“FOR or more than two years now, Niger State has been in darkness.” These were the words of aggrieved Niger State youths protesting unbearable power outages in the state.
The frustration of the youths represents the feeling across the nation over worsening power situation since the past three years that the private sector took over the generation and distribution of electricity in the country.
From Port Harcourt to Kebbi, Kano to Oshogbo, Sapele to Umuahia, Lagos to Sokoto and Akure to Abakiliki, the story is the same: No power while consumers pay for darkness.
Today, the general feeling is that the defunct Power Holding Company of Nigeria, PHCN, has performed the electricity Distribution Companies, DISCOs, and Generation Companies, GENCO.
Meanwhile, many concerned individuals and groups are calling for a review of the privatization of the assets of the PHCN with a view to returning the sector to public control.
Fashola and Buhari
For example, while protesting the intolerable power situation in Niger State, thousands of youths stormed the regional office of the Abuja Electricity Development Company, AEDC, in Minna and the state House of Assembly, threatening fire and brimstone.
Numbering over 5,000, the protesters displayed various placards with inscriptions such as ‘AEDC must go’, ‘No light in Minna, bring back our light’, ‘We say no to darkness”, among others.
Spokesman for the youths, Mohammed Aliyu Mohammed, said: “If AEDC plans to frustrate Nigerlites, then citizens of Niger State have learned to make things unbearable for AEDC too. We have told them that we need light 24 hours everyday, and that pre-paid meters must be given to all consumers in the state. Niger as the power generating state deserves to have steady power supply since we have three major dams, failing which we will continue to advocate and fight for our right. For more than two years now, Niger State has been in darkness. Officials of AEDC promised that there would be steady power supply till December but it has not been so.”
While addressing the protesters in front of the state House of Assembly Complex, the Speaker, Ahmed Marafa, said power outages in the state had affected all sectors and that the demands of the protesters would be looked into.
“It is unimaginable for a state like Niger that houses three hydro power stations to be in want of power supply”, Marafa stated.
In Aguda area of Surulere, Lagos, a resident, Mrs Toyin Awolowo, was seen lamenting how she was going to celebrate the Yuletide in darkness since there was no sign the DISCO covering the area would supply electricity. Awolowo’s pessimism may not be an exeggeration after all because information even from official quarters suggests that the power situation in the country, especially in 2016, was precarious. For instance, Transmission Company of Nigeria’s (TCN) generation report disclosed that the nation witnessed total system collapse on June 28, 2016 and partial collapse on July 10. Overall, in 2016, the power grid collapsed 22 times – 16 total and five partial – up from 13 and 10 in 2014 and 2015 respectively.
Festive season report
Meanwhile, the TCN, on Wednesday, reportedly wheeled out about 3,959 megawatts of generated electricity to the 11 distribution companies.“The News Agency of Nigeria reported that power generation data is obtained from daily forecast on the Nigerian Electricity System Operator 50 website. The daily power statistics posted by SO, a section of the TCN, showed that power generation gradually improved during the festive season with a peak generation of 3,959 megawatts from the national grid. According to the website, the country’s power generation also recorded its lowest generation of 3,366 megawatts within the same period.“The Nigerian Electricity Supply Industry operational (NESI) report for January 3 also said, the power sector hit a peak generation of 4,959 megawatts as against 3,321 megawatts recorded on December 2. NESI, a subsidiary of the TCN, said the sector recorded highest system frequency of 51.52Hz and lowest system frequency of 48.85 Hz. It also said the highest voltage recorded was 372KV, while lowest voltage recorded on the same day was 300KV. Separately, NESI, on January 3, disclosed that over N534 billion of revenue was lost by the power sector in 2016. Among the reasons for the loss are shortages in gas supply, frequency and line limitations and water levels management constraints that led to several cases of electricity outage in the country.
NESI, which put the average daily revenue loss at N1.5 billion, said gas constraint remained one of the major challenges facing the electricity sector.“It explained that the N534 billion amounts to the value of electricity lost on account of the challenges, part of which could have been used to bridge the liquidity gap in the power sector, estimated at N1trillion.
