A SWOT ANALYSIS OF THE NEW ELECTRICITY TARIFF IN NIGERIA (Part 2)

By Idowu Oyebanjo

The Opportunities

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.

The Threats

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!!!

Transmission Network

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

 

A SWOT ANALYSIS OF THE NEW ELECTRICITY TARIFF IN NIGERIA (Part 1)

By Idowu Oyebanjo

The Nigerian Electricity Regulatory Commission (NERC) has finally succumbed to pressure from investors in the Nigerian Electricity Supply Industry (NESI) to increase the tariff regime in the absence of steady power supply and at a time of economic downturn. Consumers, organised labour and affected stakeholders have expressed dissatisfaction. As painful as this may appear, it is suffice to examine the Strengths, Weaknesses, Opportunities and Threats inherent in the increased tariff structure planned for the 1st of February 2016.

The Strengths

Government’s Responsiveness and Support

In every regulated electricity business, the price of electricity as a commodity needs to be cost-reflective. This among other requirements means that price must cover the cost of efficient delivery of electricity through the value chain. Before now, the price or electricity tariff in Nigeria is one of the lowest in the world and one of the lowest in West Africa. Electricity as a commodity is produced worldwide following roughly the same process so cost should within reasonable limits be reflective and comparable. The usual dilemma in a regulated business is the requirement for government, by means of the regulator, to seek to be fair to all stakeholders especially consumers, while maintaining a fair profit margin for investors. This is generally a conflicting role. However, the government showed leadership in trying to accede to the plight of the investors by setting new guidelines that will enable increased availability of supply albeit with increase in tariffs to large consumers.

Most Nigerians are exempted from the increased tariffs

The increased tariff regime exempts consumers in the R1 and R2 categories who make up the largest number of residential consumers (albeit for six months only) whose consumption of electricity is strictly for non-commercial, but regular day-to-day home use. Most homes, and therefore the bulk of workers and citizens, are therefore unaffected for now. However, it must be stated that consumers who engage in commercial activities either in their residence or in a separate facility along with industrial consumers who consume a significant amount of electricity (high end users) have been directly targeted by the increased tariffs.

Estimated bill & Fixed charges to be history

Abolition of fixed rate that is charged consumers whether electricity is consumed or not is a welcomed development. This of course varies from place-to-place but it is about 750 Naira on the average. Also, Discos have been mandated to meter all customers so that consumers will only pay for electricity they have used. Consumers can technically insist on settling payments only if they have meters. Estimated billing should become history!!!

This of course will force all distributors to aggressively pursue the metering issue (if NERC performs its duty). It is a blessing in disguise as estimated bills through the hitherto dubious estimate regime forced most consumers into the illegal theft of electricity in conveyance. This has fostered large scale corruption in the power sector from consumers to staff of electricity companies who collude to short change their employers. This move is expected to block the massive leakage in electricity described as commercial and collection losses.

 

A more customer-friendly dispute resolution strategy.

In the meanwhile, there will continue to be disputes over electricity bills. The good news is that the dispute resolution process has been revised to be more customer-friendly and consumers need to be aware of this. Unlike before where the consumer is expected to continue to pay both disputed and future bills whilst the dispute resolution process is on-going, the new dispute resolution mechanism allows the consumer to continue to use electricity until the resolution of contested electricity bill. So they cannot be disconnected unfairly. This will force the distributors to improve in their customer engagement obligations. Customer-friendly initiatives like this will make consumers experience better customer service.

The Weaknesses

NERC misled and disgraced the nation

A significant portion for the charges paid by consumers is the cost for losses. Therefore one expects that the baseline values to be used would be determined as accurately as possible. However, in arriving at the charging methodology used for the Multi-Year Tariff Order (MYTO), NERC got it all wrong. Baseline levels of losses were wrongly determined leading to over/under estimation of charges to consumers. This is what happens when you put square pegs in round holes – Try hard as you may, it won’t fit. How long do we want to experience policy somersaults before we hear the cry of power system engineers that electricity is not a commodity like in economics? Someone who lacks understanding of power systems was responsible and accepted on behalf of the nation the baseline levels, ruined the image of the nation, and extorted consumers for many years. NERC is culpable in this national embarrassment as Lawyers and economists will never be in position to regulate electricity business. They do not understand power systems (and rightly so), and do not understand the reports provided by consultants who carry out studies for them anyway – Can we say again that to realise appreciable development in NESI today, there is an urgent need to put technocrats in charge of regulation. Copying industrialised economies in their models of power system regulation is not bad in itself, but doing so without knowing why they do things is foolhardy! They already have stable electricity for decades so they can afford Lawyers and Economists to toy with their power industry plus they have consultants who were formerly technocrats in the industry in the many decades leading up to the privatisation of the electricity supply industry. Their situation is different from Nigeria that i believe is going to witness the rebuilding of her network. Apart from this, there are thousands of experienced practitioners in their power industry who work with the distribution and transmission network operators who will challenge and contribute to the regulatory objectives set by the economic regulators in these countries. Again, there is a shortage of relevant skills in NESI to provide this check and balance.

NERC & Policy Somersaults

NERC realised too little too late. After waking up from its slumber, NERC suddenly realised consumers have been milked dry for over 5 years, removed this element of the tariff (losses) and that disrupted the serenity of the system which made Discos to declare a force majeure with the potential to truncate the privatisation process. This kind of policy somersault send wrong signals and drive away investors. NERC & the government need to provide a clear message of assurance to Discos that there is no plan to truncate the on-going power sector reform. This must be supported by a form of guarantee that will be enough to make Discos to begin investing in the network. At the minute, they are not!

