consumers’ interests. “The regulator should be professional. Professional in the sense that the interests of consumers are very well protected. In this type of industry, the consumer is very vulnerable. So, we need a very strong regulator that is able to protect consumers from exploitation, as well as ensure that investors derive enough benefits,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry. According to him, regulation is the business of government, but what is important is to ensure that the regulatory agency is made of professionals and they should have the power and autonomy to operate professionally. The political leadership needs to give them the space to operate very well, he added.

UGHELLI POWER FIRM GETS N13B AFC, BANKS LIFELINE

To boost electricity supply in the country, the Africa Finance Corporation (AFC) in conjunction with UBA Bank Plc, as co-arrangers, and FCMB and Fidelity Bank as co-financiers has provided a N13 billion debt financing facility for the acquisition of Ughelli Power Plc.  The aggregate commitment of AFC for the acquisition is N8 billion.  

Meanwhile, there is intense lobby at the Bureau of Public Enterprises (BPE) to extend the payment deadline for Enugu Electricity Distribution Company, which could not be paid for when the deadline ended on Wednesday. 

In a related development, Eastern Electric, the reserve bidder for Enugu Electric Distribution Company, has made overtures to the BPE to respect the law and immediately allow it make payment following the inability of the preferred bidder to meet up.

Besides, an indigenous firm - Forte Oil Plc, said Sunday that its subsidiary, Amperion Power Distribution Company Limited (Amperion Power) has completed the acquisition of a majority stake in the 414MW Geregu Power plant with payment of $99 million. Nigeria began restructuring and reform of its electricity sector in 2000 with the issuance of the National Electric Power Policy (NEPP) to unbundle the sector and establish a regulator, with a mandate to create and develop a competitive electricity market. 

The provisions of the NEPP were subsequently enacted   in the Electric Power Sector Reform Act 2005 (EPSR Act),  providing the key legal and regulatory framework for the reform, including the establishment of the Nigeria Electricity Regulatory Commission (NERC), paving the way for private sector participation in the power sector.        

Ughelli Power Plc is one of six power generation limited liability companies established under the provisions of the EPSR Act following the unbundling of the vertically integrated PHCN. Ughelli Power Plc is a gas fired thermal power plant acquired by Transnational Corporation of Nigeria Plc (Transcorp) in the first round of the Federal Government of Nigeria’s privatisation of power generation assets formerly owned by the Power Holding Company of Nigeria (PHCN). Ughelli Power Plc was incorporated in 2005, is situated in Delta State and has an installed capacity of approximately 900MW.  It currently generates approximately eight per cent of the total electricity within the Nigerian national grid.      

Transcorp is the lead sponsor in the Transcorp Ughelli Power consortium, which will be purchasing 100 per cent of the shares in Ughelli Power Plc.  Transcorp, incorporated in 2004, is a diversified conglomerate with strategic investments and core interests in the hospitality, agribusiness and energy sectors.  

AFC, a multilateral finance institution, was established in 2007 and has a current capital base of US$1.2 billion.  It was established to be the catalyst for private sector infrastructure investment across Africa.  AFC fills a critical void in providing project structuring expertise and risk capital to address Africa’s infrastructure development needs, and is increasingly being seen as the benchmark institution for private sector investment in the core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications. President and Chief Executive Officer of the AFC, Andrew Alli stated: “AFC’s long-term vision is to help address Africa’s infrastructure deficit and ensure sustainable economic growth for the continent.   Growth of the Nigerian economy cannot be fully realised without an efficient and functioning power sector. Power is one of AFC’s high priority sectors for investment, and arguably Africa’s most significant need. To this end, AFC stands as both an advocate and support of privatisation of the power sector in Nigeria, and has partnered with the U.S. government through United States International Development Agency (USAID) in the USD7 billion U.S. Presidential “Power Africa Initiative” to accelerate investment in Africa’s power sector over the next five years and increase access to clean, geothermal, hydro, wind and solar energy.   AFC’s investment in Ughelli power will contribute towards reducing Nigeria’s chronic power deficit, foster economic growth and create employment.  

AFC was created to address the infrastructure investment deficit and is privileged to be providing an African private sector investment solution, to drive economic growth and industrial development in Nigeria.”

