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.

POWER SECTOR RECOVERY PROGRAMME – PART 1 The case for a Power System Architect

There is no doubt that the challenges facing the electricity industry is huge even as all but the Transmission Network have become private concerns. There are fundamental changes now taking place which will define the general outlook of the Nigerian Power System in the future as the power grid becomes further unbundled and privatised such that the traditionally integrated and centrally dispatched energy system becomes a largely distributed and more complex architecture. It is fair to say that today’s technical and regulatory governance framework is grossly inadequate to manage the seamless integration of the different stakeholders and functions within the Nigerian Electricity Supply Industry (NESI) which are largely under differing ownerships. This has the potential to lead to disaster and chaos in the future if not addressed now. One of the first things required to be done is to establish an independent expert group to ensure an holistic approach to the phased development of NESI as it is becoming more than obvious to the blind that a “whole-System” approach is what is needed to address the challenges facing the industry. The recommended steering group to address the mechanisms for whole-system integration should be made up of a panel of technical experts from the Transmission and Distribution Network companies, consultants, academia, NERC, BPE, NBET, IPPs, Nigerian Gas Company, NNPC, NEMSA, MAN, data and ICT companies, the Nigerian Electricity Consumers’ forum, SON and so on, who have practical experience of the electricity supply business. The aim of the expert group is to assist in the building of an integrated perspective for the planning and operation of the future electricity network, ensuring not only technical performance but also the opportunities for jobs and exports (technical and materials), identifying issues, defining the questions to be answered, clarifying the parties accountable, obtaining synergies and highlighting areas of relevance to national policy-making.

For most complex systems (which electrical power system is one), there is often a gap between those who specify what the whole system is required to achieve and the plethora of contractors, design authorities, operators, and other technical specialists who provide the hardware, software and other technical skills to construct and run the many sub-systems that together form the whole. It must be mentioned heretofore that neither the transition electricity market nor the free electricity market alone will be able to shape the structure, supply chain and system architecture for the provision of goods and services within the NESI. Hence, it has to be stated that this expert group will provide the co-ordination and the glue between established parties and new entrants, including generators, network users and operators, to facilitate the technical operation and the market mechanisms in a multi-party complex system like the NESI.

The new architecture required to meet the challenges of the NESI would need to develop a “Power System Framework” to address whole-system issues plaguing the NESI and this can only be provided by what we will term a “System Architect”. The system architect gives a purposeful direction in the immediate and future development of the power network infrastructure based on defined codes, standards, and processes that enable seamless movement of information and operational instructions. The system architect thus takes responsibility for the correct functioning of the architecture of the whole system.

The pertinent question therefore is “Who or what is the System Architect?”

The system architect is a separately defined entity that would take a whole-system and long-term responsibility for developing and agreeing the framework of architectures, standards, protocols, and guidelines needed to ensure seamless technical integration of the sub-systems of the industry players and parties, enabling a seamless response to the challenges arising from policy imperatives as they emerge over the coming decades. This single entity will be responsible for the management of the complexity of the evolving power system architecture in the public interest on behalf of government. Solutions for system integration challenges should be developed in consultation with key industry stakeholders while considering whole-system cost-benefit across the supply chain. The system architect would also have advisory role in providing assurance that the whole system can meet the policy-driven technical challenges of the next two decades. The role would involve developing functional specifications, policies, interfaces and best practices, overseeing system integration, interpretation of the direction of established policies by government to enable the organisations responsible for implementation and operation to do so in a coherent manner. Acting as a risk manager, the system architect will provide early warning of emerging risks to system stability and advise on the feasibility and timescales for the implementation of policies. To this end, the system architect should not be limited in function only to technical matters that will make the Nigerian Power System function effectively to meet government’s policy objectives. The composition must include a team of multi-disciplinary technocrats that accommodates the requirements of the markets as well as attend to commercial and regulatory issues even as the system architect will be expected to address system-wide issues while working with government and other parties to resolve them.