Distribution Companies (Discos) presented fresh baseline values for losses

The new administration took immediate action to set matters right by asking the Discos to submit their own fresh calculations of baseline loss levels and power flow studies were carried out. The pertinent questions are: Who validates the accuracy? Same regulator? Same consultants? There is an urgent need to make available the methodology used by the Discos in arriving at their values and their cost profiles. Also, NERC needs to request each Disco to publish its strategy for loss reduction while it continues to monitor (year-on-year) actual reduction in estimated losses. It is highly likely that if the fresh baseline values have been wrongly determined, then we will keep going round in circles and there is a potential for under/over estimation of charges to consumers forcing a return to status quo ante. This has to be avoided. The likelihood is high because to determine losses, each distributor would have to have accurate data about consumers and their metered consumption, transformers, lines, cables, substations, network demand, network imbalance (NPS causes network losses), power factor, system operation and control. The subject is fairly complex, and certainly beyond the understanding of the general engineer apart from Power System Engineers who know their onions.

There is an urgent need to establish the basis for assumptions on electricity costs that is consistent with the overall power sector reform road map by ensuring that Discos develop a robust and accurate means of measuring and reporting distribution network losses. Also, discrepancies in reported losses by Discos will cause a distorted view of the power sector reform in Nigeria in the wider electricity supply industry. This has potential impact on the government- nationally and internationally.

NERC – Better late than never

NERC whose primary function is the protection of the consumers has left the matter till the end of its statutory 5-year tenure in office. This looks as if intentionally calculated to cause chaos in the system and therefore perpetuate the elongation of their term or services. Only time will tell! More than that, the increased tariffs came at a time when the regulator has been involved in the scandal of over bloated and outlandish severance payments to its commissioners which is currently under investigation by the National Assembly. With most consumers having no meters to ensure that they pay for what they have used, the possibility of a looming sack of workers in the Banking sector, and the fact that the benefits of privatisation since November 2013 is yet to be felt in terms of availability of supply, this increase in tariff came, saw, and conquered Nigerians!

To be continued………

 

Idowu Oyebanjo is a Power System Professional from the UK

 

ON THE JUST CONCLUDED WEST AFRICAN POWER INDUSTRY CONVENTION 2015

MATTERS ARISING (PART 2)  – IDOWU OYEBANJO

The event was a sure delight and the organizers, SPintelligent, did a good job but the most regrettable part was the conspicuous absence of representatives of NERC, the industry regulator, and members of the newly formed Nigerian Electricity Consumers’ forum. To say the least, this was disappointing as most of the discussions centred-on and around matters relating to these two entities. However, it was nice to have other key stakeholders like NBET, CBN, local Banks, the Ministry of Power and representatives from network operators. A major drawback of the privatisation process according to fresh claims by the  investors is the fact that they were unable to have access to the asset before taking ownership. This simply means they were unprepared for the job. No one will invest huge amount of money in a business of this scale (going by the amount of money they had to pay) and not insist on carrying out due diligence. This is why the process is facing many challenges from network delivery point of view. Discos especially have claimed that the network asset are largely dilapidated than they ever imagined and the inherited staff lack requisite skills and attitude to turn the situation around. Enough of rhetorics! we must say. Government no-doubt will have to provide intervention as recommended in part 1 of these series. A key highlight was the acceptance by the network operators of responsibility of failing to meter customers who have paid for such under the CAPMI scheme. It is important for all customers to be metered in line with earlier suggestions. The networks need rejigging to be able to consolidate the gains of the reform process. As we speak, even if we have increased generation, the transmission network is unable to carry the electricity produced successfully. Technically speaking, this leaves no room for discussions around cost reflective tariff (CRT). Representatives of TCN lamented the spate of bureaucracy and cutting of “transmission” budget by the National Assembly as the root cause of the problem. In general, inefficiency, corruption and lack of skilled manpower have made it practically impossible to improve the net transmission capacity of TCN network in the last 2 decades. In this regard, Dr Reuben Okeke, DG NAPTIN, reiterated that the structured training program within the former PHCN was stopped 22 years ago until government revamped the department in 2009 by establishing NAPTIN, the national power training institution. However, some of the trained personnel from NAPTIN are yet to be given employment by network operators. Speaking on what the DISCOs in particular can do before asking for increases in tariffs, Engr Okeke opined that much more needs to be done in the way of addressing technical losses. Discos need to replace feeder pillars which currently dissipate significant amount of losses , embark on significant investment in technical loss reduction and general network reconductoring. Speaking at the technical workshop entitled “localisation and capacity building of the power sector workforce”, he praised the achievement of NAPTIN but expressed concern that the Nigerian 20GW project requires at least 6,550 engineers and over 12,000 artisans to be trained. Government, he noted, has provided support by means of the sure-p programme but a lot more still needs to be done by all stakeholders including individuals who benefit from training, companies looking for skilled staff, network operators, and other training organizations, especially with regards to payment of tuition for trainees.

