A SWOT ANALYSIS OF THE NEW ELECTRICITY TARIFF IN NIGERIA (Part 2)
By Idowu Oyebanjo
Localisation of services
In the last few years, there has been increased agitation for localisation of services in the power sector especially in the local manufacture of smart meters. Local manufacturers of meters now have an opportunity to showcase their capability under the local content initiative. This will lead to the creation of jobs and business opportunities as marketers of electricity recharge cards or vouchers just as experienced in the Telecommunication sector will spring up along with companies involved in metering and customer billing systems. A critical element that will hold NESI in good steer is the need for a global procurement strategy or culture where stakeholders leverage on the volume of purchase to reduce cost. In the atmosphere of cuts, this will serve the industry well. This can start now. As Discos seek to purchase meters in bulk, they should negotiate a fair deal in view of the number of meters they will have to purchase. Consultants and service providers will not be left out as installation, operation, and required maintenance services for meters procured will be sourced. Generally speaking, there is need to establish the Joint Qualification System (JQS) and register of suitably pre-qualified practitioners to provide these services by the Nigerian Content Joint Consultative forum.
Other potential opportunities include but not limited to the provision of Demand Side Response and Distributed Energy Resources (DERs), pursuit of revenue protection initiatives by Discos, energy efficiency and energy conservation (as those who waste electricity will now conserve it and therefore contribute to increased availability of power elsewhere on the network), increased network operational efficiency, phased introduction of feed-in-tariffs (as consumers deploy renewable generation on their roofs), increased penetration of embedded generation with the attendant reduction in network losses and accelerated increase in availability of electricity supply.
Reconstitution of NERC
The act which established NERC does not provide for the absence of a regulator and even though this has been violated in the past, it is important to urgently appoint new NERC commissioners to oversee the affairs of NESI. As can be seen from the foregoing, there is an urgent need to reconstitute the regulator to have more technocrats than lawyers, economists and Accountants who are, by the way, also required. Role specific training needs to be provided as necessary. The regulator has to be able to bark and bite!!!
Holding Discos Accountable
In allowing Discos to pass their costs to consumers, the government through NERC has asked for certain service level agreements (SLAs) from the Discos. It is very important that the regulator is able to demand accountability from them going forward. NERC needs to set KPIs to be monitored and enforced. This, in the very least will include the distribution code which they have signed to as part of their licence conditions. NERC can use incentives and penalties to drive the development of NESI and make the privatisation process a success providing the desired model for other soon to be privatised public utilities, as well as the rest of Africa – An Opportunity for Nigeria to show leadership!
Absence of a customer-friendly regulatory regime
The whole purpose of an electric power system is to provide electricity to consumers. A power system is only effective if the consumers are happy and satisfied with the level of service received. Hence, a key measure of success of the privatisation process is the level of customer satisfaction over time. NERC should develop an interim and long term customer engagement and charging mechanisms such as the long run incremental cost model accounting for network utilisation factors, contingency analysis, peak demand and so on. NERC to further monitor investment in loss reduction strategies to ensure consumers are not short-changed for longer than necessary.
Absence of an Ombudsman for the Power Sector
An Ombudsman for the power sector is urgently required to accelerate judicial activities related to activities such as electricity theft and electrocution due to safety and regulatory breaches within NESI so as to bring to book any key stakeholder found wanting or culpable of actions that have the potential to disrupt the nascent privatisation of the NESI.
Government’s Body Language
In the recent past, Nigeria already built up a negative history of one government reversing sales of assets and public utilities sold to private investors by their predecessor. Hence, investors are generally jittery about putting their monies in Nigeria. This negative image can be gradually repaired by the government’s body language and actions. In this regard, government needs to provide unfettered assurance and guarantee that it has no intention to truncate the privatisation process so that Discos can begin to invest in customer metering and the much needed network reinforcement that will yield increased availability of stable electricity supply.
Diversified Energy portfolio
The world is a global village and with key players in the energy sector looking for alternative forms of energy, the reform process will suffer major setbacks without the diversification of the portfolio of energy sources for power generation. There is much to be gained from the international community by way of finance and foreign direct investment if the government increases the portfolio of energy sources to be tapped for electricity generation. For example, government could include, as part of the voluntary emissions reduction targets to address “climate change”, the reduction from the losses within the Nigerian power and gas network. Using the baseline values recorded in NESI, it is easy to attract funding from promises made by developed economies to assist developing nations to adapt to the effect of the so called climate change. Government can do more in the home front to encourage the increased deployment of diverse energy resources for generation of electricity especially for micro grid applications – off grid solar, hydro, coal etc. 55% of Nigerians who are yet to be connected to the grid can therefore have it without recourse to the national grid. A quick win!!!
As generation increases, the weakness of the Nigerian power transmission network will be revealed. Hence, it is better to accelerate the revamping of the ailing transmission and distribution networks at a rate that is commensurate with the growth in aggregate installed generation capacity. This means there is need to conclude the identified transmission projects that will ensure that the country’s transmission capacity is at all times greater than the aggregate connected generation capacity. Project management must be deployed. Network re-configuration as a full-mesh with significant levels of automation will help.
Security of Lives and Infrastructure
There is no gain saying that there can be no significant development of NESI if attention is not giving to security of lives, power equipment, gas pipelines and power network infrastructure.
This article conccludes.
Idowu Oyebanjo CEng MNSE MIET