An Overview of the Future Energy Nigeria 2017 Conference

On the just concluded Future Energy Nigeria [FEN] 2017 (Formerly WAPIC) Conference (Part 2)
The Technical Workshop
 Reducing Distribution Losses
The reduction in the aggregate technical, collection, and commercial (ATC&C) losses in the NESI is fundamental to the survival of the electricity market and therefore the realization of incremental, stable and uninterrupted power supply in Nigeria. A systematic approach based on the output measure technique is about the only means available in the world of power systems to achieve a performance driven development of an efficient and functional electricity distribution system in the NESI.
This was a major focus in the technical workshop with Engineer Idowu Oyebanjo as the chairperson. In his opening remarks, Engineer Oyebanjo posited that an efficient, resilient, and financially healthy power sector is required for the sustainability of the NESI. With the levels of technical and non-technical losses in the power sector, the entire sector can become grounded. However, speakers at the technical workshop gave insight to well-prepared solutions that can assist with the reduction of losses on the distribution networks.
Speaker: Oladipupo Bello, Managing Director, Adroit Metering Services Limited, Nigeria
Topic : Resolving Challenges of Standard Transfer Specification (STS) in Nigeria through ‘Hosted” services.
Outline of points
1. Losses from payment systems and internal processes of DisCos largely ignored and can be significant.
2. Ghost Vending is popular in the market but NERC appears to be unaware of it or at best not doing anything to stem the tide of the ugly occurrence. This is a situation where third parties who have access to the STS codes of DisCos carry out illegal sales of tokens.
3. Robust monitoring an oversight by NERC is absent even as the illiquidity and debt profile of the NESI grow astronomically.
4. Knowledge gap in the sector is alarming and should be addressed.
5. A data driven system of processes must be implemented in NESI immediately to ensure that most information do not go unrecorded.
6. The previous NERC commissioners know a little about power systems. Too many Lawyers and “fancy bureaucrats” leading a sector as important as the power sector. Significant progress expected from the current crop of NERC commissioners with a larger proportion of engineers.
7. Corruption is the bane of the power sector as well as the larger society. Everyone everywhere looks for a way to exploit the system. The collusion of staff of electricity companies with consumers to by-pass meters, the paradox of estimated bills, entrenched poverty in the society, the believe that electricity should be a social service to be provided by the government, poor network infrastructure are some of the highlighted reasons for having up to 50% losses on the power network.
In summary, in view of the technicalities involved in resolving the multi-faceted and multi-dimensional challenges facing the DisCos, we hereby encourage the DisCos to embrace third-party applications such as the STS which is an open standard for pre-payment systems. If adopted as an industry strategy, we believe this will take the burden of responsibility from them because it is obviously more complex than they can handle.
 Speaker: Prince Olaoye Ghaffar, CEO, De Apps Technologies, Nigeria
Topic : Using technology to stop power theft by e-metering.
Engineer Idowu Oyebanjo expressed his concern over treatment of patents in Nigeria as innovative solutions for electricity theft his team has designed will require patent rights to be observed in Nigeria, otherwise, the required innovation and technological solutions will not come the way of NESI.
He also raised the following questions in the introduction to this session:
a) What are the major reasons why we have power theft?
b) What categories of persons/strata of society are grossly involved?
c) What solutions can be proposed?
d) What findings do we have from research into the methodologies used by electric utilities in other less developed countries having similar issues?

Outline of points
1. The perennial excuse of lack of affordability to pay for electricity consumed by citizens attendant to the general poverty levels in the society, sheer ignorance, impunity for theft, endemic corruption in the NESI and the wider Nigerian society, the believe that electricity should be provided as a social obligation from the government of an oil “rich” Nigeria are some of the reasons why power theft is rampant.
2. Eradicating electricity theft will align with the objectives of both PSRP and ERGP as this will boost the economy.
3. Power theft is not unique to Nigeria. Only the scale of widespread is alarming here.
In summary, electricity robbers make all consumers pay more and worsen the legacy of ongoing debts in the NESI. Unmetered customers involve in power theft but e-metering/smart metering is part of the solution.
Power theft is a global challenge, albeit to a larger scale in Sub-Sahara Africa. We can learn from the experiences of South Africa, Mozambique and Botswana on how to tackle this ugly headed cankerworm!
 Speaker: Franklin Ajaegbu, Programme Manager: Energy Efficiency Management, Port Harcourt Electricity Distribution Company, Nigeria.