A key discussion at the event was the issue of cost reflective tariff (CRT) and this was brilliantly anchored by Dolapo Kukoyi, a leading commercial solicitor with significant experience in the legal aspects of the developments within the Nigerian power sector reform. She agreed that the issue is no doubt contentious as key stakeholders disagree on what a cost reflective tariff for electricity should be. Power experts reiterated the need for transparency and accountability in the process for determining CRT. What are the basic elements considered in arriving at the cost?, What is the actual cost or price of gas?, What is government’s policy on coal and energy mix for power and how can this affect the interpretation of a CRT?, What impact does operations and maintenance costs, age and depreciation of assets have on CRT? There are lots of questions to be answered. In general, conference delegates agreed that the subject of tariff needs to be well understood by all stakeholders. I will be providing insight on this in separate articles. It was found that the discussions around CRT held with investors by BPE was hazy and at best inconclusive as the country hurried into the privatisation of the sector. This is a lesson for other developing nations to avoid this kind of hullabaloo. For example, consideration was given to an aggregate technical, collection and commercial (ATC&C) losses of 30% in the reform process whereas investors now claim on receipt of assets that losses could be well above 50%. The question is how have they arrived at this value and how are we to be convinced that this is not an attempt to ask for an increase in tariff willy-nilly? A more worrisome question is when will they ask for another increase in tariff or another “cost reflective tariff” if this subject is not robustly tackled?

The initial optimism shared by network operators in the power sector relating to CRT with the revision of the Multi-Year Tariff Order (MYTO) – 2 was doused by the reversal of decision by NERC early March 2015. This left network operators with great uneasiness as customers who have been at the receiving end of increased costs for no electricity consumed since and before privatisation remained in confusion. Banks and lenders on the other hand are not comfortable with such trends and will as a minimum like to know how costs are determined. They will want to have a cost regime that reflects flexibility and simplicity, that can be modelled financially with the ability to respond favourably to micro and macroeconomic shocks in the larger financial market. Also, they will like to see major reviews provided for every 5 years with bi-annual reviews of tariff regime. The inconsistency on the part of the regulator with regards to  5 or 10 or 15-year tariff path is causing a crisis of confidence in investors who may be left with no option soon than declaring a force majeure. Already, the liquidity problem in NESI will mean the electricity market will remain grounded. The disbursement of the Nigerian electricity facility stabilisation fund of 213 Billion naira commenced but now stopped by CBN was to address this shortfall but it was only in part able to alleviate cost of legacy gas debts owed to Gas providers, and monies owed Discos by government ministries, departments and agencies (MDAs). The general consensus was that MDAs in particular need to change from the culture of not paying for electricity consumed if the power reform process will make any sense. The position of network operators is that they are running out of cash flow and the business is clearly not profitable in the short term. While one feel great pity for their situation, it confirms however that these guys are not investors but opportunists as proper investors look at profit over the long term. The lacuna already created by the incompetent and shoddy manner of privatisation of the electricity network of the largest economy in Africa will be with us for a long time to come.

As a summary, it is believed that Discos can do more with the current tariff if they meter all customers, collect payments of outstanding debts from MDAs, operate more efficiently, reduce staff and overhead costs and proof their credibility to investors.

Sincere gratitude to the organisers and sponsors of WAPIC 2015 as we look forward to an equally rewarding experience at the 13th edition in the future.

Idowu Oyebanjo MNSE CEng MIET

ON THE JUST CONCLUDED WEST AFRICAN POWER INDUSTRY CONVENTION 2015

MATTERS ARISING (PART 1)  – IDOWU OYEBANJO

The just concluded West African Power Industry Convention (WAPIC 2015) event held from 23rd till 26th November 2015 at Eko Hotel and Suites, Lagos was a strategic hub for stakeholders looking for collaboration and joint solutions to the intractable challenges bedevilling the electrification of the West African sub-region. The main focus was the status of the Nigerian Power Sector reform. Some of the key conclusions from the event are highlighted below:

  1. There is an urgent need for the new Minister in charge of Power to put together a team of technocrats with proven expertise to review the status of the power sector reform with a view to establishing and possibly dismantling bottlenecks in the entire value chain of generation, transmission and distribution of electricity in Nigeria. This team, which must be apolitical, will review existing laws, policies and processes as they affect the dismal performance of the reform despite humongous amount of investment in the last 20 years. Serving as a “system architect”, it will take a holistic view of the entire system from end-to-end, ensuring synergies between parallel and hitherto conflicting activities which have more often than not led to policy reversals and summersaults creating thus far the volatility, uncertainty, complexity and ambiguity experienced in the Nigerian Electricity Supply Industry (NESI) to the sheer embarrassment of all stakeholders.
  2. To be able to sustain NESI, there is an urgent need for a clear focus on localisation and capacity development for the power sector work force by strictly implementing the Nigerian Content development regulation, establishing a power academy (university for the power sector) and apprenticeships that fit into the National Vocational Qualifications (NVQs Levels 1-6), as well as provide funding for training and research grants focusing on specific areas of need of NESI.
  3. It was generally accepted that the portfolio of energy mix for generation of electricity should include renewable energy for off-grid connectivity under the existing rural electrification projects. A clear message that Nigeria should not and does not need renewable energy systems to meet the challenges posed by huge deficit in power it faces currently was passed. This was thoroughly reviewed in view of the scale of investment, expected impact and power system economics. Rather, as far as concentration of investment in fuel supply requirements to provide respite in the shortest possible time frame is concerned, 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 NESI.
  4. All stakeholders agreed on the need for a Cost Reflective Tariff (CRT) but disagree on the implementation as the process needs to be transparent in all ramifications. Also, customers must be metered and the provision for estimated billing abolished as it does no good to both network operators and consumers of electricity. There is a dire need for re-orientation and re-evaluation of the payment culture of consumers just as the menace of electricity theft must be curtailed to guarantee the survival of the reform process.
  5. Financial Intervention is a fundamental requirement for the power sector reform in Nigeria but disbursement must be by the output measure technique where financial intervention is linked to specific outputs expected in the overall performance and health indices of different items of plants on the power network over a given period of time. Scheduled payments to benefactors will be based on verifiable investment which translates to a quantum leap in electricity made available to consumers. This may be in the form of loan facility or percentage stake of government in NESI. Whatever the case, a lean on the shares of defaulting operators will be enforced as a means to guarantee performance.
  6. Weak regulatory framework, issuance of many contradictory and unclear policies send the wrong signals to potential investors. Hence, there is need for strategic governance that ensures policies are well-thought through before they are made and the potential impact on the credibility of the reform process is evaluated before any policy reversal is mused. Today, a country like Ethiopia attracts foreign direct investment (FDI) and other investor funds ahead of Nigeria because large fund owners perceive Nigeria to be a risky place to do business. To reverse this ugly trend, governance and regulatory framework need to be strong, policies must be clear with appropriate legal and regulatory framework, contracts must be enforceable, projects must have commercial viability, and the Banking sector reform must continue until local Banks can access finance from international finance institutions (IFIs). To do this however, the media will also play a part in ensuring the country is projected positively to the rest of the world as the aforementioned changes are made.
  7. The need for accurate and up-to-date data for NESI cannot be over-emphasised. The successful planning, operation, maintenance, protection and control of a functional electric power system depends hugely on data. The starting point is the data or information relating to the actual load demand and specific information relating to individual customers connected to the grid. In this regard, the 5.9 billion naira loan granted TCN recently by the World Bank is a welcomed development.
  8. Network operators must embrace operational efficiency rather than requesting for an increase in tariff as this alone will not solve the problem on hand. As far as progress in the last 20 years is concerned, the quantum of electricity generated and transmitted for distribution before and after privatisation has remained roughly the same. Peak generation as at the end of December 2012 was 4,518MW and it is around 4,883MW now.