The system architect in general will operate as an integration model that combines the existing segmented functions into a single function with the overall responsibility and ultimate accountability to the Minister of Power. For example, the architect can extend the scope of two key existing entities- the Grid code and Distribution code panels whose scope at the minute is limited to operational and technical matters rather than the integration of technical, operational and commercial aspects across the whole system. To succeed, the panels must be constituted to address structural and technical constraints jeopardising the successful development of the NESI with a clear focus spanning the whole system – generation, transmission, distribution, consumer, and related information flows. NERC too should ensure the integrity of the underlying systems engineering while keeping its focus on commercial and economic levels. The activities of the Association of Nigerian Electricity Distributors (ANED) and Nigerian Electricity Consumers Advocacy Network (NECAN) forum need to be strengthened to realise the objectives of the power system. It is believed that the integration and management of data and ICT will present further challenges despite the goodwill or commitment of stakeholders and expertise of individuals involved if there is no adequate legal personality or party that will be accountable for ensuring the functionality of the increasingly complex system. Overall, there is a highly fragmented institutional landscape today that maintains and develop the codes which govern the operation of different aspects of the system, but none of which takes a whole-system view. This needs to be addressed urgently.

Tackling the Nigerian Electricity Problem

There is no doubt that one day, the stage will be reached (if not already so), when Nigeria will realise that the celebration of mediocrity is inconsistent with positive development in the electricity sector. At that time, the infernally avaricious cartels and demons who are holding the country back from seeing the “Light” will be joining the rest of us in solving this intractable problem. All hands will be on deck! Even then, it will take a few years of working in the right direction before the goal of uninterrupted power supplies can be reached. I speak now as a qualified professional in the field of Power Systems.

So much has been said about plausible solutions to the avalanche of problems bedevilling the electricity sector that it will be incorrect to say that the government is short of ideas on what is required to tackle the problems. What is lacking is the will and resources to do so.

I begin with a one sentence summary of the solution. “Gas must be made available to Gas fired Power Stations dotted around the country to generate electricity for evacuation via a network of strengthened Transmission and Distribution Assets by technically qualified personnel working in the envisioned Electricity Supply Industry (ESI)”. Straightaway one can see the dire need for the will to tackle the problems intertwined with the harnessing of the resources to do so. This means that strategists, economists, project managers and seasoned engineers who have verifiable power industry experience will be required to charter the course that will lead to a sustainable ESI. Therefore, it is safe to prophecy that the surest sign to identify the stage described in the opening paragraph will be the unprecedented availability of gas to power stations and the gathering of those with thorough knowledge of how electricity systems work from within the defunct PHCN and outside of it to lead the way. This will include courageous and determined Nigerians who currently work in the ESI in developed economies.

When commentators unfamiliar with the requirements of a functional Power System say that the management of the Power Sector in developed economies is not necessarily by Engineers, caution is required because the truth is that such economies for upward of sixty to seventy years of the last century built, operated and managed their electrical networks using qualified Engineers. Hence, they already had a functional Electrical Power System in place and only in the wake of the privatisation of electrical utilities within the last twenty years have they made the mistake (my opinion) of employing Accountants, Economists and Administrators who by the very nature of their professions are better placed to implement the requirements of privatised businesses. What should have be done is to develop management capabilities within the industry to ensure Engineers in Management can be better placed to balance the economics of regulation with the dynamics of an Electrical Power System. This is an Achilles heel faced by industrialised nations today as far as the management of their electricity systems is concerned. Nigeria can avoid this error. To be sure, a functioning ESI is a vastly technical system that will not succeed apart from placing a high impetus on the views and contributions of qualified Power System Engineers. The so called administrators will forever employ technical consultants to explain the finer details of Power Systems to them before they can derive successful economic models to regulate or manage the business. This adds avoidable costs to the whole business of Electricity Supply and is especially germane as Nigeria, effectively, has to build her Power System “from scratch” in the daunting face of meagre finances.

