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Abstract
The electricity power supply in Nigeria has become a major cause for concern for
government since 1999; whereas over $20 Billion has been expended on electricity,
there has not been any appreciable success. According to a publication of the
Presidential Task force, titled Electric Power Investors Forum, Nigeria has an
installed capacity of 8, 644MW but currently produce about 3,781.80MW for a
population of 160 million as at October 2013 (Premium Times, November 2013). The
Power produced is far below the countrys peak demand level forecast of 12,800 MW
of electricity. To solve the severe power problems in Nigeria, the government on
November 1, 2013 handed over 10 DISCO (Power Distribution Companies) and 5
GENCO (Generating Companies), to private companies in order to attract additional
investment and efficiency. In this paper, the survey of deregulated electricity markets
of various countries and the challenges faced by the government controlled power
sector will be outlined; to assist the new companies achieve better ROI (Return on
Investment). With the present electricity market structure, each of the Distribution
companies will operate as a monopoly in their various zones, which may lead to
severe customer dissatisfaction. To mitigate this, various innovative measures and
controls will be recommended in the paper for the regulator, the providers and
consumers to ensure improved performance and sustainability of electricity supply.
INTRODUCTION
Since the handover of distribution to11 private companies in Nigeria, there have been
series of complaints from consumers on poor service delivery (poor or no service in
some areas), excessive billing using estimated billing instead of metering and on the
part of the DISCOs, some consumers attitude to bills payment, inadequate supply
from Transmission company, sabotage by staff and consumers, old equipment, cost
of fund and inadequate finance to purchase equipments and materials needed to
sustain acceptable customer satisfaction level and good return on investment.
With these level of challenges it is proving increasingly difficult for the DISCOs to
market power efficiently and attain greater customer satisfaction levels noticed in
other climes.
CONSUMERS
All the DISCOs in Nigeria carry the baggage of over 3 decades of extremely poor
performance of the previous companies, PHCN and NEPA who are re-christened as
Never Expect Power Always which has led to poor perception. Most Nigerians are
still seeing all the companies as government agencies instead of normal private
concerns. This is making some people believe that Electricity is their right that should
not be paid for. DISCOs cannot access some locations to carry out billing for fear of
been attacked, like some places at Lagos Island.
Many consumers tamper with the DISCOs equipment and materials. Some even
collude with PHCN staff to alter the equipment, such as meters. In addition, some
communities have Electricity committees who have made themselves repair men
who go to the sub-stations to replace materials with substandard and/or overrated
materials (e.g. fuses) that end up destroying Transformers and other materials.
As part of this paper, we carried out a study of payment of bills by Welders located on
east-west road between Rumuokoro to Rumudara junctions; Among the 10 welders
surveyed, only 2 regularly pay (Between N2, 000 and 6,000) bills, 1 pays once in a
while through his landlord, 2 does not pay at all and 4 pays to PHCN/PHED officials
who do not remit the money to PHCN/PHED.
Some consumers are not getting supply at all as a result of faulty substation
equipment, poor or old distribution cables and accessories and poor/no/inadequate
supply to certain areas for technical/economic reasons.
DISCOS CHALLENGES
The problems of the DISCOs are many 8 and common but some are peculiar, but the
most pressing is that the current demand of 12,800Mw is higher than nationwide
production of about 3,700MW. This is directly affecting their income as the MD of
Kano DISCO, Dr Jawil Gwanma said in an article in Guardian1 that at purchase, BPE
guaranteed them 80MW of supply, but they are being given 40MW part of which
20MW is committed to Niger Republic, leaving only 20Mw to service 13 business
units in Jigawa, Katsina and Kano states.
The challenges in the area of poor supply from the national grid can be demonstrated
further from a global perspective by reviewing the table below using data sourced
from world bank2 and Wikipedia3 websites:
What is further worrisome is that the DISCOs are not able to deliver all these power
from the grid to their consumers because of commercial and technical losses as
stated in a publication of Sunday Punch of April 13, 2014, at page 25.
It is more worrisome that the database and/or statistics available are grossly
inadequate and there are no plans/facilities to rapidly improve the situation. For
example, no DISCO in Nigeria can claim to have 90% valid information about their
consumers.