Already, the sector is finding it difficult to access more loans from Nigerian banks due to their inability to meet the payment obligations for previous debts.“The situation will also affect the capacity of the power firms to improve on electricity supply to consumers for domestic and industrial uses.“NESI said in its daily statistics on energy losses that the industry lost N1.525 billion on December 24, 2016 alone.“It also disclosed that about 12 power stations could not produce electricity during off-peak period under the review.“Statistics from the National Control Centre.
Osogbo showed that Afam IV-V, Geregu Gas, Alaoji National Integrated Power Project, Olorunsogo Gas, Odukpani NIPP, Okpai, Ibom Power, ASCO, AES, Omoku, Rivers NIPP and Gbarain power plants could not produce a single megawatt on December 25, 2016.“Nigeria has installed power output of 11,165mw, of which the 12 plants have a combined capacity of 2,035mw.
The growing feeling is that the privatization of the assets of PHCN was nothing but a fraud to the detriment of consumers. And the feeling is justifiable.
Power supply, so frustrating
Three years after the privatisation, Nigerians have not seen the promised benefits of the private sector’ to take-over of the distribution and generation of power.To compound the situation, the mind-boggling funds have been suck into the sector with nothing to show for it. Amid the appalling power supply, many consumers are disturbed by inadequate meters and the crazy billing system in the name of estimated bills.
In fact, the billing system and poor metering by the DISCOs have forced many consumers to doubt the wisdom behind the privatisation of the power sector.
According to Amos Simon, the Chairman, Palmgrove Housing Estate, Lagos, the objective of privatising the power sector has been subverted by the new owners.
He believed that the new power sector operators are only interested in making money through crazy bills than metering electricity consumers.
Simon expressed regret that the Credit Advance Payment for Metering Implementation, CAPMI, a metering intervention programme introduced in 2014 by the Nigeria Electricity Regulatory Commission, NERC, has been stopped by the new operators. “CAPMI is meant to enhance revenue generation as well as reduce revenue losses by operators.
Many Nigerians are now regretting that they supported the government when the plan was being sold to the people. The existing regulations provided that consumers should not pay for meters as it was to be supplied free of charge by electricity distributors and paid for on monthly basis. The paucity of funds, which militated against adequate procurement of the facility by DISCOs, forced the CAPMI to come in and intervene in the metering problem,” he said.
Theodora Orji, the Managing Director, Treasureland Water, Ikoyi, described the estimated billing system as a fraud. Orji accused the DISCOs of extorting consumers in spite of poor service delivery and suggested that the only way out is for government to sanction them.
According to her, consumers are also complaining that in spite of erratic power supply, they are still meant to pay for transformers.
To Tajudeen Bamidele, Chairman, Prestige Printing Press, Somolu, Lagos, NERC should begin to sanction DISCOs which fail to provide meters for customers who had paid for them under the CAPMI scheme.
According to him, metering is important to the success of the privatisation of the electricity industry, particularly as it is to address the problem of estimated billing and protect the interests of the DISCOs against revenue losses.
“It is however imperative for the DISCOs to increase public awareness on metering through aggressive campaigns so that more willing customers can be encouraged. Electricity consumers are not happy about the outrageous bills received from electricity companies in spite of poor power supply since November 2015,” he said.
Privatization, a scam, says NUEE
Lamenting the developments in the power sector, the National Union of Electricity Employees, NUEE, speaking through its General Secretary, Mr. Joe Ajaero, did not mince words in condemning the privatisation process which he described as a ‘scam’.
“Even the so-called bidding process was a scam. Some of the companies that won the bids emerged on the eve of privatisation. We need to have a holistic review of the process. If it has not worked, what is wrong in cancelling it? “, Ajaero said.
The union leader explained that electricity workers in the country had petitioned the Bureau for Public Enterprises, BPE, demanding 10 per cent of government’s remaining 40 per cent share in the DISCOs, as part of an agreement reached during privatisation.
“In line with the privatisation Act, workers were supposed to be allocated 10 per cent. Our lawyer, Femi Falana, has written the Bureau for Public Enterprises (BPE) to demand this. Three years later, nothing has been allocated to workers. Even government that claims to be retaining 40 per cent in the DISCOs has not received one Naira in dividend since the privatisation ended. It means that government sold 60 per cent, but in the real sense, handed 100 per cent of the distribution companies to investors. This is now the case of the buyer being the seller. We have to investigate all these things.”