In itself, this presents a once in a life time opportunity to develop the Power System in a safe and coordinated manner that will meet the challenges of today and serve the needs of future generations by leveraging on the experiences from other ESIs world over who have surmounted the teething problems that may crop up in the development of a vibrant ESI.

Congruent to the resolution of the problems is the availability of adequate technical capacity within the NESI. This is grossly inadequate today. Significant focus must be placed on the training of existing and would-be Engineers, artisans, technicians, craftsmen and other key personnel that will physically deliver the infrastructural development programme required by the NESI.

There is no problem of national embarrassment that reflects the depth of decline in the Nigerian education system than the electricity quandary we have found ourselves.

Idowu Oyebanjo is a Chartered Power System Engineer

THE NEW WORLD ORDER OF WOMEN’S EMANCIPATION

The world is undergoing a change of civilization and most people are yet to grapple with the wind of change. For many reasons, chief among which is economic, Women have stopped being home builders only. They are now working outside the home and in some cases, are bread winners. There are great women who both work at home and secularly. They are to be commended. To be honest they are so gifted. They can be many things at a time – mother, nurse, doctor, psychologist, cook, cleaner, carer, economists, accountant, technologist, student, wife, etc.

Yet, this is not in line with the creator’s design for her. She is not wired to do this nor is this the definition of her role and will ultimately lead to tragicomedies. Women’s emancipation is what it is touted as and it will be the order of things from now to the extent that 50 years from today, it will be the norm if this wicked system remains.

ON FG’S PLANNED DEMAND FOR TRANSPARENCY FROM DISCOS

By Idowu Oyebanjo

The Federal Government has announced plans to escrow and beam its searchlight into the revenue accounts of the operations of the DisCos due to poor monthly remittances. Although DisCos have condemned the move, this is a good step in the right direction. To address the problems of NESI, a holistic view of every aspect of the multi-faceted problems plaguing it is required with a view to solving them in a coordinated manner. One of the major problems in the Nigerian Electricity Supply Industry (NESI) today is the potential for illiquidity. In simple terms, this arises when DisCos declare, whether truthfully or otherwise, that they have not collected enough money from consumers of electricity and so are unable to make full payments to the bulk electricity trader, NBET, for electricity received. This has the potential to always create illiquidity in NESI because their remittances should have been used to pay all key stakeholders in the industry including but not limited to GenCos, TCN, Gas providers, market operator, NERC, NBET etc. The solutions to address this anomaly include a massive investment in customer metering, reduction in network losses, preventing electricity theft and collusion of staff of electricity companies with consumers to defraud the industry, discontinuation of estimated billing, and ensuring that revenues collected by DisCos in behalf of NESI is transparent to all key stakeholders, and not least the Federal Government which still owns 40% of DisCos. The government has chosen to implement the last of the aforementioned solutions but the DisCos have frowned at the move. Thus a critical review of the position of DisCos is in order.

Reacting to the planned move by the Federal Government, Discos, under the aegis of the Association of Nigerian Electricity Distributors (ANED) have spoken against the move in clear but illogical terms. ANED has argued that the move is tantamount to a re-nationalisation of the DisCos. This is true but that is what is required to salvage the current situation. If the DisCos cannot invest in the network, and will require government bail-out, then the government (and any lender for that matter) will like to have a transparent view of the revenues collected for accountability, probity and possible repayment of loans in the form of bail-out funds. Furthermore, ANED has posited that this move will send the wrong signals to local and international investors but this is far from the truth. Rather, the opposite will be the case. True investors appreciate transparency and will see the seriousness of the administration in maintaining a financially healthy power market and they will be drawn to NESI once the market stabilises to replace the present crop of “investors” who lack the technical cum financial muscle to pull this through. Rather than see this as an effort to ensure the survival of NESI, ANED has said the move will prevent the “injection of the cheap and sorely needed capital that is critical to the rehabilitation and improvement of electricity infrastructure”. However, it has to be stated that it was the continued lack of investment in the network by the so called investors (they are not) since they took over the national assets that has prompted this move by the Federal Government in an attempt to save the industry. Ideally, DisCos should find the money to invest in the network.