Topic : Energy Efficiency as an underlying solution to energy deficiencies and collection losses.
This session discussed practical energy efficiency projects such as bulb exchange, enlightenment campaigns, energy audit, School-to-School training etc. The need for power system planning, load balancing and energy audit in realizing energy efficiency was discussed.
Resolving the Legacy of on-going Debts
During the stakeholders’ talk anchored by Dolapo Kukoyi, Partner, Detail Commercial Solicitors, an update was given on the constraints from the transmission and distribution networks leading to the ugly recurrence of load rejection in the NESI. The average industry debt in 2016 was put at 50% with a tariff deficit of 460 billion USD.
In reacting to this, Mr. Azu Obiaya of the Association of Nigerian Electricity Distributors (ANED) said we are in a big mess because of the lack of a cost reflective tariff as was promised DisCos prior to investing in the network business. He puts the cost reflective tariff to about eighty naira per unit as opposed to the thirty naira on average charged today. For example, the total market shortfall to August 2017 is 892 billion Naira at an average monthly shortfall of 47 billion Naira. This is because the DisCos only get about 30% of revenue collected. The market is a farce and should not have been declared. Every day is another legacy of debts for the next generation of Nigerians. The required investment to cause the change we want in the power sector will not come except we fix all the problems and issues that we have talked about in the last four years. He concluded by saying if we do nothing, we will still be talking about the same issues in the next five years.
When asked whether if a cost reflective tariff will solve the problem, Mr. Azu Obiaya did not respond but simply said investment had to be made.
Engineer Oyebanjo posited that the truth about a “cost reflective tariff” in the manner the DisCos want it will only mean lining their pockets because with the level of ATC&C losses on the network, no CRT will come to our aid.
On the issue of the current structure of the NESI, Mr Victor Udo, Senior Special Assistant to the Governor on Planning, Akwa Ibom State maintained that the idea of tinkering with the current structure to accommodate current realities and opportunities within the sector is a step in the right direction. Declaring the eligible customers, he says, will improve the performances of DisCos and increase the total aggregate generation capacity in the NESI. It is expected that there will be some investment in distribution system infrastructure, private sector participants will build power plants and licensed electricity traders will spring up. He stressed the need to allocate risks in the NESI and to articulate them with a view to derisking them. Such risks, he says include, the vandalization of gas pipelines, transmission network constraints, macroeconomic changes which affect the sector, regulatory uncertainties and induced changes, performance levels of DisCos to mention a few. On a positive note, the problems with the power sector present great opportunities for attracting investment according to Mr. Emeka Ofor of Nigerian Investment Promotion Commission (NIPC). Some of the latest incentives to attract investors to Nigeria include a tax holiday of 3-5 years and a pioneer status recognition.
The main questions to be answered include:
1. Why is the NESI crawling?
2. Why is the sector struggling since 2013?
3. How did we get insolvency?
4. Why don’t we have the required investment coming into Nigeria?
5. What can be done to ensure that the DisCos meet their performance targets?
6. What structure do we need?
7. How will the eligible customer criterion be implemented in the NESI?
8. Why are legacy debts recurrent?

….completed
Engineer Idowu Oyebanjo MNSE CEng MIET UK

 

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Highlights from the just concluded Future Energy Nigeria 2017 Conference

PART 1

The just concluded Future Energy Nigeria Conference for 2017 held at Eko Hotel and Suites, Lagos, Nigeria from 7 – 8 November has set a new dawn for the Nigeria Electricity Supply Industry (NESI). Engineer Idowu Oyebanjo, a UK Chartered Power System Engineer and MD, Idfon Power Engineering Consultants (iPEC), sets the tone for an industry wide historic shift in mindset for all Stakeholders in the NESI saying: “We must move away from talking about the known issues to proffering and implementing solutions”. He said he will expect that from now on, future power conferences in Nigeria will be solution-based.
The theme of the event aligns with the Power Sector Recovery Programme (PSRP) and FG’s plans to attract required investment from the private sector to ensure incremental, stable and uninterrupted electricity supply while promoting economic development opportunities across the country through the Economic and Recovery Growth Plan (ERGP). This can be achieved by focusing on solutions to practical issues surrounding financing power generation, transformation, transmission, distribution, supply, while diversifying the energy mix, closing the metering gap and increasing performance standards of all major stakeholders to mention but a few.
Apart from the strategic conference, the event showcased a pre-conference master class which provided financing options for Renewable Energy (RE) systems, detailing what financiers are looking for when funding a RE project.
The Strategic Conference
The Keynote address 1
What does the Economic Recovery and Growth Plan (ERGP) mean for the Nigerian Energy Sector?
Patrick Okigbo of Nextier Power in his speech highlighted the relationship between ERGP and PSRP while stating the conditions precedent that the Federal Government of Nigeria (FGN) must meet before the World Bank and affiliate financial institutions can grant Nigeria the required loan of 5.3 billion USD to combat the infrastructure, liquidity, and governance challenges the power sector faces. This, according to him, will require specific, strategic interventions by FGN and its regulatory agencies to reset the electricity market. To reset the NESI, immediate steps to take must include financial, operational (technical), governance and policy interventions.
The World Bank Group and others have stated time-bound conditions precedent for the disbursement of loans to FGN to include ensuring:
1. A minimum of 4000MW daily generation capacity in 2017.
2. DisCos’ performance and put in place credible business continuity plans in case DisCos fail.
3. Proper sector governance by appointing qualified and competent professionals from the private sector to lead sector agencies and boards.
4. Data driven processes for decision making across the sector.
5. Sacrosanctity of electricity market contracts.
6. A communication strategy that carries all stakeholders along and especially to have customer buy-in.
7. An FX policy for the power sector.
8. Increase in electricity access in the NESI using off-grid solutions.
9. Private sector investment by removing all barriers to investment including the implementation of a cost reflective tariff.
In reaction to the speech, the audience was perturbed by the fact that Nigeria with an external reserve of over 30 billion USD is seeking a loan of 2.7 billion USD from the World Bank group. Engineer Idowu Oyebanjo recommended that investment should be made in the distribution networks while regional power grids should be established for significant penetration of embedded generation in every part of the country as soon as possible. He further recommended that for the PSRP and ERGP to succeed, there is an urgent need to put in place a Power System Architect, a multi-disciplinary team of technocrats from diverse fields to coordinate the implementation of the program.
Everyone agreed that the time to act is now.
Keynote Address 2
A critical review of Nigerian Power Sector’s Legal/Regulatory Framework – Areas for Legislative Intervention
For the first time, the Nigerian National Assembly co-located the Future Energy Nigeria event to focus on the broad energy portfolio by bringing the entire value chain together for frank and honest discussions on strategies for overcoming funding challenges, capacity building and knowledge sharing between IOCs and Independent participants in the oil, gas, and power industry in Nigeria.
Senator Enyinnaya Abaribe, a passionate, prolific and unassuming distinguished Senator and chairman, Senate Committee on Power, hits the nail on the head, quoting from the holy books saying: “For all have sinned and have fallen short of the glory of God”. He said we must avoid the blame game we have witnessed in the last few years and move towards resolving issues and implementing solutions. In his characteristic manner, he summarized, quite quintessentially, the challenges of the power sector, the solutions as well as made the promise that Nigerians will get the support of the Legislative chamber. He opined that the robustness of the discussions during the FEN 2017 conference means that a public enquiry on Legislative interventions in the power sector should involve all stakeholders from the FEN 2017 conference among others.
To have the chairmen of the committees on power from the Senate and House of Representatives, His Excellency Senator Enyinnaya Abaribe and Honorable (Chief) Daniel Asuquo at the event proves that the Law makers in the country are aware of the problems in the power sector and are willing to tackle them head-on. Senator Enyinnaya Abaribe reiterated the relationship between the GDP of a nation and the quantum of electricity supply. He asked the question: What is the most efficient way to produce and let Nigerians have safe, secure, reliable and sufficient power? Engineer Idowu Oyebanjo responded that the creation of regional grids with the transmission network left in position for interconnectivity and economic transfer of electricity where possible is the veritable means to achieve the required progress in NESI. On the subject of RE, he maintained that all energy sources will be included in the future energy scenario for NESI. A separate legislation on RE is already before the National Assembly and a public enquiry about it should be expected pretty soon.
The Lawmakers promised that the inputs arising from the deliberations from this conference will be used to engage appropriate arms of the government.
Unbundling of the Transmission Company of Nigeria (TCN)
A search beam into the activities and role of TCN as the weakest link of the NESI brought the need for improved operational efficiency. Some stakeholders believe that with TCN remaining in the hands of the government with other segments of the NESI in private hands, full privatization or concessioning of the transmission network is inevitable as we move along towards the full liberalization of the Nigerian electricity market. The idea of concessioning the transmission network was deemed inappropriate in the short-to-medium term but can be considered in the medium-to-long term planning of the development of the power sector reform program.
Everyone agreed with Engineer Idowu Oyebanjo that a regional grid system with the transmission network used as and when required (for example as an interconnector) is the surest way to realize the immediate objectives of both the PSRP and ERGP. Continuing with investment in the transmission network will have a limited impact compared to using same funds to strengthen the distribution networks.
…….to be continued