Ajaero alleged that the DISCOs and GENCOs have two different accounts. “One is the official account that is always in red which they use to deceive government that they are not making profit. The unofficial account tells the story of how the operators are smiling to the banks while consumers bear the brunt, paying heavily for power they never consumed”.
Separately, the organised labour has petitioned President Mohammadu Buhari, notifying him of the alleged anomalies in the privatization of the defunct PHCN, and the need to address same to avoid industrial unrest.
In the petition by NUEE, Senior Staff Association of Electricity and Allied Companies, SSAEAC, and Nigeria Union of Pensioners, NUP, Electricity Sector, the organised labour did not only highlight the pending issues since the privatization of the assets of the PHCN three years ago, it also copied the petition to top government officials including the Vice President, President of the Senate and Speaker of the House of Representatives.
The petition, titled, ‘Sundry issues plaguing power sector progress and threat to industrial peace’, said : “We are constrained to put up this petition to your excellency for your positive consideration and action. Pursuant to the Power Sector Reforms of 2005,the Power Holding Company of Nigeria[PHCN] was unbundled into 18 different companies and whole/partial stakes in 17 of them were sold to private investors in October 2013. We state with all sense of responsibility that the facts preceding the sales are well known to the Bureau of Public Enterprises [BPE], Federal Ministry of Power, Federal Ministry of Labour and Employment and the Nigeria Electricity Liability Management Limited [NELMCO].
“Recall that the agreement between the government and the labour unions was dated 11th December, 2012. An addendum to the agreement was on 31st October 2013, before the handover of the companies, full settlement of labour issues still pending at handover date 1st November 2013. Yet another agreement of 13th January, 2014 on Resolutions reached at the conciliatory meeting between the officials of the Federal Government, represented by the Secretary to the Government of the Federation, the Minister of Power, Minister of Labour and Productivity, Bureau of Public Enterprises on the one part and, the Labour Unions in the Power Sector represented by SSAEAC and NUEE, Trade Union Congress of Nigeria[ TUC] and the Nigeria Labour Congress[NLC] on the other part. The agreements read in the part that the PHCN would not be liquidated unless all liabilities are settled.”
The petition went on: “Three years after privatization, BPE is still unable to complete payment of outstanding PHCN staff entitlements, vis-a-vis severance, gratuity and death benefits. There are well over 961 pension issues, over 1,887 disengaged staff yet to be verified and over 3,000 yet to be paid severance. This is a breach of agreement entered with labour during negotiation. Parties agreed that the PHCN shall not be liquidated until all liabilities to former PHCN staff are settled. The move by the Federal Government to liquidate PHCN [ liquidation fees curiously paid well in advance] without settling the workers entitlements is a violation of the agreement entered with government. We dare say that the interest yield on all outstanding payments is overdue.
DISCO official disconnecting lines on electric pole
“10% equity holding for workers of privatized companies is yet to be issued yet the companies are holding 100% control of the companies for about 60% payments they made-no meaningful government representation. Your Excellency may also wish to know that the money constitutes the Superannuation Fund were contributions made by PHCN workers. In this context, the Superannuation Fund/Board of PHCN is a company limited by shares with a Board of Directors. Thus, the Board cannot be dissolved unilaterally [as being moved by BPE/NELMCO], without the consent and involvement of the owners at an agreed Annual General Meeting.”
‘Investors destroying unions’
The unions argued that prior to privatization, conferences/workshops involving labour unions and the investors were agreed to be organized by the Federal Ministry of Labour as an avenue to nip post privatization matters, but were abandoned, saying the Minister of Labour and Employment should be directed to reactivate such programmes in order to reverse the healthy industrial climate in the sector. They contended that it seemed investors are being allowed to destroy labour unions as is the case in Port Harcourt Disco, Enugu Disco and Kainji power station among others.
“Primary and secondary schools were set up and owned by PHCN workers [non-core assets]but were taken over by the investors. We implore your good office to direct the authorities concerned to handover the schools back to the owners-labour unions. In any case, non-core assets like schools, buildings, vehicles, etc. were not part of the privatization deal. The Afam Power Plant(a failed privatization example) with capacity of 115MW has been out of operation for a while now due to damaged power transformer and has not been able to pay workers salaries for upwards of ten(10) months,” the petition said.