Finally, ANED has argued that this kind of move has not been implemented in the communications sector. Perhaps there is need to remind the association that the operators in the communications industry have not asked for unfounded bail-outs and they are largely regulated by means of competition which differs from the regulation of monopolies which is what DisCos are.

The Federal Government is right to demand transparency from DisCos and this is part of regulating the privatised monopoly. It should never be construed as an intrusion if there is nothing to hide. This will bring sanity and improve the financial health of the industry. Yet, there are methods to achieve this kind of regulation for it not to be seen as intrusive even by the DisCos.

Idowu Oyebanjo MNSE CEng MIET

Eligible Customers in NESI – Part 2 SWOT Analysis

By Idowu Oyebanjo

Opportunities

The expectation is that large industrial consumers of electricity, Manufacturers Association of Nigeria (MAN), Industrial clusters, Business and Energy parks, Distributed Generators including renewable generation from solar, tidal and wind energy will be the immediate beneficiaries of the proposed scheme. More production firms can now opt for procurement of electricity directly from independent power plants (IPPs) in industrial clusters. Ultimately, this will lead to the creation of more jobs for Nigerians and the reduction of wholesale electricity prices, and other goods and services. The manufacturing industry is expected to pick-up as we witness the return of most companies that left our shores, abandoning Nigeria for neighbouring countries due to intermittent supply of electricity. In addition, domestic customers who live in the neighbourhood of customers that meet the eligibility criterion will benefit, hopefully, from the improved quality of electricity supply that should result from this move.

Where applicable, DisCos to a large extent will still have to design, install, maintain and operate the network through which eligible customers in relevant categories procure electricity from generators. This means customers who can afford it will pay DisCos for direct connection to the electricity grid. This will inevitably gravitate towards the independent electricity distribution networks ownership already provided for by the EPSR Act. Opportunity now exists for interested investors to set up independent distribution network companies, obtain licencees from NERC and provide efficient and reliable customer-centric service within NESI.

The main income stream of DisCos are from connection and distribution network use of system charges. As both still apply the way the scheme is designed for certain categories of customers, there is potentially no significant loss in revenue to DisCos as power still flows through their networks. DisCos will suffer loss of revenue where independent networks are installed. To this end, the declaration already provided for financial incentives to DisCos if they experience any drop in income as a result of implementing the scheme is apt. This has the potential for disagreement as it will be difficult to determine, inter-alia, the value of income that would have accrued to DisCos but for the declaration.

From service provision point of view, there will be opportunities for competent independent connections providers, consultancy services, and companies that can handle the delivery of turn-key Engineering, Procurement and Construction (EPC) power projects. In this regard, the compilation of a register of certified providers of services in a national electricity register is necessary. This is an opportunity to strengthen the Nigerian Content act of the power sector as enshrined in NERC regulations to ensure the targeted localization of the industry. The mistake of the oil industry must not be repeated in the power sector.

Opportunity now exists for GenCos to sell more power from their hitherto constrained capacity and obtain better return on investment in NESI at lower financial risk as power will be supplied to credit-worthy off-takers at a much higher economies of scale through bulk purchase of electricity. This has the potential to enhance their long-term business development strategies. They will also be able to make up their dwindling revenues and hopefully be in a better position to make payments to gas suppliers as and when due.

As the power network becomes more complex, so does the importance of Health and Safety within NESI. With a poor history of safety, there is an urgent need for a Health and Safety Executive body which will have the powers to investigate and prosecute licensees in NESI found to be culpable of neglect for not putting in place measures so far as is reasonably practicable to prevent danger of electrical hazards to its staff and to the general public. Technocrats with demonstrable knowledge and experience in power system planning, design, operation, control, protection and management will be most invaluable in helping to ensure the effective implementation of this policy directive and stable development of NESI.

