A Review of the Nigerian Energy Industry

Dip in power generation worries distribution firms

14 May 2015, Lagos – The continuous dip in power generation due largely to gas supply shortfalls is a major source of worry to the electricity distribution companies, as it is taking a toll on their operations, our correspondent has learnt.

Power1The Discos, which are the closest link to the consumers in the power value chain, have seen significant reduction in the power allocated to them from the national grid following the drop in generation.

The two Discos in Lagos, Ikeja Electric and Eko Electricity Distribution Company, have seen their average power allocations from the national grid drop by more than 100 per cent to 350 megawatts and 250MW, respectively.

Generation plunged to 2,391.31MW on May 5, 2015, while the actual supply fell to 2,345.7MW, data obtained from the Presidential Task Force on Power showed.

The generation rebounded to 2,913.52MW on May 9, when 2,838.03MW was sent out to households and businesses across the country, according to the PTFP. On Monday, May 11, generation dropped to 2,585.80MW, while 2,524.37MW was sent out, data from the Federal Ministry of Power showed.

The Head of Corporate Communication, EEDC, Mr. Godwin Idemudia, said in a telephone interview with our correspondent, “It is impacting on us negatively right now. There is no power and people are complaining every day.

“Our network is ready to take a load of about 700MW, but what we are currently getting is 250MW. It is affecting our operations seriously. We are the ones the customers know. They don’t know generation or transmission. We have had to come up with load shedding.”

He said the embedded power generation, which the company and some others had been eager to explore, would come on stream before the end of the year, with 200MW going directly into its network and not through the national grid.

“We are pursuing embedded generation vigorously,” Idemudia said, adding that the company was also currently making pre-paid meters available to customers who could pay for them under the Credited Advanced Payment Metering Implementation scheme after which the company would refund the customers.

According to the Chief Executive Officer, Ikeja Electric, Mr. Abiodun Ajifowobaje, in the last one week, the average power allocation to the company has been 350MW as against the minimum load demand of 1,250MW.

He explained that the huge shortfall was seriously affecting the operations of the company as it had to resort to load-shedding, which he said was having adverse effects on both Ikeja Electric and the customers in terms of man-hour being used to carry out load-shedding as well as service delivery to customers.

Ajifowobaje, however, said the company would ensure that the allocated power would be equitably distributed to all its customers.

Ikeja Electric had last month said it was investing $100m (about N20bn) in smart pre-paid meters to be distributed to its customers free, starting from June.

Energy law and policy experts at Banwo and Ighodalo, a Lagos-based law firm, Mr. Ayodele Oni and Mr. Akindeji Oyebode, said the owners of the distribution companies were required to spend funds to reduce technical, commercial and collection losses over a five-year period in accordance with pre-agreed thresholds.

They said in a report, “Such funds will run into hundreds of millions or even billions of naira. No one has, however, considered that such capital expenditure may not be justifiable if the relevant distribution companies don’t receive enough power to sell to consumers on their network.

“Imagine a scenario where so much is spent without a line of sight as to how and when recovery of such sunk costs will occur. No lender will consider same bankable. Hence, the government needs to provide support by playing its own role in ensuring that the distribution companies receive enough power to be able to make enough money to justify the capital expenditure.”

According to them, the obvious but more difficult option is to create an environment that enables generation companies to increase their capacity and also overhaul the transmission grid to facilitate the delivery of improved quantity of electricity to the distribution companies.

“It is also arguable that many of distribution companies can go the way of embedded generation. However, that will not make sense if it will be in very large numbers. The grid is the cheapest and on the whole, the most efficient means of wheeling power from where same is generated to the consumer,” they said.



– Punch

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