“We request your excellency to give appropriate directives for payment of workers salaries while concrete action should be taken to restore the station to service so that the workers can return to work to generate power for the country. Sequel to the privatization, it was agreed that 2% deductions of workers’ salaries shall be paid to the unions for costs incurred during the four-year long process. Although an initial percentage was paid, but three years after privatization, BPE has failed or refused to remit the balance of the outstanding 2% deductions to the unions.”
The petition alleged that unhealthy industrial relations between investors and the trade unions in the power sector is palpable. “For instance, in Port Harcourt Electricity Distribution Company (PHEDC) And Enugu Electricity Distribution Company [EEDC], there is an issue of non-recognition of unions by the management of PHEDC and EEDC, which was not resolved despite intervention by the Federal Ministry of Labour and Productivity. Federal Ministry of Labour has not invoked workers rights to unionize against these companies,”it stated.
The petition told the President that the privatization has led to private monopoly with very low efficiency in the power sector than ever recorded under government ownership. “The investors have neither technical or financial capacities. Instead they have become experts in articulating reasons why they cannot deliver on service and efficiency despite illegal tariff adjustments.”
The petitioners contended that that to worsen the matter, same investors have focused on TCN for take-over, claiming it is a weak link. This is another ploy to deceive government when they are yet to match TCN 6000MW capacity in generation and distribution. Your excellency, chase such proposers of TCN tinkering away from you for they want you to fail without redemption. For a start, let generation and distribution companies justify the opportunities they were given to invest and expand the companies. When that happens, Nigerians will beg them to take over TCN.
“Transmission Company of Nigeria [TCN] is under financial and psychological torture by the Discos and Ministry of Power. While the Discos are starving it of legitimate earning of services rendered and denial of CBN relief for unpaid earnings by the Discos, Federal Ministry of Power is strangulating it with the threats of ejection, denial of office spaces and no approval and fund to purchase another office complex.
“Federal Ministry of Power seems determined to shut TCN down operationally. Your excellency, you may need to direct the Permanent Secretary [Power] to release the seized office spaces of TCN or give money for an adequate office space to be acquired by TCN. Needless to say that the Ministry is occupying its old space in Federal Secretariat [vacated for no good reason] and pushing or distracting TCN from concentrating on rendering service to the nation.”
The unions listed some of the outstanding liabilities to include Pensioners Unsettled Liabilities; agreements signed by government/unions.
Established Arrears totaling about N34 billion, and arrears of 33% pension increase for PHCN pensioners since July 2014 when NELMCO handed over to it.
They prayed Buhari to use his office to get all MDAs involved in the power sector to address lingering issues, and ignore the call to tamper with the TCN.
The petitioners added: “We notify your excellency that the labour unions will have no other choice but to use legitimate means to achieve the rights and welfare of their members. This will have adverse consequences on the power sector hence this concerted effort to avert it.”
Our case, by operators
Making their case, the power sector investors, on the aegis of Association of Nigerian Electricity Distributors, ANED, say they may be compelled to declare force majeure to protect their investments.
Force majeure refers to an irresistible force or unforeseen event beyond the control of an organisation making it materially impossible to fulfill an obligation. Explaining some of the various agreements yet to be honoured by government, ANED Executive Director, Research and Advocacy, Sunday Oduntan, said the two parties agreed that with base loss studies completed, there should be cost reflective tariffs from day one as specified under the performance agreement. However, this never happened as R2 customer class was politically frozen and collection losses removed, in 2015. Consequently, sculpting or under-recovery of cost will result in N164 billion revenue shortfall, for the period of 2016 through 2018, just as delay in reflecting costs means a growing increase in deficits.
ANED listed tariffs reflecting reality as another government commitment to investors. However, it explained that there has been unrealistic generation projections as inflation increased from assumption of nine percent to the current 17.9 percent.
The government was said to have agreed to a credit worthiness support of power purchase agreements by the Nigerian Bulk Electricity Trading, Plc. (NBET). In the case of the GENCOs, they are owed in excess of N184 billion.
Apart from that, increased access to gas supply was agreed upon, but the nation has witnessed little or no improvement in gas supply as there has been pipeline vandalism, resulting in an average of 50 percent reduction in generation, for the period of May, June and July 2016 alone.