Threats

The threats emanating from the declaration of eligible customers depend on which hat one wears. For example, the scheme, when fully implemented will create competition in the distribution of electricity. The DisCos will argue against the timing of the declaration quoting section 24, sub-sections 2 and 3 of EPSRA that the pre-requisites for the declaration of eligible customers have not been met. These pre-conditions have regards to the degree of privatisation that has occurred, the existence of sufficiently large number of competitive entities, adequate metering of all consumers, availability of communication and information technology infrastructure required for the smooth operation of a modern electricity market. The maximum demand customers, many of whom constitute the bulk of eligible customers, represent the main sources of revenue to the DisCos. If such large consumers such as industrial, commercial and clusters of both within the DisCos’ franchise area sign up to bilateral arrangement for the procurement of electricity via the transmission network and or directly from generators, DisCos will lose a reliable source of steady income stream. Congruent to this is the fact that the reduced tariffs paid by residential consumers is as a result of the higher income stream DisCos derive from these same larger power consumers. Thus, this declaration may lead to an increase in tariff regimes for residential consumers, who are already disenfranchised and frustrated by the goings on in the electricity sector. The potential for protests and rejection of hikes in tariffs by residential consumers, organised labour and members of the National Assembly is very high.

The transmission and distribution networks as they are today will not be able to deliver on this policy except significant investment is made towards their upgrade. Significant network losses mean that eligible customers in certain categories will suffer from poor service delivery and this has the potential for illiquidity since power supplied by generators will not reach eligible consumers. Also, the transmission and distribution network operators may collapse under the weight of financial penalty for failure to meet service level guarantees when imposed.

GenCos in supplying eligible customers will face further competition from existing captive power plants, independent power producers and DisCos that encourage the connection of distributed generators to their network, the stiff competition of which consumers will be the ultimate beneficiaries.

Absence of infrastructure for revenue collection and transparent disbursement to relevant stakeholders in a way different from the status quo will spell doom for this policy directive and therefore, a more sophisticated and technology dependent approach is required. If generators are unable to secure payment guarantees from eligible customers or service level delivery is not attained, the potential for illiquidity will persist.

In view of antecedents, potential investors will be seeking to understand how NERC will go about the actual implementation of this policy with regards to sacrosanctity of contracts with DisCos, the establishment of new bilateral contracts between eligible customers and generators, mechanisms for revenue collection, tariffs and pricing of electricity supply to eligible customers, the impact of policy on the revenue stream of DisCos, potential policy summersault due to unforeseen reaction of DisCos, the creation of service level agreements that incentivise good performance but at the same time punish failures to honour guarantees.

Other issues requiring attention include matters of route through which new electricity infrastructure will travel and the attendant way leaves, easement or land use, the cost of building the network connecting eligible customers especially directly to generators, safety issues when running parallel networks with possibility of multiple earthing and increase in electrocution, ability to manage, operate, maintain, and protect the network, Interactivity issues and customer apportionment factor for relevant categories of eligible customers etc.

There is also the possibility to frustrate the scheme if the same DisCos with their ineptitude and inefficiency are asked to develop the infrastructure for the direct connection of eligible customers to GenCos and or distributed generators since the core of skills and expertise in-country resides with them. It would be better to allow new but qualified investors to create competition with the DisCos in building required network capacity for eligible customers where applicable.

…concluded.

