A Review of the Nigerian Energy Industry

‘NERC should set bench mark for new investors’ – Engr. Kola

phcn209 January 2014, Lagos – For over 14 years, the federal government pursued the privatization of Power Holding Company of Nigeria, PHCN assets. 2013 witnessed the end of this rigorous exercise marking a historical change in the nation’s power sector. In this interview, the Chief Executive Officer of MOMAS System Nigeria, Engr. Kola Balogun, projects 2014 expectations in the sector

2013 in retrospect
2013 has been a year that witnessed what has been pending for a very long period of time, that is the conclusion of privatizing the power sector. So its no longer news and we have to thank the federal government for the imitative.

However, for every good policy anywhere in the world it is humans that can make that policy not to be good and for very bad policy it is humans that can make that policy to be good. The initiative of privatizing the power sector can become something regrettable if care is not taken because some of the investors have not been properly informed, they have not properly investigated the peculiarity surrounding the distribution companies that they have bought and that would go a long way in slowing down the process of witnessing the dividends of privatizing each of those distribution companies.

It is a common knowledge that we have three segments in the power sector. The generation, transmission and distribution but where most people are familiar with is the distribution. Every electricity consumer wants to see power in their house and that would determine if the sector is doing well or not.

However, if everybody wants to see electricity, everybody wants to equally pay and ensure that they are not cheated. Also government expects that nobody should cheat them in this era. In order words what we need to do first of all is to address our collection platform where everybody would find it easy to pay for their electricity, where everybody would find it easy to buy their credit if they are using prepaid. We should try as much as possible to discourage estimated billing, it is an abuse of consumer right, it should be disregarded in all our billing system.

What would help us to discourage that is proper metering. So what all investors need to do irrespective of which country they come from is to harmonized our billing platform, where we can have higher collection efficiency. This collection platform would be done in such a way that it will interlink with all the banking infrastructure that we have and as such it would be easier for every consumer to go to every ATM point or POS and make electronic payment. It would be easier to go to the street, buy a recharge card and recharge their meters.

Once we have these issues well addressed and it is error free, whatever metering plan you have on it would have a soft landing because your landing point is your collection efficiency. So no matter the amount of power we have generated, if we are not able to collect them efficiently, it means that the transaction is still flawed because we need to guarantee all the GENCO in the sense that if we don’t have enough money we cannot pay them.

Therefore, we need to harmonise our collection and billing platform to merge with the banking sector for easy means of collecting revenue. Having done that, we need to ensure that we enact a very solid law or regulation that punishes energy theft. If I know that this is the consequences on cheating on electricity, then I would be made to face the law or I will discourage myself from doing that and as such anybody who wants to do policing of energy theft would then create another channel of job because it means somebody would have to be doing the monitoring all over the country. So you can imagine the number of people that would be employed along that line. They will monitor improper installations, energy theft and lots more.

This has to be the job of regulator or the new electricity company called EMS, they have to bring out module of planning or guidelines to guide these new investor because many of them don’t know the terrain very well and they need to be guided.

The success of the telecommunication sector was through the efficiency of NCC. They were at their top form so to speak in the entire affair and monitoring every activity in the telecom sector. This is the reason why we our regulator in the power sector to be up and doing at this point in time. They need to come out more than what they are doing now.

This is their era than what we use to have in the past. They should come out, roll out plans and tell the new investors what they need to do and they should set a bench mark or task to achieve at every quarters. These are things that we need to do quickly, then we would see the goodness in the power sector.

Even if we are generating enough electricity and there is means to distribute the energy, then it would be a waste. So as soon as we guarantee the payment structure then we can now do network upgrading. The transformers need to be upgraded, the cable lines needs to be upgraded then we would have a good network, power will be distributed evenly and people that don’t have power supply will begin to have.

The major task ahead of us is that we need to set a bench mark that will be roll out by NERC. They need to set a very good standard and template by which the new investors are going to operate because most of them don’t seems to understand the terrain very well.