 

Therefore, in the short term, one expects Nigerian government to focus on training and human capital development, provide gas as a minimum to the NDPHC power plants and fix the liquidity problem within NESI. In the medium term, effort must be made to implement a 20,000MW (20GW) integrated energy system whilst capacity, security of supply of gas and electricity, power quality, customer service, and so on are to be long-term initiatives.

 

Idowu Oyebanjo, a power system engineer was a delegate and speaker at the conference.

TARIFF INCREASE – NERC TO MAKE PUBLIC STATEMENT OF CHARGING METHODOLOGY

Idowu Oyebanjo

One of the main problems with the power sector reform in Nigeria is the absence of technocrats in the right positions. This will always lead to reversals and policy summersaults. When those with lack of knowledge of Power Systems speak, especially when the target audience resides predominantly in a country where there has not been electricity for so long, they tend to get away with it. The problem is that such people constitute a laughing stock when similar comments are made before an international audience. Hear the CBN governor, “For you to have good electricity, you need to pay a little more (to have better maybe)…”. I can guarantee that NERC does not know what it means to determine a cost reflective tariff because these are some of the fundamentals of power systems that only those who have studied power systems and have demonstrable experience or practice can handle. Fake consultants employed by NERC can’t do it. The DISCOs or GENCOs advocating for these price increases have not done it either. Can we as public request that NERC publish the analysis used to determine the so called “cost reflective tariffs?”

The power sector needs Nigerians who studied Power Systems, and who work in economies where uninterrupted power supply is the norm, to mediate the correct transition to privatised electricity utility. Although I maintained this position 7 years ago, the position is still valid because you cannot apply the Quota System syndrome to the generation, transmission, and distribution of electricity. It will fail! There is need to start again or at best, re-jig the status quo of the reform in a way the losses to the nation can be minimised.

Another example of putting the cart before the horse is the fact that the wheeling capacity of the transmission network is known to be lower or at least equal to the peak generation achieved recently in response to the “Buhari Body language” in August 2015. This simply means there is no improvement to power supply that can take place now even when tariffs are increased because the weakest link has not changed and will not change overnight. More than that, I warned the authorities against establishing the electricity market because the power system is not yet ready for it but they have gone ahead because some believe the laws of economics apply to the physics of electricity. Try as you may, you will always recourse to the recommendations made by power systems engineer who know their onions. They aren’t many worldwide so not all consultants can be of help.  I think because Nigeria has been in darkness for so long, it is in a mysterious way reflective of the attitude of those in charge of the power sector reform. Can we say for the umpteenth time that the only way, and I mean the only way to have stable electricity supply is to liaise with power system engineers of Nigerian origin with demonstrable experience of power system leading the course in some way?

All of these amount to one thing – Abusing the sensitivities of the already impoverished consumers is the way to loot more money from the federation especially when the government at the federal level has tightened loop holes using the TSA.

 

MORE DEATHS DUE TO ELECTROCUTION IN NIGERIA UNLESS…….

BY IDOWU OYEBANJO

Electrocution is basically death caused by an electric shock. While this is not a favoured topic, it is important to expose the facts about the Nigerian Power System and the high potential that it possesses to cause more deaths due to electrocution in the short to medium term if things are done improperly as they are now.

One of the anti-climax of not having stable electricity for over 50 years now in Nigeria is the fact that one did not hear so much of deaths due to electric shock from electrical appliances or devices. This is mainly because there was no “light”. With the recent increase in availability of gas to power stations, and the attendant availability of electricity supply, the weakness of the power system will come to the fore and more electrical safety accidents are bound to occur. Unfortunately, because electricity is a good servant but a bad master, the fatal results of not following electrical principles in the design, operation, maintenance and control of the power system is death by electrocution! In the last few weeks alone, we have had the death of a staff of one of the electricity companies while he was carrying out his day to day activities on a power line. But more recently, the case of Oluchi Anekwe, a 3rd year student at the University of Lagos has reinforced the calls by experts for a holistic review of the operation of the Nigerian Power System.