Idowu Oyebanjo MNSE CEng MIET

Eligibile Customer Declaration in NESI -Part 1 SWOT Analysis

By Idowu Oyebanjo

The declaration of eligible customers prior to the prevalence of conditions precedent as stated in the contract between FG and DisCos became inevitable because the DisCos have not been transparent with remittances of monies collected from consumers thereby worsening the illiquidity crisis in the electricity market within the Nigerian Electricity Supply Industry (NESI). In addition, DisCos have failed to invest in customer metering and the reduction of aggregate technical, commercial and collection losses as required by their distribution licencees. Federal Government (FG) has therefore invoked the eligibility customer clause according to section 27 of the Electric Power Sector Reform Act (EPSRA) 2005 under Ministerial directives. One can easily understand the FG trying to preserve the health of the sector. However, the initial reaction of the DisCos may be to cry foul. This may not be necessary as some of the transactions will still go through DisCos and TCN. It is therefore in order to evaluate the Strengths, Weaknesses, Opportunities and Threats in FG’s decision to allow GenCos to sell electricity “directly” to four categories of customers with average monthly consumption of 2MW and connected to the medium and high voltage segments of the electricity network. This in my opinion should be described as customers with minimum Authorised Supply Capacity (ASC) of 2MVA. This is equivalent to a consumption of 100 Amperes (unit of current) at 11kV.

Strengths

By declaring the eligible customers, Nigeria’s privatisation addresses the myth around subjecting a “natural monopoly” to economic regulation rather than competition in a privatised electricity supply industry by deepening competition in the electricity market of natural monopolies. Such competition or liberalisation will force the existing 11 DisCos to improve their operational efficiency and customer service. This will become a reference wherever matters of electricity regulation are being discussed in the world of power systems.

The advent of Distributed Generation and bringing of generation close to consumers will help to improve the liquidity of the electricity market and achieve the desired reduction in network losses more quickly if the scheme is properly implemented.

Overall, the declaration of eligible customers and full liberalisation offer many benefits to NESI, address some of the causes of the liquidity issues bedeviling the industry, re-establish confidence in NESI, send the right signals to potential investors, will create jobs in an improved manufacturing sector and therefore the economy, introduce competition in demand side as well as in distribution of electricity, improve operational efficiency, reduce network losses, encourage customer friendly operations, introduce innovation, end the era of unnecessary bailout funds and hopefully reduce cost of wholesale electricity in the long term.

Weaknesses

The main reasons for the inability of the DisCos to perform have not been tackled. They are technically and financially bankrupt. As it stands, government will need to fund metering of consumers and network infrastructural development by DisCos or wait for them to return the Asset to BPE for fresh investors with technical cum financial capability to take over the operation of the assets. Also, the government-owned TCN network is the Achilles heel of the electricity value chain. In the last three years of privatisation, investment in transmission and distribution infrastructure has not been made to facilitate the uptake of stranded generation capacity. In its current state, the transmission network is capable of wheeling a maximum of between 4,600 – 5,500 MW of electricity. Thus, this policy directive by government has the potential for the privatisation or concessioning of the transmission network to qualified investors. There are also the lingering issues of cost–reflective tariffs and base-line network losses which I must say are difficult to resolve.

Gas-to-Power initiatives in Nigeria need increased attention and dedication to ensure adequate investment in gas infrastructure is in place to deliver gas to thermal power plants dotted around the country without which there can be no increase in the quantum of electricity to be supplied to eligible customers. In addition, the incessant cases of vandalization of gas pipelines for economic sabotage has to be addressed by going to the root of the matter, meeting the yearnings and aspirations of agitators and stakeholders, accelerating the passage of the bill to out-law gas flaring and consideration of other alternatives such as mini-LNG, LPG, CNG for gas-to-power schemes.

Eligible customers are located in widely separated geographical areas, and more importantly, at considerable distance from existing GenCos. Thus, except independent power plants are sited near aggregated clusters of consumers, the scheme will be difficult to implement. It must be emphasised heretofore that implementation will have to commence gradually and in clusters in various parts of the nation for the positive impact to be felt. This aligns with our earlier proposition that regional network development along with distributed generation schemes provide the fastest means of ensuring incremental, stable and uninterrupted power supply in Nigeria.

 

…to be continued

Idowu Oyebanjo MNSE CEng MIET