At the close of the official deadline on Wednesday, all the preferred bidders for the nation’s utilities for privatisation had paid up except Interstate Electrics, which was unable to pay the remaining 75 per cent of the bid price for Enugu Electricity Distribution Company.

Information released from Ministry of Power indicates that apart from the preferred bidder for Enugu Disco which failed to make payment that of Sapele Power Station had made ‘substantial part-payment’. It is not immediately clear if ‘substantial part-payment’ also qualifies as beating the deadline. Spirited attempts to get Vice President Namadi Sambo, who is the chairman of the National Council on Privatisation, to make a special case for Interstate Electrics were unsuccessful. A source said the promoters of the defaulting firm have been told in clear terms that international development partners like the USAID and the Department of International Development (DFID) of the British government, which are involved in the bid process as observers, would not accept it. “This was why the bids from Dangote and Rockson Engineering for two generation firms were disallowed in July, last year; both bids arrived only a few minutes late.

Interstate Electric was also given the example of Mike Adenuga, who could not be awarded a GSM licence in 2001 when MTN, NITEL and Airtel received theirs because of a mistake,” Meanwhile, Minister of Power, Prof. Chinedu Nebo is getting set to formally declare the Transition Electricity Market, to enable the new investors commence business in earnest and further drive the process. He said in Abuja, “The completion payment now entitles the preferred bidders to take full possession of the 15 PHCN unbundled entities (10 Distribution companies and five Generation companies).”

Nebo reassured of government’s resolve to pursue the transformation agenda to the end, and monitor the emerging transition market, in order to protect the interest of both the citizenry and the investors.

He said the stability of the national grid was being enhanced to ensure effective transmission of any quantity of power being generated in the new dispensation. He said efforts were also on to provide more electricity off-grid, especially for the rural areas, while also sustaining subsidy for low income electricity consumers in the nation’s tariff structure. The promoters of the consortium have gotten their lawyer to formally write BPE on the need not to drag the privatisation process into unnecessary litigations.

Eastern Electric had on Wednesday declared preparedness to pay $126 million for the takeover of the company which provides power to the southeastern part of Nigeria, following the failure of Interstellar Electric to do so. The consortium was formed by the five Southeast state governments: Nestoil, a major indigenous operator in the upstream sector of the Nigerian petroleum industry; Aba Power Ltd and Geometric Power Ltd, and Diamond Bank and members including NRECA of the United States and the NETGroup of South Africa.

The firm’s statement read: “We shall not have difficulty raising the funds. The BPE is still holding on to our $10 million bank bond raised when we were bidding for the Enugu Disco.”

The BPE had on Monday announced that it would not extend the Wednesday deadline for the payment of the outstanding 75 per cent of the bid prices for successor companies of the Power Holding Company of Nigeria by the preferred bidders. BPE said if they failed to pay by 5 p.m. last Wednesday, they would lose the bids, while the reserved bidders would be invited to take over the assets.

A source at the BPE said that the agency has to give some period of grace to Interstate Electric Limited to make payment and also to CMEC/EUAFRIC Energy JV, the preferred bidder for Sapele Power Plc, which had earlier paid a substantial amount of the 75 per cent balance.

Interstates, which is promoted by businessman, Emeka Offor, was preferred to acquire the Enugu Disco and like others, it had initially paid the mandatory 25 per cent bid price but was unable to meet up with the 75 per cent balance at the expiration of the deadline set by the BPE.  

Also, a source in the Interstate who spoke in confidence said:  “We are making frantic efforts to ensure that we make the payment in the next few hours.  There is still hope for Interstate Electric Limited to take over the Enugu Distribution Company.  Though, the BPE gave us up till Friday, August 24 to make the final payment, we were not able to pay.  But I assure you that in the next 24 hours, the company would have fully paid for the power firm”, he said. A source in BPE confirmed that the agency was trying to relax the rule contained in the Request for Proposal (RFP) to give opportunity for Interstate Electric Limited pay their outstanding balance.

Head, Brand and Corporate Communications, Odion Aleobua, said in a statement yesterday, that Amperion Power completed the acquisition of the power plant ahead of the Wednesday, August 21, 2013 deadline with the payment of $99 million to the BPE representing 75 per cent balance for the power generation asset. 

This, the company said was in addition to the $33 million mandatory down payment made on February 21, 2013 to the BPE by the group to complete the required bid sum of $132 million.