Engineer Idowu Oyebanjo MNSE CEng MIET UK

CHALLENGES FACING NESI, SOLUTIONS AND LEGISLATIVE INTERVENTIONS

CHALLENGES FACING THE POWER SECTOR- POSSIBLE SOLUTIONS AND REQUIRED LEGISLATIVE INTERVENTIONS

CHALLENGES SUB-SECTORS AFFECTED PROPOSED SOLUTIONS MY COMMENTS LEGISLATIVE INTERVENTIONS
1. Policy & Governance framework All 1. Rules & Roadmaps to be clear.

2. Policy somersaults to be avoided.

3. Idle gas fields to be concessioned for development by willing generators.

4. Incentive to extend tax holiday to up to 15 years.

5. Exemption from duty on power equipment imported solely for power sector development.

6. Implementation of capital & investment allowance which can be carried forward and used after tax holiday.

7. Ensure a reliable transmission infrastructure that creates a level playing field for efficient and sustained private sector participation in NESI.

Commission a Power System Architect to develop a new electricity master plan for NESI which takes a holistic view of all the sub-sectors related to the generation, transmission, and distribution of electricity in Nigeria and ensures that the challenges facing the power sector today become history. 1. Commission a Power System Architect.

2. Convene an assembly of Nigerian professionals working in the electricity supply industries in developed economies that enjoy uninterrupted power supply such as the UK, USA, Canada, China, Europe etc and seek their support.

3. Follow through with the implementation of recommendations of Power System Architect based on inputs from all stakeholders.

4. Policy intervention required to ensure government subsidises tariff payments for consumers.

 

 

2. Regulatory NERC 1. A reconstitution of NERC to have people who understand power sector issues in key positions.

2. A larger percentage of NERC commissioners should be seasoned Power Systems Engineers.

The yet to be appointed Chairman of NERC should be a seasoned Power Systems Engineer to ensure the power sector recovery programme succeeds.

 

1. Ensure NERC is led by a seasoned Power System Engineer who has worked in a power system that works.

2. Ensure the full independence of the regulator.

3. NERC to enforce regulation that the GenCos should provide spinning reserves for effective frequency control by revision of ancillary services agreements.

4. Ensure that NERC commissioners are appointed or re-appointed before the expiration of the tenure of office of the current set of commissioners to avoid any lacuna in line with the EPSRA 2005.

 

3. Ambiguities in EPSRA All 1. Parameters for competition during post-privatisation stage to be made clearer. (S.25 & S.26)

2. The role of NBET during the transitional & medium term market stages to be clearly defined.

3. The roles of Energy Commission of Nigeria & The Federal Ministry of Power to be clearly defined.

4. Electricity theft – S.94(3) does not directly address electricity theft. There is need for a robust regulation on electricity theft to curb growing collection losses.

5. Licensee tenures – S.71 provides that the maximum term to be issued per licence is a maximum of 10 years which can be extended only for another 5 years at NERC’s discretion where it is in the public interest to do so. This does not encourage long-term investment.