Power supply dropped after complete privatization
Power supply dropped mainly because of the staff disengagement. The process in which the staff were disengaged was not too proportionate. The time they send in the list and the time they actually did the disengagement process was not too proper. You should not disengage technical staff because once you disengage technical staff there is no body to replace him. That approach was not too go enough.

What they would have done was to retain all the staff for a minimum of six months then in the process they can now start in doing the cleaning exercise. Immediately they took over, they started to disengage them and that was what affected the whole process. They should have left all of them and start to look at those that are not really relevant to the success of energy distribution.

Notwithstanding, the fact that the gas issue is still there, am not to conversant with the gas position to the GENCO so I cannot state authoritative what happen at that time but I know that the power generation went down.

Survival of CAPMI scheme, how visible is it?
Your question is very important because it is one of those things that is draining people like us who have actually invested heavily in the sector, expecting a very good return which we have not gotten up to till date.

CAPMI is a leverage for consumers who will come and purchase a pre paid meter for a fix mount which will be refunded after a period of time. But when the new investor came in they taught that it was a particular agenda that is not going to favor them but if you look at the entire meter process, you would see that it is actually a relief on their part. Because once a consumer pay, it is not part of their investment plan to install meter to that consumer.

I think what they have in mind is that they want to understudy the entire process, they want to examine it and see what its look like before they can continue scheme and that is why they actually slowed it down, hence it is affecting us who have invested so much in it because we have produced a lot of meter for this scheme and we were excepted to have a minimum stock before we were accredited for the scheme, those things are actually biting us.

We have over prepared for the privatization of the sector and for the CAPMI scheme and for us not to be put in line is actually slowing us down and it is affecting our finances both in the banking sector and to those we have expose ourselves to. But we are happy that NERC has come out to say that the scheme is still in place but not all the DISCOs are actually implementing the scheme today but we are hoping that by next year they would come out with their various plan to roll out the CAPMI scheme and bring out their own metering plan so that electricity consumers can have meter.

More meter importers, less domestic manufacturers
For a regulator to appoint so many importers of pre paid meters does not seems to go down well with the local content policy that we have because if you are asking a lot of them to import, what will happen to those who are manufacturing locally? We still need to reduce the number of importers, we need to encourage more industrialization.

Even the number of manufactures that were accredited they don’t have existing factory but only a few of us does. But NERC is going to come out with another set of list for manufacturers because they are going around ascertaining those that have existing factory and those that are qualify to be importer in the entire sector.

The fact that they want to import, there are certain category of meters that can be imported that we cannot produce locally like the industrial meter still needs to be imported but we are efficient enough to produce domestic meter and meet local demand. We can produce 100, 000 a month.

Metering is something you don’t do in a rush, it has to be in phases like the smart metering, it has to be taken in steps to follow up the infrastructure in place. It requires a lot of telecommunication infrastructure and with that not all consumers are eligible to it, not all areas are suitable for smart metering. So we need to take it in phases and do the network placing and do the consumer metering process in phases.

2014 projections
There should be a round table discussion with both the stakeholders and the players in the industry. The regulator needs to call all the players in the industry and come out with a communiqué that will the sector forward. We need to hear from all stakeholders. What do they have in mind? What is the way forward? That is very essential for us to have a guideline for the next phase and we have to do it on time so that in the first quarter of 2014 we would have already have a guideline in taking a decision for the way forward.

Also the need to reemphasis the continuous growth of our country, we need to develop our country by ensuring that most of the materials that will be require for a long period of time should be produced locally, the market is there and the product is there, so why can’t we do it right?

The onus lies with the regulator and all those monitoring the sector. The earlier we seat down and discuss, the better to get a direction because we need somebody set up the direction and say this is the template everybody should key into. The template in terms of DISCO performance, template of protecting the local content in the sector, and the flexibility in ensuring that consumers have the simplest way to pay their electricity bill, a system that would not allow them to pass through any stress and to discourage estimated billing system.

We can achieve these things in the first quarter of next 2014 and by the second quarter we are already seeing a precise work out power sector. It is not as if this things will not have little teething problem but we can now start to address them and before the year runs out we would have a clean slate in the power sector.

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