The minimum current a human can feel depends on the current type viz Alternating Current (AC) or Direct Current (DC) and the frequency for AC systems. If this current is high enough, it can cause tissue damage and ventricular fibrillation of the heart which leads to cardiac arrest. The potential seriousness of an electric shock depends on the path of the body the current passes. It is most dangerous if a path through the heart is established. Other possible consequences of electric shocks include but not limited to deep skin burns, nervous breakdown, micro and macroshocks to mention but a few.

The only way to reverse the current trend is to allow technically intensive review of the running of the Nigerian Power System. Specifications and policies guiding the operation, control, protection and maintenance of power system plants need to be developed for use in the Nigerian Electricity Supply Industry. These guidelines must be enforced in such a way that if any company is found in breach of it, the penalty or consequence must be very severe. There is therefore an urgent need for an Health & Safety Executive (HSE) body for the power system. The HSE must be very powerful with the powers to jail and fine erring individuals or companies found wanting.

To prevent deaths from electrocution, significant attention has to be placed on power system protection. From fuses to relays, adequate protection must be available for any power circuit or plant to minimise the risk of electric shock or death to personnel or individuals in the vicinity of or in close contact with power system plants. Protection settings have to be determined for the entire power network and the coordination of grading stages for all items on the network is a must.

WHY NIGERIA DOES NOT NEED RENEWABLE ENERGY FOR MAIN POWER GENERATION

BY IDOWU OYEBANJO

Recently, there has been an increase in the agitation for the deployment of alternative sources of energy for the generation of electricity in Nigeria especially when the problem of providing stable electricity seems to be intractable. But to be frank, this is not how to solve the problem. The inclusion of alternative energy sources as part of the total mix of generation portfolio is recommended but this must remain as “back up” to electricity generation from conventional sources of energy.

There is a general tendency to follow the crowd by copying the trend in developed economies and most times this yields positive results. However, this will only be the case after a careful consideration of local circumstances. The Western world is persuading Nigeria to embrace their much needed market for Renewable Energy System not because they want to help, but because of the trade and economic benefits it will bring them in terms of the gains from the delivery of goods and services that this will bring, huge financial gains from the cost of expatriates they will export to us just like in the oil industry now taken over by their own mostly less educated professionals compared to locals, economy of raw materials in the industry they really need in their own environment, making Nigeria a dumping ground for their products among other reasons. If any country is serious about assisting Nigeria, they should provide funds and expertise to build, operate, maintain and transfer ownership of thermal plants (OCGT and CCGTs) in Nigeria within the shortest time frame possible.

There is no doubt that the capacity credit (I use a technical term here) of most of the renewable electricity systems is low compared to that of conventional generation which in simple terms means they cannot be relied upon for grid operations exactly as electricity generated from conventional energy sources such as oil, gas, coal etc. Power System is difficult to explain to non-power engineers especially those who hear about what takes place in other countries and believe Nigeria should copy them hook line and sinker without looking at local circumstances. In this regard, the 24.5 million Euros (N5.3 billion) fund provided to Nigeria under the Nigerian Energy Support Programme (NESP) by the European Union (EU) and German Federal Ministry of Economic Cooperation and Development (DMZ) should be used to focus on training and development of human capacity for the power sector, strengthen thermal plants as well as the associated gas gathering facilities (pipelines and gas-to-power plants) for the power stations, and develop Hydro power generation schemes in country. No one is ruling out the fact that a general mix of energy sources will add value, but proper power engineers know that to get Nigeria out of the meagre generation capacity levels she has today, aggressive pursuit of significant generation from conventional energy sources such as hydro, oil, gas, and or coal is urgent!

Another fact to consider is the economics of scale. Those who preach the deployment of renewable energy sources do not consider the economics. To get Nigeria out of the parlous state of generation capacity levels today, spending on renewable energy amounts to being penny wise but pound foolish! This is all down to the cost benefit analysis of renewable generation. Why will you spend trillions of dollars to generate a few megawatts of renewable energy from solar or wind, when you can adequately generate thousands of megawatts with the same amount or even less? For example, the raw-material for gas thermal plants is vastly abundant in-country and is sufficient to get Nigeria out of the electricity quagmire before she can “join” the western world to deceive the rest of the unwary nations on the need for renewable generation!

If to be considered at all, the deployment of Biogas for distributed generation may be a plausible step in the right direction. But take for example, solar panels (Array of Photo Voltaic cells) used for renewable power generation from the sun. These require significant amount of land to generate a few tens of megawatts. Such land in the circumstance of Nigeria should be made available for building Housing estates to bail Nigeria out of the Housing crisis already present with us. Arable amount of land should be better put to use in Agriculture to provide food rather than as an opportunity cost in the sense of foregone alternative to generating power. What about the security of the investment? In Nigeria, a mere child will throw stones at these solar panels and break them in one day. Vandalisation of solar sites will become the order of the day. Whereas, developed economies who use renewable energy sources have less problems of housing, food and vandalisation of such facilities even when left in the open. A lot needs to be considered before jumping to copy technologies from overseas. What needs to be done like we do in our different spheres of life is to assess the suitability and practicality of deploying a method from overseas in country. If possible, the adaptation of ideas to local circumstances is in order but this has to be handled by Professionals. Quota System syndrome will not work in this regard!