6. Limitation on fines & penalties that can be issued by NERC to deter defaulting operators in the industry to be reviewed.

7. Concurrent powers of Federal & State legislation with respect to electricity generation, transmission and distribution.

8. The centralised and poor transmission network system needs to be Decentralised.

9. Captive power is restrictive to self-generation for self-consumption without the option to sell to a third party as against the industry norm of plants being owned and operated by third party.

The proposed Power System Architecture Project will examine this and more in detail and resolve bottlenecks. 1. Ensure proper delineation of the powers of NERC and the Minister of Power.

2. Avoid multiplicity of roles in NESI such as in NEMSA versus NERC, Ministry of Environment versus Ministry of Power on Renewable Energy etc.

3. Facilitate the comprehensive review of the EPSRA 2005 by the Power System Architect and the implementation of its recommendations.

4. Finance All 1. Funding is required to transit Nigeria from an oil dependent economy to a more diversified one by developing gas-to-power infrastructure.

2. FG to approach donor organizations that are highly vested such as World Bank, IFC, and AFDB to provide support.

1. Expedite confirmation hearings of heads of power sector MDAs.

2. Approval of funding for network development based on the proposition of the Power System Architect.

3. Support for the power sector recovery plan.

4. Adoption of laws and regulations aimed at removing hurdles to the development and financing of power projects.

5. Indebtedness DisCos 1. Address the indebtedness from acquisition loan and CBN intervention capable of impairing DisCos from meeting their obligations in the short term & sourcing new facilities for network investment.

2. Address the inability of DisCos to borrow money from local commercial banks to finance the 2016 tariff deficit has worsened NESI.

3. Address the negative change in the projected macro-economic variables used in the tariff assumption.

4. Whereas CBN provided the agreed financial intervention to NESI, NBET did not raise the required power sector bond to aid financing deficits in 2016 and beyond. NESI will be in perpetual deficit except there is a change in the way the industry is structured.

1. CBN to allow Commercial banks to come together under a lending club deal, aggregate the loan and securitise it with some credit enhancement through Federal Government’s partial or total guarantee.

2. The commercial banks will thereafter sell off the loans off their books as they convert loan to investment.

3. Reduction of interest rate charged by commercial banks relative to the prevailing rate during the time of privatisation.

 

GenCos Debts owed by NBET and Market Operator must be paid to avoid the collapse of the electricity market. This is a “bottomless” pit. Cost will be recurring until the transmission grid is reinforced. Whereas CBN provided the agreed financial intervention to NESI, NBET did not raise the required power sector bond to aid financing deficits in 2016 and beyond. NESI will be in perpetual deficit the way the system is structure
GenCos, TCN, DisCos Rising cost of revenue shortfall & increasing cost of project management threaten the survival of the sector reforms. There is need to find credible solutions that deploy best practices in project management and due diligence.

 

Power System Architect to ensure illiquidity is addressed while deploying Project Management techniques as much as possible.
6. Forex GenCos, TCN, DisCos 1. Most power equipment, especially the long lead items, are sourced from international markets and therefore cost is susceptible to movements in the foreign exchange market.

2. Misalignment of the value chain must be corrected – GenCos’ costs under PPA must be aligned with MYTO

1.      Approve special concessionary rates for operators to source Forex from commercial Banks while creating a Forex stabilization fund.

2.      Approve that power sector operators be given preferential treatment in Forex allocation.

 

7. Gas GenCos 1. Insufficient gas supplies to existing gas fired plants and the over 11000MW of generation capacity in development has to be addressed.

2. Idle gas fields to be allocated to willing generators for development. Such must be for dedicated gas-to-power projects.

3. CPG projects are complex and demand experience, expertise and patience. Therefore, project developers need to be in control from generation through distribution to metering for success.

4. Gas-to-power infrastructure and transportation network grossly inadequate. Investment required for dedicated gas-to-power projects.

5. Off-shore and on-shore gas development by government to be for dedicated gas-to- power generation.

 

1. Changes must be made to the existing out-dated regulatory framework. Such regulations for power and gas must be synchronised and subjected to periodical reviews in line with realities to provide enabling environment to investors.

2. Price of gas to be in naira.

3. Legislation must be in place to fast track network upgrades as well as punishment for vandalism through the courts.

8. Energy Mix GenCos 1. Nigeria should not depend only on gas and hydro but should explore other sources such as solar, wind, nuclear, coal, biogas, waste-to-power, waves and tidal barrages, landfill gas etc.

2. Coal-to-power generation should be encouraged in a way that guarantees sustainability and environmental friendliness.

1. Develop a mechanism for recovery of developing infrastructure needed for power plants to function optimally.

2. Setup Power and Steel funds for developers to access cheap funds.

3. Ensure a multi-decade policy to support a deliberate development of power infrastructure in Nigeria by commissioning a Power System Architect.

4. Facilitate the implementation of an energy policy on renewable and sustainable electricity systems.

5. Encourage research in Energy Systems.

9. Enforcement of Standards & Regulations All 1. Power system must be properly planned, controlled, operated and protected in such a manner that safety of lives and property is ensured.

2. NEMSA staff to be empowered to effectively enforce standards.

10. Human Capital All A large percentage of the Power Sector workforce is retiring soon. A deliberate development and optimal utilization of Nigerian human resources in the sector is key.

