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Nigeria Power – New power investors jostle to replace Gencos,Discos – oilprice.com.ng

Most Nigerians would rather sympathise with and not celebrate the new Minister of Power, Sale Mamman,  over his appointment by President Muhammadu Buhari given the fate that befell  his predecessors who left office with burnt fingers.

Unfortunately for Mamman, he is coming on board at a time the power sector appears already saturated  with challenges enough to break the most powerful minister.

From Chief Bola Ige to the immediate past minister Babatunde Fashola, the sector has been enmeshed in unending crises, including fraud, industrial unrest, consumer dissatisfaction and inability of power Ministers to build a sector that guarantees uninterrupted power supply to Nigerians.

Contrary to expectations, Nigeria’s power ministry comes across at least in mind of most observers as one with mindless corruption crisis that has compelled the Federal Government to initiate a probe on how over $16billion was allegedly spent by the power ministry during the Olusegun Obasanjo administration with nothing concrete to show for it.

Due to vested interests in several sectors, Nigeria’s  power sector  perhaps remain one agency of the Federal Government that draws the largest rebuke for its failure to unlock the creative energy of enterprising Nigerians.

However, among the powers believed to be holding Nigerian power consumers ransome are the owners of DisCos and  GenCos as well as the importers and manufacturers of power generators.

Regrettably while the unbundling  of Power Holding Company of Nigeria (PHCN) into 11 distribution firms and  over  12 or more generation firms, was expected to bring significant relief to the country, the decision to privatize the industry has rather worsened the crises to the extent that many manufacturing and commercial companies have already left the country, now ranked 146 out of 190 countries in the Ease of Doing Business class.

It was against this backdrop that observers have called on the Nigeria’s new power minister to chart a clear-cut direction on what he intend to achieve and set to work immediately, if he does not want to be profiled alongside his many predecessors.

With the expiration of the power contract set for December 31, 2019, Nigerians are expecting the new power minister to use his long broom to sweep off the failure that the power companies have represented over the past five and replace them with new investors with competence and resources to turn the sector around.

Some of the distribution firms that Nigerians believe have performed sub-optimally include,  Abuja Electricity  Distribution Company (AEDC), Kano Electricity Distribution Company (KEDCo), Enugu Electricity Distribution Company (EEDC),  Eko Electricity Distribution Company (EKEDC), Ikeja Electricity Distribution Company (IEDC) and  Benin Electricity Distribution Company (BEDC).

Others are Kaduna Electricity Distribution Company (KEDC), Yola Electricity Distribution Company (YEDC),  Jos Electricity Distribution Company (JEDC) , Ibadan Electricity Distribution Company (IBEDC).

The generation firms include, Egbin Power Plc, First Independent Power Limited, Azuri Power West African Limited, G. Eurafric, Geregu Power plc and  Transcorp Power Limited.

Others are  North South Power Company Limited, Mainstream Energy Solutions, Pacific Energy Limited, Afam Power plc,  Geometric Power Limited and Ibom Power Plc.

Among the consumers’s many expectations of Mamman include, the recapitalisation of the DisCos who have been operating with antiquated equipment inherited from the former Power Holding Company of Nigeria (PHCN). For instance, after five years of the power contract with the Federal Government, it has become apparent that most of the DisCos do not have enough capital to invest in the industry and so are not capable of participating in the power distribution industry such as ours.

According to the DisCos, the non -cost reflective tariffs is a major reason for not investing in the industry. Despite being heavily subsidised by the Federal Government, the power vendors have in the last five years of operation failed to improve on power.

With the expiration of the performance agreement by December 31, 2019, the Federal Government should urgently bring in new investors who should be better equipped with enough funds to invest in the industry.

Besides, Mamman should critically look into the metering system with a view to making the facility available to every Nigerian considering that estimated billing system is nothing but extortion and corruption.

Also, the government should encourage alternative  sources of power like the renewable energy. The five per cent import duty on their equipment should be removed or reviewed downward to improve their performance and persuade more people to enter into the business.

There is a lot of indiscipline in the sector. So, the minister should quickly end the brickbat between the operators and the regulatory agencies because an industry soaked in crisis does not grow. To this end, more powers should be given to National Electricity Regulatory Commission (NERC)  to discipline and sanction erring operators.

However, the operators have their own challenges which should not be swept under the carpet.