Let us now consider the reasons why developed economies who acquired their present status from the availability of uninterrupted power supply from thermal and hydro generating stations would want other developing or under-developed nations to seek their renewable alternatives. A major reason is to slow down the rate at which poor but aspiring nations develop. Once India and China’s rapid development in recent times started to make them forces to reckon with in the global economy, significant effort has been launched to prevent any other nation from the third world to develop as fast. This is the origin of the climate change conundrum. The primary public policy argument they put forward in their own countries for promoting electricity generation from renewable energy sources is the requirement to reduce pollution that comes from burning fossil fuels. Some advocate renewable generation to improve energy security, price stability, job creation, and political jingoism. The truth however is that most of the developed countries have run out of their own oil reserves. The nations where they can get imports from are usually in crisis and generally unstable politically and socially. This level of insecurity of supply is what they have decided to tackle by switching to energy sources out of the control of humans which makes perfect sense for them. But that is not what Nigeria needs.

We can refer to the percentage of electricity generation in civilised country from renewable energy sources expressed as a percentage of their total electricity generation to come to grasp with the economy of scale and what may be required of Nigeria. Germany currently generates 30% of her electricity from renewable energy sources, USA 10% and the UK about 15%. Judging from the statistics, the countries we intend to copy generate the bulk of their electricity from conventional energy sources such as Gas, Oil and Coal. So, why should we do less?

NERC – REGULATING IN WHOSE INTEREST?

NERC – REGULATING IN WHOSE INTEREST? – By Idowu Oyebanjo

What exactly is happening in the Nigerian electricity Supply Industry (NESI)? Whose interests are the leaders serving? Whose interest are the operators of the weak electrical network serving? And most importantly, in whose interest is NERC regulating the industry? These questions have remained with us for a long time now. Each time one examines these questions, more questions come to the fore. Was Nigeria ready for privatisation? Does Nigeria realise that the management of electricity systems is highly technically intensive and would need individuals who know their onions to mediate the course? Is the regulator aware of its role to protect consumers from the regional monopoly of the operators? Why has it taken so long, after “unending” complaints from poor and already impoverished consumers, before NERC was forced by an order from the 8th Senate to carry out what is supposed to be its main function? Why should consumers be pushed to the wall before a revolution occurs? Why should government wait until a huge crisis of discontent from millions of individuals – North, South, East or West, united in one voice, unleash mayhem on public utility and public officers because of years of neglect and mismanagement of funds meant to provide electricity for the nation? Why is Nigeria yet to have electricity which was discovered over a century ago?

It is widely accepted that regulation, where it is impossible to have competition, as is the case with the distribution of electricity through wires, is a veritable means of providing quality service at low cost to service users. This is true but so much depends on the regulator. The principal role of a regulator in a privatised electricity system is to cater for the interest of the consumers in such a way that operators can make reasonable profit without exploiting the consumers. In this regard, NERC has failed Nigeria woefully in recent times. Why do we say this?

There is ample evidence that NERC has orchestrated a villainous act against customers in the area of estimated billing and fixed charges. In effect, NERC has raised money for the distribution companies (DISCOs) from the pocket of already impoverished Nigerians. With NERC unable to account or monitor how much money has been “borrowed” from individual consumers, this act of treachery is daylight robbery. Take for example the Credited Advance Payment for Metering Implementation (CAPMI) programme. It is advanced robbery! The CAPMI jargons is simply for exploiting consumers. The CAPMI scheme was to provide a platform for willing consumers to pay the cost of the meter and get the meter installed within 45 days. Also, the distribution company was to return the payment made by the consumer via a percentage deduction in their monthly electricity bills until the distribution companies repaid the consumer for their advance payment. It is regrettable that consumers have paid for these meters and years after, they are yet to receive their meters. This is double jeopardy considering that these meters were supposed to have been supplied to consumers free of charge in the first place. For the avoidance of doubt, the electricity meter is the property of the distribution company! NERC is unable to account to date for the number of consumers who have paid but are yet to have their meters nor can they articulate a means of monitoring the return (with interest) of payments made by consumers as promised by distribution companies when the proposal was muted in the first place. No one is looking after the interest of the consumers!!!!

A close examination of the components which make up the tariff payment by Nigerians as stipulated by the multi-year tariff order 2 (MYTO 2) shows a significant amount attributed to the cost of losses. This is  a deliberate act to short-change the consumers because of their lack of awareness and understanding of Power Systems. How can you pay for the cost of losses which cannot be accounted for? The distribution companies to begin with are yet to know their Assets as they claim. They have been unable to determine their losses yet they are being paid for these losses. They have not metered the customers, yet they are being paid for aggregate technical, commercial and collection losses (ATCC). The use of bogus language and profligacy to confuse the generality of consumers who do not understand the meaning of Megawatt is pulling the wool over their eyes. Worldwide over, consumers are never interested in the details of Power Systems. One thing and only one thing interests consumers anywhere in the world – the availability of electricity! A survey of developed countries of USA, UK and Europe shows this fact too. The role of an efficient regulator is to protect the interest of “disinterested”  and disenchanted consumers. Power Systems is hard enough to understand for power engineers, not to talk of the wider citizenry whose businesses and activities differ extensively. For NERC to have allowed distribution companies to extort consumers for this long through the estimated billing conundrum tells the whole world of power systems that it is serving the interest of the cartel behind the woes of the power sector. As long as those who are in charge of the power sector have no clue about the technicalities of power systems, the hope of having an efficient and robust power system will remain a mirage for a distant future.

In one of its latest misdemeanour, NERC suddenly jolted consumers with the idea of negotiating with the distribution companies before any increases in tariff can be approved. Insult upon injury! This is a total begging off from one’s duty. Observed on the face of it, this looks like a brilliant idea. However, this is no brainer for those of us who understand how current flows. Apart from the obvious fact stated earlier that consumers know less about the concept of electricity, and care less by the way, this is the role of the regulator. The regulator should as a matter of course include in the regulatory order an incentive for distribution companies to engage the consumers and include this in the regulatory mechanism. These guys don’t understand how to run an electricity supply business, and rightly so because we are not used to putting square pegs in square holes.