 

1. Set up a specialised NVQ for the sector.

2. Set up a University for the Power Sector. Programme to be coordinated by the System Architect.

 

11. Technology All 1. Renewable energy technology and sustainable electricity systems to be aggressively pursued.

2. Research and development in the area of power systems to be given adequate financial support.

12. Technical TCN & DisCos 1. Weak transmission & distribution networks to be revamped.

2. Steady investment in the networks monitored by the output measure technique.

3. Involve PPP, debt financing, contractor financing & project financing.

1. Quick win by establishing regional grids to significantly reduce network losses in the transmission network.

2. System Architect to review the future role of the transmission network in NESI by carrying out a comprehensive study.

3. Implement demand response strategies such as peak shifting, peak shaving, valley filling etc.

4. Implement a range of pricing and incentive/penalty regimes to drive efficiency in NESI.

5. Rural Electrification should be a key part of policy intervention for quick wins.

1. Radically reconfigure the electricity sector by decentralising the weak and dilapidated transmission network for distributed generation solutions nationwide.

2. Facilitate the exit of non-/under-performing operators and the entry of new capable and reputable game changers in NESI.

13. Metering DisCos 1. DisCos are unable to efficiently distribute electricity and collect payment for it hence a third-party funding of customer metering in a transparent NESI is required.

2. Technology to be deployed.

3. under-utilisation of local capacity to be addressed.

4. Create liquidity to attract vendor financing and special purpose vehicle funding such as the pension funds

5. Accurate accounting of every single unit of electricity generated, transmitted and distributed is the most fundamental element of sustainable operations.

 

 

1. If there is no system to recoup their investment, true investors will not approach NESI.

2. Ensure metering sub-sector is profitable for investors.

3. Use of pension funds in the current NESI will lead to painful end to Pensioners. The fundamental issues around inefficiency of the operators must be addressed by the System Architect.

4. Ensure local content is prioritised in the meter acquisition process.

5. Create a sustainable structured payment mechanism.

 

1. Compel DisCos to source meters locally provided technical specifications are met.

2. Promote technological growth of the local metering industry.

3. Facilitate pricing review for meters in a price-resistant market.

14. Non-Technical

·         Meter by-pass

·         Electricity theft

·         Non-payments of electricity bills by MDAs.

·         Collusion by staff of electricity companies with consumers to short-change the system.

·         Vandalism

·         Militancy

·         Poverty

 

DisCos 1. Technology driven solution required.

2. Punishment for stealing electricity to be so severe that it must be a deterrent.

3. Source deduction of payments by MDAs.

 

 

 

 

 

 

 

1. Establish an Health Safety Executive for NESI.

2. Establish a special court for the power sector to ensure immediate trial of defaulters in the power sector.

3. Discourage estimated billing.

4. Resolve the Niger-Delta militancy and the insurgency in the North-East.

5. Resolve issues around the vandalization of critical power infrastructure, right of way and host communities, erosion of towers etc.

 

15. Load rejection

 

TCN & DisCos Load rejection occurs because given gas availability, available generation capacity is greater than the wheeling capacity of both transmission & distribution networks.
16. Cost-Reflective Tariffs (CRT) All 1. The 3 conditions for adjustment in tariffs (inflation, gas price, exchange rate) as specified in licence conditions have taken place without a change in tariff.

2. Power System architect to develop a credible cost reflective tariff adjustment mechanism that will cover cost of operations and production plus adequate ROI so as to attract investment into the sector.

3. CRT must be established transparently and must be based on efficient costs.

1. Power System Architect to implement.

2. The three arms of government to cooperate on this matter and the buy-ins of all key stakeholders, especially the consumers, to be sought ab-initio.

3. Legislative intervention that establishes a power system architect that facilitates/ supports regulatory oversight functions which engenders firm monitoring and performance benchmarking methodology to enhance transparency in the sector, set and monitor KPIs of operators with rewards and penalty used to drive investment in the network by the output measure technique.

4. Guide against financial under-reporting by operators.

1. Co-operation between the three arms of government to implement a credible tariff adjustment mechanism that will be acceptable to the consumers.

2. Ensure NERC is giving full autonomy to bark and to bite erring operators.

3. CRT must be established transparently and based on efficient costs. It must not burden the poor consumers.

4. MYTO tariff design to be reviewed by the Power System Architect in such a way that inherent deficiencies are addressed.

17. Illiquidity All 1. Tariff adjustment

2. Government to settle estimated deficit by MDAs after verification of claims.

3. Treatment of volumetric energy risk.

4. Sacrosanctity of contract and the signing of back-to-back contracts.

5. Interim fund management.

6. Targeted intervention to reduce the operating cost of investors and thereby reduce consumer tariffs.

7. Implementing liquidity & payment solution that recognises that improvement of DisCos operational efficiency is the most viable way for the sustained growth of the NESI

 

 

1. Aggregate Technical, Commercial & Collection losses in NESI means that most of the generated electricity cannot be accounted for once they pass through the networks of wires, transformers and plants.

2. Legacy issues of metering, meter by-pass, estimated billing, corruption, poverty and so on means DisCos have had poor monthly remittances to the bulk electricity trader for the electricity they have received.

3. Massive investment in metering, reduction in network losses, discontinuation of estimated billing, encouraging transparency in the collection and remittance of revenues.

1. Ensure KPIs are set for operators followed by a firm monitoring of performances.

2. Power System Architect to facilitate the development of a national e-payment portal through customers in NESI can pay for services which will be transparent to approved stakeholders.

3. NERC and CBN to mandate all banks to integrate all non-designated accounts by DisCos for energy payments into a common accounting system while prohibiting all cash-based transactions.