For the DisCos, they argue that foreign exchange and the banks’ lending rate fluctuations impacted negatively on their operations.

The appropriate price for a kilowatt hour of electricity should not be lower than the production cost. This does not encourage investment and effective performance.

The  minister should, therefore consider the tariff which they say must be at N80 per kilowatt hour before they can perform.

Speaking to Daily Sun,  the Executive Director of Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, said that the regulators should consider  the unsteady foreign exchange, lending rate and the cost of production of power before fixing tariff.

“It is the responsibility of the regulators to look at the factors including foreign exchange, lending rate, the cost of production of power. They should use that to determine the tariff. But the tariff should be in excess of N80” he said.

The generation companies (GenCos)  are complaining of  non-payment of their stranded generated power which the government agreed  to pay. But the Nigerian Bulk Electricity Traders (NBET) whose mandate is to defray this cost  is not well funded to undertake the responsibility.

So, the Minister should ensure that NBET is well-funded to enable the agency  pay the  GenCos.

The grid system appears to be another knotty issue requiring urgent attention. From available record, the nation’s grid cannot accommodate more than 4,000 megawatts and so when generation peaked  at 7,500 megawatts, it could  wheel a little above  4,000 megawatts leaving 3,500 megawatts wasted.

This  stranded or wasted power, according to the  Executive Secretary of  Association of Power Generation Companies (APGC),  Dr Joy Ogaji,  ought to be paid for.

However, instead of paying this debt, the Federal Government  entered into another power generation deal with Siemens.

Ogaji, picked holes in the document which Siemens used to win the contract, saying that it was a stolen document.

Another problem is the metering issue which has wrestled the industry to the ground.

While consumers are lamenting the heavy burden placed on them with estimated billing system, the DisCos have made it pretty difficult for consumers to be metered because they gain from the system.

However, the Federal Government has subsidised the power industry enough to operate seamlessly but the industry has remained ever paralysed.

Consequently,  the Minister has the herculean task of making sure that the industry  repay the loan which is  running into billions of naira.

Daily Sun spoke to some Nigerians including stakeholders  on what the Minister should do to make the industry remain afloat.

The Chief Regulatory Officer on Government Affairs for  Benin DisCo, Mr Yemi Omoyele said that the power sector reform did not ascribe roles to the minister as such.

But the minister can intervene in the policy direction of the industry.

According to him, the minister should continue with the rural electrification policy of Babatunde Fashola. He should also encourage investment by instituting investment-friendly policies. Above all, he should ensure that government agencies pay their bills promptly.

“On the side of policy direction, I would want the power ministry to ensure that the government agencies pay their bills promptly.

He should pursue policies that encourage investment, particularly investment-friendly  policies.

“To the best of my knowledge the minister does not have a significant role  to play in the tariff fixing. The new minister should continue on the rural electrification which the former minister initiated.

Transmission Company of Nigeria (TCN) is a government agency but you must also understand too that TCN  is a licensee like the DisCos and GenCos.

TCN abides by the rules of National Electricity Regulatory Commission (NERC). What the minister can do is to facilitate their budget.

“TCN is a licensee like the DisCos and GenCos except that they get their subventions from the government. So, it is easier for TCN to get World Bank loan” he submitted.

According to a human rights activist and the National Co-ordinator of Human Rights Writers Association of Nigeria (HURIWA), Comrade Emmanuel Onwubiko, the association  wants transparency/accountability and openness in the running of the financial dealings of the ministry and agencies under it; set up a platform for constant interfaces with credible civil society groups and the media to get feedbacks from Nigerians on service delivery and otherwise; ensure that DisCos and other private sector initiatives in the power sector do not continue to under-perform in terms of distribution of electricity and to end the exploitation of customers through non-metering and the vicious menace of estimated  billings.

“Rural electrification is key because the bulk of farmers who feed the nation stay in rural areas; ban the importation of generating sets and stop federal government offices from using generators; ensure that government  offices pay up their electricity bills; ensure local contents in the supplies of electrical equipment by encouraging foreign manufacturers to set up industries in Nigeria; effectively police electricity facilities by getting by-in of communities. End nepotism and favouritism in awards of public contracts and strictly observe public procurement laws  to stop corruption,” he said.

A consumer, Mr Sani Bello advised the minister to set to work immediately and avoid statements that can be used to judge him in future.

“The minister should  work more and talk less because Nigerians will judge him by his works and not by his talks” he advised.

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