ANED further explained that government had reneged on its agreement to increase generation levels from 2014 to 2016 to between 5,000MW and 7,500MW, whereas the present generation level stands at about 2,000MW to 3,000MW, due to gas pipeline vandalism and transmission wheeling constraints.
It pointed out that whereas government committed to a subsidy support of N100 billion for the power investors, the promise has not been met under the multi-year-tariff order, MYTO, 2.
According to ANED, power investors have little or no access to finance as the banking sector has been over exposed to oil, gas and telecommunication sectors by over N3 trillion debt. It averred that if government does not take urgent steps to address the issues raised, the power investors will have no option than to declare a force majeure.
“In spite of these challenges, the DISCOs have made progress. We have reduced technical and commercial losses (even with the limited capitalisation). We have improved billing systems. We have improved ICT and GIS infrastructure. We have set up call centres addressing over two million queries from customers. We have reduced down time due to improved network maintenance and upgrades. We have recruited thousands skilled personnel, significant grid metering achieved”, the group said.
It lamented that foreign exchange keeps fluctuating, saying: “As of December 2015, it was N197, and by June 2016 it became N293 and now it is N360 at official rate. This is a difference of N163 especially in buying gas to generate power. What that means is that the cost of Generation Companies, GENCOs, producing energy has increased because they buy the gas in dollars. The invoice we get from GENCOs for the same quantum of energy received has increased. Even if we are paying the same amount that was agreed in December 2015, that amount is now giving a lesser percentage of payment. For instance, average cost of electricity is N25 and the cost that comes to me is N48, I am expected to sell that power at N25. How do I balance that?”
N400 billion debt
Similarly, the Executive Secretary of GENCOs, Mrs. Joy Ogaji, told Sunday Vanguard that the debt owed them was over N400 billion, “The situation in power generation is very obvious. The fact still remains that we at the generation end of the value chain are quite handicapped at the moment, with the debt owed us which has risen to over N400 billion. It is noteworthy that most of the power generation plants have been disconnected from the supply of gas (companies not named) simply because we are unable to pay for gas supplied. The situation is getting bad and should be addressed as urgently as they should because the country’s power supply is dependent on how far we generate”, Ogaji said.
She said the GENCOs had been under so many challenges since they started operations.
Some of the challenges, according to her, include payment of outstanding receivables and steady payment process going forward; Non-activation of the Industry Agreements; Liquidity issues (Irregular disbursement of CBN Intervention Fund); Foreign Exchange Issues; Non-Payment of Value Added Tax (VAT) to GENCOs even-though they pay VAT for gas purchased; Lack of transparency and visibility of market collections; Gas constraints due to vandalism and other associated issues; Grid Instability and Transmission Evacuation Problems: and GENCOs limited Involvement in Adopting Cost-Reflective MYTO Tariff.
She noted: “There have been historical challenges to the growth of the sector including prolonged Federal Government presence at commanding heights, consistent under-investment since the early 80s and poor management of the country’s gas resources. As outlined above, the GENCOs have exceeded their expectations. The strain on these assets is compounded by the fact that there has been limited new capacity added in recent years before take-over.”
On the TCN, she stressed that the existing transmission network is inadequate, fragile and not reliable, adding: “Modernization of existing plants is necessary but will require significant capital investment, some of the GENCOs have taken heavy loans to overhaul their plants (Egbin, Ughelli, Geregu 1, Shiroro, Mainstream just to mention a few.)”
In a seeming reaction to ANED’s allegations, the Minister of Power, Works and Housing, Babatunde Fashola, accused the DISCOs of undermining the efficient and effective regulation of the electricity sector by the NERC.
According to the Minister, when NERC wanted to activate their contractual obligations as contained in the Transitional Electricity Market, TEM, the DISCOs dragged the regulatory agency to court and frustrated its efforts.
He also accused the Discos of being mostly responsible for the delay in the settlement of debts owed them by the Ministries, Departments and Agencies.
Fashola emphasised that the DISCOs have, irrespective of their excuses, failed to inform Nigerians that, in the last three years, they have refused to submit their audited financial reports to NERC.