TECHNICAL LOSSES
The main reasons for technical losses are over age, weak and under-sized aluminum
conductors (wires) 4,8, and poor condition of the sub-station equipment, lack of and/or
shortage of replacement parts, very poor logistics equipment and poor response time
by staff.
COMMERCIAL LOSSES
As demonstrated above, the DISCOs are not able to meter all consumers
appropriately because only about 25% of consumers are actually metered, as
demonstrated by a snap study we carried out as part of the this paper. In the same
publication referred above The DG of Bureau of Public Enterprises, the body that
midwife the sales of the companies said: The investment to be made by the DISCOs
must cover the commitment they have all made in the following arrears: metering
(about 6million meter), health, safety and environmental practices: reduction in the
number of customer interruptions due to network faults; new customer connections
and network expansions; and improving customer services and complaints.
Unfortunately, as a result of the type of loan capital that was used to purchase the
DISCOs, the fact that the ownership of the companies are not properly spelt out and
the non resolution of ownership in respect of the power equipment in the distribution
network owned by the State, LGA and some other government agencies, the DISCOs
are facing multiple problems keeping money aside to meet investment required to
improve their services to the consumers.
To bring home this point, the Senate Committee on Privatisation and
commercialization, led by its Chairman, Olugbenga Obadara, during a courtesy visit
at Government House, Port Harcourt as reported by Kelvin Ebiri, in The Guardian of
14 May, 2014, heard this from Governor Amechi:
We generate 545 megawatts, and we are also building another 180 megawatts, and
before the end of this year, we will have 715 megawatts. We asked them, how do we
get 24 hours power supply, and they told us, we should invest 13 billion naira more.
We have already paid 5 billion naira as take-off grant, and our target is that before the
2015 elections we should have regular power supply. We are funding now, and when
the project is completed, the federal agencies collect the funds and nothing comes to
us.
The privatization is not complete, the federal agencies collect the money we
invested and own the infrastructures or we are ready to buy you out and own the
power distribution network in Port Harcourt. We are tired of complaining about
power. On your way to the federal government Afam Power Station, also ask them to
show you the state government Afam Station.
Some other causes of commercial losses are (1) insufficient billing (2) Low meter
efficiency (3) Faulty or non-reading of meters (4) Software errors (5) Prolonged
dispute (6) Inadequate revenue collection centers.
As can be seen above, the cost in Nigeria using the 2011 figures is the third highest
among the 17 countries surveyed at an amount of 29cents which is bigger than South
Africas own standing at 14 cents. Now, using the figures in MYTO for 2014 as
published by NERC, the rates has gone up; but Nigerians are actually ready to pay
more because the total cost (including noise and other inconveniences) of using
generator in Nigeria is by far higher than supplies from the DISCOs.
Also, the amount of funds required to fund the investment required to drastically
improve power is huge; for example, to purchase 6million meters at N35, 000 each is
an investment of over N210, 000,000,000.
RECOMMENDATIONS
As a result of neglect over the decades, investment in our Power sector has not
matched growth in demand due to increase in population and economic activities and
so the challenges faced by the DISCOs are enormous and require fundamentally
different approaches to enable them rapidly improve power supply to consumers in
the country.
May, 2014
REFERENCES
[1] http://www.theguardianmobile.com/readNewsItem1.php?nid=19902
[2] http://data.worldbank.org/indicator/EG.ELC.PROD.KH/countries?
display=default [3] http://en.wikipedia.org/wiki/List_of_countries_by_population
[4] Electricity Consumers Paying for Investors Losses-Source The Punch, April 13,
2014
[5] http://www.thisdaylive.com/articles/know-your-disco-ibadan-electricity-
distributioncompany/172333/
[6] Market Structure and Competition: A cross-market Analysis of U.S. Electricity
Deregulation December 2003, Jane Bushnell, T. Mansur & Celeste Sarava [7]
http://businessdayonline.com/2014/02/eko-kano-discos-open-new-path-seek-offgrid-
power/#.U3o1fCgcZYE
[8] Power Distribution Problems on 11Kv Feeder Networks in Akure, Nigeria
November 2013, A.O. Melodi, P.T. Ogunboyo
[9] MYTO 2 By NERC Nigeria
http://www.nercng.org/index.php/nercdocuments/MYTO-2/