4. Facilitate the capitalization of government equity (40%) in the DisCos to address part of the liquidity problems.

 

FELA AND THE POWER SECTOR

FELA AND THE NIGERIAN POWER SECTOR

It is now two decades that Afrobeat legend and king of African Music Fela Anikulapo Kuti died but his legacies live on. In order to ensure that future generations of Nigerians continue to recognise that a “prophet” once walked the land, it is important to show how Fela, through his music, described many of the things we are witnessing today in a prophetic career spanning over three decades.

The confusion in the Nigerian Electricity Supply Industry (NESI) and the general mood of the larger Nigerian society was well captured in Fela’s “Confusion Break Bone” where he opined that the consequence of a lack of an independent regulator to look after the different stakeholders in the Power Sector will lead to policy somersaults, chaos, illiquidity, distrust, fraud, corruption, estimated billing, collusion and many other vices which characterise the NESI with seeming no way out today. The greatest disservice to the NESI was allowing non-Power System Engineers to be in charge of the Power Sector for the past decade. Only until recently have Engineers been put in the right number in the Commission (NERC) that regulates the activities of stakeholders in the Power Sector. The idea of not putting square pegs in square holes should have naturally been foreign to Nigeria, but over the years, politicisation of everything, the celebration of mediocrity and the quota system misnomer has led us to this disaster or “pafuka” as Fela puts it.

The power sector is at crossroad asking for investment in the network by the operators at the same time introducing the eligible customers within the same network. Crossroad is when you ask for Unity, Restructuring, and Separation at the same time. Fela Anikulapo Kuti captured it nicely in his 1975 “Confusion Break Bone” album when he says:

“I sing about one street for Lagos, called “Oju Elegba”, I take am compare how Nigeria be, one crossroad in center town, larudu regbeke, regbeke lau, lau, lau, lau. For “Oju Elegba”, moto dey come from East (calls from every section of the country in this case), moto dey come from West, moto dey come from North, moto dey come from South, and police man no dey for center, na confusion be dat ee-oh.”

Fela continues, “my people dey say Nigeria done dey, but me as I see am, I know say Nigeria go-go down, how country go dey make money, make people of country no see money?” Yes, it is not inconceivable that Nigerians should enjoy uninterrupted power supply free of charge as a social service judging by how much people steal and even stash in their farms, other rooms and cupboards with increasing number doing so with impunity.

“When I say confusion, everything out of-e control, when everything out of-e control-e go be say, e “pafuka”-oh” as Fela described it suggests that the confusion in the Power Sector will soon lead to the unwanted situation where the GenCos and DisCos will declare a Force Majeure and hand over the Power Sector to an unprepared government as they cannot continue to wallow in debt doing business in Nigeria except if a radical reconfiguration of the NESI takes place. For now, many-a-decision taken in the NESI amounts to opposing and counteracting ventures. Given 701billion Naira subsidy to generate more electricity into a very lossy transmission network will lead to the same consequence – illiquidity. Not addressing the aggregate technical, commercial, and collection losses (ATC&C) in the electricity value chain and injecting subsidy is ridiculous, myopic and a means to loot money to say the least. It’s like pouring water into a basket and this is happening because those leading the power sector are not Power Engineers.

Fela recognised that the problem with NESI is huge as he said: “my problem e no small at all, nothing de for me to sing about. If something good de I go sing, everything e de e no de good. If I sing say, food no de, na old news be that. If I sing say, water no de, na old news be that. If I sing say, electric light no de, na old news be that. Na old old, old news be that o. Na old news be that. I can’t sing say, “infilation”, mismanagement, stealing by government,
na old news be that. Na old, old, old news be that o. The problems still de paparapa (no end in sight to the cry of Up NEPA!)

Then, because of the absence of stable electricity supply, there will exist vices and robbery in different forms. This will include, says Fela, leg robbery, pick-pockets, armed robbery with guns, kidnapping, head robbery (executive, legislative and Judiciary), authority stealing by public office holders- free stealing will be the norm and generally acceptable policy in the country!

Hear him in another of his 1980 hits “Authority Stealing Pass Armed Robbery”

“Authority people dem go de steal, public contribute plenty money. Na him authority people de steal. Authority man no de pick pocket, na plenty cash him go de pick. Armed robber him need gun, authority man him need pen. Authority man in charge of money, him no need gun, him need pen. Pen get power, gun no get. If gun steal eighty thousand naira (80,000 Naira), pen go steal two billion naira (2 billion Naira). You no go hear dem shout: thief, thief, thief. You no go hear them shout at all: rogue, rogue, rogue. You no go hear dem say: robber robber…”

There must be a reason why we have not been told what has or will become of all the looted funds recovered from mid-2015 to date!!! Will they be used in 2019?

Fela mentioned the sort of words that very readily deceive Nigerians. So, when next you hear these words, please take cover.

Mis-appropriation, yes, yes, yes, mal-administration, yes, yes, yes, nepotism, yes, yes, yes, mitigation, yes, yes, yes, make I remember another one wey dem de use, “defraudulment”, “forgeralization”, embezzlement, vilification, mismanagement, public enquiry, yes, yes, yes. Authority stealing pass armed robbery. We African must do something about this nonsense, yes, yes, yes. We say we must do something about this nonsense. Because now authority stealing pass armed robbery…”

Note that according to Fela, Pafuka (the wanton and deliberate destruction of established norms, values and institutions) will eventually kill Nigeria- Pafuka na quench!!