In a document obtained by Sunday Vanguard, the Minister described the position of government thus, “Following the privatization in 2013, the ministry is now largely a policy maker and regulator, through the Nigerian Electricity Regulatory Commission, NERC, and is now only directly responsible for expansion and maintenance of the transmission line through (TCN) and completion of projects started before the privatization which were uncompleted.
“We inherited over 100 transmission projects for which contractors were not paid for about three years and this not only resulted in stoppage of work, laying off of workers, but also left projects uncompleted.
“It also resulted in contractors abandoning over 800 containers bearing transformers, switches, panels and other equipment needed as materials to complete transmission projects because they could not pay for them.
“To compound the situation, there was no provision in the budget of 2015 to pay them as only N5 billion was budgeted for the Ministry of Power.
“All this has changed. The ministry has N24 billion for 2016 and has started paying contractors and getting the necessary approvals for them to return to work. Examples of these are in Sokoto, Maiduguri, Okada, Alagbon, Damboa, Nasarawa, Gurara, Osogbo, Kashimbilla, Kumbotso, Ikot Ikpene to mention a few.
“This puts a lie to the narrative that the transmission grid is static at 5,000 megawatts and is not expanding because these projects add to the capacity.”
Fashola, however, disclosed that some of the projects that should start coming to conclusion in 2017 are the 215 MW Kaduna Power, 40 MW Kashimbilla Power (Hydro), 40 MW Gurara I Power (Hydro), 29 MW Dadin Kowa Power (Hydro), 10 MW Katsina Power (Wind) 1,125 MW (14 Solar projects) and the 240 MW Emergency Power Project for Afam (Gas).
“We are working with the generation companies to increase their power generation capacity through repairs and maintenance. Egbin has restored all its turbines even though it has suffered gas outage as a result of vandalization,” the minister said.
“Kainji, Jebba and Shiroro have increased the number of functional turbines, so they are producing 300 MW extra power during this year’s rainy season, more than they did last year.
“As of November 5, this year, reports reaching me from the control center showed a peak generation of 4010 MW, and this is without the 3000 MW lost to gas pipe vandalization.
“I am aware that efforts are in progress to repair and restore the damaged gas pipelines, and also to fast-track emergency gas supply.”
He noted that government had recently provided a guarantee to ensure supply of gas to Calabar power plant, which has power and transmission, but no gas to operate efficiently.
“On the distribution side, we continue to work with the DISCOs to improve their customer service and in particular meters supply.
“As you heard on a recent TV program, some of the local meter manufacturing companies attest now to improvement in orders to supply of meters.
“As you will have also seen, I have been involved in meter distribution flag offs in Kano, Benin and Sokoto. All told, while there is still work to do, and there is the big problem of liquidity to overcome, the promise ahead looks good, the plans are clear and our resolve to implement is unwavering.”
Fashola went on: “Going forward, we intend to roll out our Rural Electrification Implementation program which Mr. President has now approved as required by the law.
Our objective is to improve access to power for rural communities.
“You will have heard of our education intervention project, which is indeed a rural electrification implementation project. We are using universities as one of the anchors because they are in rural areas and they represent a quick way to penetrate the rural areas and also expand to villages and towns in rural areas, close to universities.
“We are starting with 37 federal universities, seven teaching hospitals, to which we plan to deploy 37 independent power plants of nine gas plants, and 28 solar plants to guarantee a cumulative 120 MW, to replace 1,105 generators that are producing a wasteful 210 MW.
“We have done the audits and planning of all the schools and if we get financing authorization we can implement, to provide access to power to our people in the rural areas.
“The second anchor of our rural intervention is the use of small hydro dams that are in the rural areas to support agriculture and agro processing by providing power.
“The approval for the first six is pending for consideration by the Federal Executive Council.
“All of these sources of power, with embedded power from Paras Energy 40 MW gas in Lagos, the expected completion of Azura power in Edo, expected gas supply to Ihorbor gas power plant, Gegeru power, Olorunsogo, Omotosho, Gbarain and others make me hopeful that we can get incremental power.
“How well we do with making the incremental power steady and ultimately uninterrupted will depend on how we as a people resolve issues like vandalization, electricity theft, electricity conservation, invocation of court powers in utility regulation and of course strikes”.