When asked recently to explain why we are experiencing improvements in power supply, NERC has stated that poor project management skills have contributed to their dismal performance in times past. Anyone can come up with an excuse for not doing something at anytime. The problem with that is we cannot move an inch in power system in this way. Says the NERC chairman, “we now realise we need to pay closer details to the details of the electricity market, the issue of gas, metering, legacy debts etc”. A lot of putting the cart before the horse. What is the guarantee that this will not be the lame excuse they will offer us after another ten years? How on earth was it possible to build gas-fired power stations without provisions made for gas pipelines to carry gas to such thermal power stations?

It is no wonder then that the many cases of wanton killings and electrocution of Nigerians reported daily to NERC have not been investigated and dealt with according to the provisions within the electricity act. I believe NERC will continue allow Nigerians to be killed because it lacks understanding of how to run the show. Take for example the fight NERC put forth against the establishment of the Nigerian Electricity Management Services Authority (NEMSA)  Act. This shows clearly that the regulator does not understand its role. More than that, it betrays the general lack of understanding of power systems in Nigeria today. Nigeria needs a holistic appraisal of the power system and how it should function. The opportunity is there now to develop the power system in a way that meets the objectives of today and the aspirations of tomorrow in the areas of design, infrastructure development, installation, policies,  and regulation. Since we have come this late, it is best to get it right once and for all time. There is need for seasoned Electrical Power Engineers of Nigerian origin with a minimum of five to ten years of cognate experience in the business of electricity supply within and outside Nigeria to lead this course. The government may have to provide electricity as a social service for some time at least to palliate consumers who have remained in darkness for so long.

 

 

Idowu Oyebanjo is a Power System Professional from the UK

2015 WAEC RESULTS – A REFLECTION OF THE NIGERIAN EDUCATIONAL SYSTEM!

The West African Examination Council (WAEC) has just released the results of the 2015  May/June West African Senior School Certificate Examination (WASSCE) and the results as expected, “experiencing a free fall under gravity”, pointed in the “right” direction – Downward! Why? Quality Education has become history in Nigeria, especially in the Public Institutions of Learning. Despite the myriads of “Private Schools” springing up, the situation is going from bad to worse.

Yeye, my great Grand-mother, always said to me while growing up as a boy in Ikogosi-Ekiti, “Ti Iwaju O ba se lo, eyin a se pada si”, meaning, if it becomes impracticable for you to move in the forward direction, it must be possible to take a reverse”. I think this is dependent on the route. There is clearly no alternative route to getting a sum right than doing it right; starting from, and according to, basic principles. Therefore, a mirror reflection on how the system of education was before our “uncommon” era is in order.

Teaching was, and still is, a profession for the erudite in any given society. As such, Teachers must be respected, well remunerated and encouraged. That was the case in the golden era of The Nigerian Educational System. Teachers were paid comparatively higher than most workers and were among the few individuals who had bicycles or cars. To qualify to teach, you must know your subject well enough and must pass requisite examinations unaided by examination mal-practices. Yes, Teachers were the “Alphas” and the” Omegas”. They were feared and respected because they represented the needed back-up for Parents when their children proved stubborn at home. Teaching was a profession of well-disciplined individuals. Undertaking Teacher training made you aware of this. Teacher Training was an on-going exercise. From graduation to becoming a Teacher, throughout the School Term, and some good part of the School Holiday, a Teacher was required to undertake a form of training or the other. Every weekend within a School term, a Teacher had to prepare notes of planned lessons for the week ahead. This afforded the opportunity to prepare for the needs of each member of a sizeable class. The notes of lessons would be critically assessed by the Head Teacher or anyone designated. Useful comments were made by the reviewing Teacher and where appropriate, re-submission of planned work may be demanded if there was evidence of gross unpreparedness for the Lessons of the Week. This way, it would be easy to spot, not for victimisation, the training needs of individual Teachers to be saddled with the responsibility of shaping the future of the lives of the children, the nation! The Head Teacher would often be a Teacher too and certainly not a money collector nor a Finance Director!

A typical note of lesson from Teachers would be synonymous with plenty of worked examples, illustrations, graphs, analyses, proofs, ingenuity, ethics, and a lot more, depending on the subject. It was a must to include “Home-Work” which helped the supervising Teacher to be aware of the depth and thoroughness of the Teachers as key Text Books and other sources of material references were usually quoted. More-Importantly, “Home-Works” were marked on time, corrections made, re-submission by erring students demanded until most students reached the satisfactory level of performance. Thus, students and Teachers had the impetus to become progressive members of the society and were helped to reach their full potential.

A proper register of attendance was kept, not only for Teachers, but also for students. Late-coming was a taboo, or was forcefully made a taboo by the unwelcomed strokes of cane on your buttocks or at your back. Any perpetual late-comer was sent home and reasonable explanation had to be provided by one or both parents who must visit the School to tender explanation before their ward or child was re-admitted to School. Unjustifiable absence from School was unheard of. Record of every activity (including extracurricular activities) which took place in the School Calendar year would be kept for the Inspectors. Oh, the Inspectors!!! When the time arrived for the Inspectors to visit your School, even the leaves and the Blocks of the Walls surrounding the Perimeter of the School Knew of the visit! It was a time for Proper Accounting for the belongings of the master – The children of the Federal Republic of Nigeria. Inspectors were thorough and diligent. Lesson notes for Teachers and Notebooks for randomly selected Students from the School being inspected were checked for forensic examination and validation of the status of education the School claims to have among other things. This way, the quality and quantity of work done by the Teachers were verified independent of the School Authority as a form of check and balance. A report was written which would be taken seriously by the Investigated School as well as the Local Education Authority. The Schools’ Management Committee (SMC), working in partnership with the Schools’ Management Board (SMB), collated and evaluated the reports from Inspectors. It ensured necessary actions were taken to put things right in the Schools within its domain and required query and disciplinary actions were also provided.