In a direct hit, Fela in the Egypt 80 expose´ wondered why the electricity conundrum existed. He described its appearance as one of the vocabularies of problems in the lips of Nigerians back then as happening “just Like that”. In the song written about the problem of lack of electricity “Just Like that” culled from his “Egypt ‘80” performance, Fela said: “Akuba, oroyan (2ce), white man rule us for many years we get electricity constantly, our people come take over dem come build kainji dam. Dem come build the dam finish electricity come stop. One year, two years, twelve years till now no electricity for town. Just Like That (x10)”.

When the Minister of Power says: “All Power belong to God”, I believe as Fela expressed it in one of his Egypt 80 albums “Overtake Don Overtake Overtake [ODOO]”: “the reasons for our suffer e don de show hin face to us”. When everything scatters, it will be as he puts it in his 1975 songs built on instrumental interplay between electric keyboards, horns and other percussion instruments “Everything Scatter” where he says: “before you know, commotion don start, big trouble, big argument, big fight, big everything, commotion de go, commotion de come, fight de start, fight de stop, trouble de turn round and round…”

The matter of solving the electricity problem in Nigeria by way of the privatization of the public utility into the private pockets of cronies is a big thing. Fela saw this coming and he alluded to it in his 1981 album “unknown soldier” when he said: “This thing wey happen, happen for my country. Na big, big, thing. First time in the whole world. If you hear the name, you go know. Government magic. Tell me the name now. Government magic! Them go dabaru everything, them go turn green into white, them go turn red into blue, Water dey go, water dey come. Them go turn electric to candle. Government magic….” For him, it was not all about complaining as he suggested that the abundance of natural resources in Nigeria should put the matter of electricity to rest. In his 1975 song “Water, e no get enemy”, he encouraged hydro power generation from our river basins. Hear him say:”Ko s’ohun to’le se k’o ma lo’mi o, (that is there is nothing you can do without water), ko s’ohun to’le se k’o ma lo’mi o, omi o l’ota o, water, e no get enemy! Water, e no get enemy, omi o l’ota o, I dey talk of Black man power. I say water, e no get enemy”.

Fela himself asked the pertinent question albeit rhetorically in his famous collection of songs from 1973, 1975 and 1977 but released in 1987 “Black man’s cry”. He asked:“Nijo wo la ma bo o o, l’oko eru? (that is, when will we become free of this NEPA, electricity etc problems?). He was confident of the answer as he said: “A a bo njokan o, eh, l’oko eru, a o bo njokan o o, l’oko eru, a o bo njokan o” There is light at the end of the tunnel afterall!!!
We are all victims of circumstances. Fela, in his Africa 70 series “Swegbe and Pako”, described the problem with the Power Sector when he said: “Tailor wey dey sew like carpenter na Swegbe eh (Na Swegbe oooh), Doctor wey dey do like a Lawyer na Swegbe eh (Na Swegbe oooh), Lawyer wey dey talkie like a Doctor na Swegbe eh (Na Swegbe oooh), Commissioner wey no know him work, na Swegbe eh (Na Swegbe oooh). We don finish for swegbe, now na Pako. Carpenter wey no know him work, na Pako oh (Na Pako oooh), Tailor wey dey sew like Carpenter, na Pako oh (Na Pako oooh), Lawyer wey dey talkie like a Doctor na Pako ohhh (Na Pako oooh), Doctor wey dey do like a Lawyer na Pako oh (Na Pako oooh), Commissioner wey no know him work, na Pako oh (Na Pako oooh). If you be pako, you be swegbe (Na Swegbe oooh). If you give, you be pako (Na Pako oooh). Swegbe na swegbe ehh eh (Na Swegbe oooh). Pako na pako oohh (Na Pako oooh). This is the problem with not putting people in their area of specializations when you assign tasks based on quota system.

There is need to take a step back and get the power sector right once and for all and this is a decision Nigerians have to take. Fela in his album “let’s start” first recorded in 1971 and later 1978, says “je ka bere”! Let’s take action!

 
By Idowu Oyebanjo

PROPHETIC DESCRIPTION- NIGERIA

A prophetic description of Nigeria by Abami Eda-Fela Anikulapo Kuti in “Confusion Break Bone”

My people talk say Nigeria don de, but me as I see am, I know say Nigeria go go down

How country go de make money, make people of country no see money?

Larudu regbeke, regbeke lau

Confusion (when everything is out of control) and Pafuka (comatose, failed or final state of the nation) starts with …..

Pafuka fit be hospitals, police stations, mortuaries etc

Then there will be many problems

My problem e no small at all, nothing de for me to sing about.

If something good de I go sing, everything e de e no de good

If I sing say, food no de
na old news be that

If I sing say, water no de
na old news be that

If I sing say, electric light no de
na old news be that

Na old old old news be that o, Na old news be that
I can’t sing say, “infilation”, mismanagement, stealing by government
na old news be that. Na old, old, old news be that o,

The problems still de paparapa

Then, there will exist vices and robbery in different forms

Leg robbery, pick-pockets, armed robbery with guns, kidnapping, head robbery (executive, legislative and Judiciary), authority stealing by public office holders- free stealing will be the country policy!

Note that Pafuka (the wanton and deliberate destruction of established norms, values and institutions) will eventually kill Nigeria- Pafuka na quench!!

 

Nigeria at crossroad

Crossroad is when you ask for Unity, Restructuring, and Separation at the same time
Fela Anikulapo Kuti captured it nicely in his “Confusion Break Bone” album when he says:

I sing about one street for Lagos
Called “Oju Elegba”
I take am compare how Nigeria be
One crossroad in center town

LARUDU REGBEKE (after each line)
Regbeke Lau, Lau, lau, lau

For “Oju Elegba”
For “Oju Elegba”
For “Oju Elegba”
For “Oju Elegba”
Moto dey come from East(calls from every section in this case)
Moto dey come from West
Moto dey come from North
Moto dey come from South
And police man no dey for center (not directing traffic- there are no traffic lights in Lagos)
Na confusion be dat ee-oh

POWER SECTOR RECOVERY PROGRAMME – PART 2 Implementing the Recovery Programme

The Federal Government (FG) of Nigeria, working the World Bank and other partners, has set out the power sector recovery programme since April 2017. Its objectives include but not limited to the strengthening of the sector’s governance framework and electricity market, improvement in the quality and security of power supply, encouraging transparency, probity and accountability by all stakeholders with a clear focus on service delivery to customers. The FG aims to achieve all of these by means of various financial, technical, operational, governance and policy interventions.

The implementation of the power sector recovery programme will require a collaboration and commitment which responds to the unique challenges facing NESI. This can only be delivered by a power system architect – a team of multi-disciplinary technocrats that will draw on their respective strengths and engage with a broad community of stakeholders and other specialists. Of utmost importance in this regard is the technical expertise, knowledge and experience of seasoned power system professionals in the established power industry (including retirees) who must obtain a balance between commercial and customer requirements with technical considerations. In addition, the perspectives of the domestic, industrial and commercial consumers, policy makers and their supporting agencies, generator importers, vested interests, manufacturers of equipment and those who may be involved at any point in the electricity supply chain must be well accommodated.

The power sector is undergoing a significant change in landscape at an unprecedented rate and it is therefore expedient to create the right conditions to encourage needed investment and innovation to move the sector to the next level. The challenges facing NESI are different from those of developed economies and must be treated based on its unique characteristics!

The main drivers for the proposed power system architecture include energy sufficiency and sustainability, quality and security of electricity supply, economic development, competitive market mechanism, communication and transparency, technology, data management, cost reflective tariff (CRT), customer focused service delivery, policy and governance framework, training, safety, environment etc.

The successful implementation of the power sector recovery programme requires overcoming technical, governance, commercial and other barriers.

Technical Barriers

The power network is weak and significant upgrade is required to realise the objectives of the recovery programme. Experienced sector technocrats have reached advanced age with a majority now retired following the privatisation of PHCN in 2013. The lack of technical expertise will affect the proper implementation of upgrades to power infrastructure or assets, including the IT and communication backbone required. In addition, the current state of the transmission and distribution networks is such that financial intervention only at the generation end of the value chain will not have any noticeable impact. The total technical losses on the network means that electricity generated will never get to the customers except a revamped network is used. Commercial and collection losses add volumes to this. Loss reduction is highly technical and it is a specialist area that technocrats will have to resolve. It is doubtful that the current operators of these networks can meet their loss reduction obligations for different reasons.

Governance Barriers

Policy somersaults experienced in the sector since privatisation in 2013 has created investor scare over the years. Therefore, emerging policies, legislations, regulatory independence, and targeted industry codes (technical and non-technical) are required to restore investors’ lost confidence. New codes will have to be introduced especially as it relates to energy sufficiency and efficiency, environmental impact, including the role of renewable and untapped fossil-fuel sources. The implementation of the policy on eligible customers must be such that investors and key stakeholders such as the DisCos and TCN must feel comfortable with their fears and concerns promptly addressed. The disagreements relating to the reconstitution of the boards of the DisCos, financial transparency and recapitalisation also need to be resolved.

Significant investment in gas-to-power infrastructure plus measures to ensure the safety of the assets is a major pre-requisite for the successful implementation of the recovery programme. There must be a concerted effort to stem the tide of militancy, pollution of the environment, including the vandalization of gas pipelines and power infrastructure. Localization of the industry and resources thereof is mandatory. Host communities should be made key stakeholders to the extent that the security of the infrastructure will be paramount to them. In the meanwhile, alternative methods such as LNG, CNG, LPG and mobile gas transportation should be considered for gas-to-power. Rather than gas flaring, effort must be made to increase the volume of gas available to gas-fired plants dotted around the country. A quick passage and implementation of the PIGB is apt in this regard.

Commercial Barriers

The Nigerian electricity market was declared pre-maturely. However, if it cannot be scrapped, significant efforts will be required to strengthen it. Regulators will have to be trained sufficiently to handle the dynamics and peculiarities of an electricity market. Anomalies in the commercial framework, payment settlement systems, existing contracts, and market structure have to be dealt with. The entire information and communication management strategy required for a functional electricity market needs to be reviewed and implemented.

Among the pre-conditions for release of loans from the World Bank and partners are the issues of cost-reflective tariffs, metering of customers and mechanism for repayment of loans. These have to be dealt with.

Another barrier to a successful implementation includes the absence of special courts to prosecute individuals or company representatives who act in a manner that undermines the safety and smooth running of NESI including those involved in collusion with staff of electricity companies, the theft or by-pass of electricity, those responsible for electrocution, manufacturers and vendors who facilitate the importation, design, construction and installation of sub-standard components etc.

The Nigerian power system will become more complex as times progresses and a “whole-system” or holistic approach is the best way to achieve a vibrant and healthy power sector. The various aspects of the power sector recovery programme are interdependent and only a power system architect or similarly constituted body can deliver this programme in a systematic, efficient and timely manner.

A close monitoring and continuous review of the implementation of this complex and urgent power sector recovery programme by a formally constituted power system architect is now on a critical path.