The master and owner of the belongings (the children), is the government. Government ensured Teachers’ salaries were promptly paid and the School environment was conducive to quality learning. The Libraries were well equipped and exceptionally bright students were given sponsorships. Thus, you could guarantee to a reasonable extent that a student failed largely as a consequence of his own failure.

How did Nigeria get to this point where it is almost certain that the percentage of success in the next rounds of School Certificate Examinations would spiral downward? The value of quality education may not be readily quantified in much the same way as would the proceeds from Oil and Gas, but every income into a given society which depends on Human capital (Labour), results from some form of education and training, home or abroad. To an illiterate, investing in or spending on a sector from which you do not get “any national income” is stupendously stupid as he cannot “see” that every individual working in every other sector is a product of the educational system. What then becomes of a country ruled by Illiterates for over fourty years apart from the very early years, post-independence, when Nigeria had the kind of education described earlier?

Education is synonymous to development. But destructive factors including but not limited to the myopic, short sightedness and self-serving ideologies of “her heroes past”, absence of infrastructural development and functional industries, have reduced the impetus and desire to research, and the determination to excel in Nigerians. The environment for innovation became absent once the celebration of mediocrity became the norm as Nigeria started the misnomer called “Quota System”. Intellectual property is stolen daily with impunity. Lecturers accept bribes in cash and in kind! Focus is on buying the Teacher’s Text Book rather than the text in the Teacher’s Book. There is obviously the need for a sort of education that is linked to productivity.

While it must be admitted that quality education is witnessing a decline in most parts of the world today even in the most technological and advanced economies such as USA and The UK, the astronomical rate of retrogression of The Nigerian Educational System is indeed worrisome. More than that, the developed countries, having realised their folly in lowering educational standards have started to retrace their own steps as far as quality education is concerned.

Sanity is now urgently required in the educational sector.

Idowu Oyebanjo is a Power System Engineer from The United Kingdom.

 

MEETING THE CHALLENGE OF HUMAN CAPITAL DEVELOPMENT IN THE NEW NIGERIAN POWER INDUSTRY (PART 2)

The most worrisome thing is that those who are taking the lead in this matter do not understand how Electric Current flows. If you make use of Knowledgeable Power System Engineers of Nigerian descent, who work in the Electricity Industries in the developed economies, most likely you will achieve better results in less than four years. Ofcourse, these will work with qualified Consultants who know their onions but because they already have a foothold, they are more likely to get better value for money for Nigeria. The truth is that not all foreign Consultants will want electricity in Nigeria because this means Nigerians will leave their shores and return home, Nigerians will go to Universities in Nigeria, world economics will change and the propensity for Investment will shift to Nigeria to mention a few benefits that will result in electrifying the nation in darkness.

The way to go about this is to set up a summit to attract these Power Systems Engineers of Nigerian descent and bring them together to brainstorm on these ideas and more in support of this reform. They are everywhere and Government machineries could be used to track them down. For example, the Association of Nigerians in Diaspora was formed in the year 2000 by former president Obasanjo towards this end and have no doubt being functioning well since then. This could be one means of achieving this noble objective. The latest approach by SHELL Petroleum Development Company of Nigeria (SPDC), SHELL Nigeria Exploration and Production Company (SNEPCO), Petroleum Technology Association of Nigeria (PETAN), the UK chapter of Nigerian in Diaspora Organization (NIDO) and the department for Trade and Investment in the UK in establishing a knowledge sharing framework and portal to boost Nigerian Content development and employment in the Oil and Gas Industry is required in the Power Sector. It need not have waited this long!

In a sense, the exodus of Nigerians to the Western World, especially of Professionals, is a blessing in disguise. What this will turn out to become is that they have all proceeded, mostly at great cost to themselves, on training and development that could not be obtained in the dark years past in Nigeria. Well trained in best practice in their different endeavours, uninterrupted electricity and improvement in security of life and property might encourage some, not all of them, to return to make useful contribution in Nigeria.

The framework described above will progressively increase the quantum of composite value added to or created in the Nigerian economy, by a systematic development of capacity and capability of Nigerians, and the deployment of her natural resources and raw materials in the Power Industry. Thereafter, Nigerians will be “exported” as technical aids to other African countries as well as the developed economies with a view to recouping at least part of the investment in these Engineers as a form of National income. However, if the Investors who have bought the Discos do not have a clue as to how to run a distribution network, and they have passed the technical evaluation by Nigerian “Experts” who themselves know little about electricity Supply, there is a risk that “there is no light” at the end of the tunnel for Nigerians afterall. Only time will tell….

This strategy will not only meet the most coveted objective of ensuring adequate skilled capacity in-country, it empowers fellow Nigerians, keep them in the frame work of international practice in the Energy/Power Industry and contribute immensely to Local Content.

To avoid the problem the Oil Industry is facing with the Petroleum Industry Bill (PIB), we must all have a clear focus – “Nigerianization” of the Power Industry is the path to follow!

 

Idowu Oyebanjo writes from the UK

e-mail: oyebanjoidowu@yahoo.com