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(Note: minor edit made to clarify the role of the discos.)
The incessant hum of generators belching fumes into the air day and night...
The look of helplessness of the artisan as he sits idle outside his stall...
The frustration of the housewife as she sees the food that she has spent days painstakingly preparing turn bad because it can't be preserved...
Yes - these are the signature stories of what I (and many people) would regard as the Obasanjo administration's biggest failure - the inability after nearly eight years in office to make any difference in Nigeria's long running power supply problem.
So in this article, I'll be looking at why this has happened... what his administration has done so far... and what challenges lie ahead.
I won't bore you all to death with the history of electricity supply in Nigeria. All I will say is that large-scale power generation, transmission and distribution has been the sole preserve of the government since independence - this has been enshrined in law by Decree 24 of 1972. The company responsible for doing this was until recently known as the National Electric Power Authority (NEPA), and for most of its history it has had a reputation as one of the most inefficient and corrupt institutions - although it probably stands out because its inefficiency has had such a dramatic effect on the everyday lives of most people. It has also suffered from terrible neglect by the government - prior to the advent of the current administration, the last time any generating capacity was added was as far back as 1990 with the construction of the Delta thermal power station in Ughelli.
Anyway, when the Obasanjo administration came to power in 1999, it appointed the late Bola Ige as the minister of Power and Steel - a curious appointment indeed, given that Ige was a chieftain of the opposition Alliance for Democracy. Ige promised that by mid 2001, the country would have uninterrupted power supply - a rash promise to make, considering what a mess the power infrastructure was in at the time. Unsurprisingly, the goal wasn't met - and since then, the government has continued to make unfulfilled promises about meeting some power generation target or other by such-and-such period.
It isn't as though nothing is being done, though. First of all, the government has realised that NEPA cannot be solely responsible for power generation alone, and it has begun moves to encourage more private sector involvement. Prior to the start of the current administration, a NEPA Amendment Act had been passed in 1998. The thrust of the act was to end NEPA's monopoly over the generation, transmission and distribution of power and hopefully encourage private players to invest in power infrastructure.
Unfortunately, ending NEPA's monopoly didn't seem to have the desired effect of sending private operators scrambling to enter the power supply market. This was probably because the laws governing how these private entities would operate were not clear. How much tariff could they charge? What was the lowest level of service they were permitted offer the customer? With these matters unclear, it is probable that private operators were wary of getting involved.
So the current administration has attempted to clarify the ground rules for operators in this sector. To this end, the Electric Power Sector Reform Act was passed after much delay in 2005. Amongst other things, the act established the Nigerian Electricity Regulatory Commission (NERC) whose responsibility is to license companies to generate, transmit and distribute electricity and setting up the legal framework within which these companies will operate. This presumably means it will state exactly what their responsibilities are, what kind of service they may provide, what works they may carry out in doing so, what tariffs they may charge and what customer service levels are acceptable. The hope is that the legal framework created will encourage companies that have up till now been scared to participate to do so, and the competition it will create will be beneficial to the consumer.
Another measure that the current administration has taken is to expand the existing generation capacity by building plants at Geregu (in Kogi), Papalanto (Ogun), Alaoji (Abia) and Omotosho (Ondo) and encouraging independent power producers to build and expand plants at Afam, Bonny, Kwale, Abuja, Obajana and Enugu. The expectation is that once all the plants are complete, the total power generating capacity of all plants in Nigeria will be over 10,000 MW. But if you consider that the generating capacity of Eskom, the major power generating company in South Africa is 40,000 MW for a population of just over 40 million, then its reasonable to conclude that 10,000 MW will be insufficient for a population of 140 million.
It should be also noted that a high installed capacity itself doesn't necessarily mean uninterrupted power supply. First of all, just because the total installed capacity is 10,000 MW doesn't mean that 10,000 MW will be generated. The actual output could be much less if the plants have to shut down due to poor maintenance, or due to non-availability of fuel to run the plants (this is what is causing the severe power shortage in the country today). Even if the full power generating capacity is used, there might still be shortages if the transmission infrastructure is so badly maintained that there are power losses along the line. So increasing the installed capacity is necessary, but not sufficient.
Yet another measure the government has taken is the restructuring of NEPA by first of all creating a holding company for the assets and liabilities of NEPA, namely the Power Holding Company of Nigeria (PHCN). Then it has broken up NEPA into six generating companies (gencos), one transmission company (transco) and eleven distribution companies (discos). NERC will issue licenses to all these companies so that:
- the gencos will be responsible for generating power, so they will manage the plants that I mentioned a few paragraphs ago.
- the transco will be responsible for managing and expanding the National Grid - the power transmission infrastructure that includes the cables, pylons and transformers and that transports the electric power to various distribution sub-stations across the country.
- the discos will manage the distribution infrastructure downstream of the sub-stations and also deal directly with the consumer - handling billing, revenue collection and customer service issues.
The details of the exact relationship between these three types of companies are still being worked out, but I presume that it'll be something like this:
- the gencos and discos will sign contracts in which the disco will purchase such-and-such an amount of energy;
- the genco will then pump this energy into the National Grid;
- the transco will then transmit it to the locality in which the disco operates;
- the disco will then distribute this energy to its customers, bill them for its usage, pay the transco and genco from the proceeds and hopefully have some left over to satisfy its shareholders.
This arrangement means that the role of the transco is very important; it will need to do a lot of monitoring not only to ensure that the genco lives up to its end of the bargain by pumping in the exact amount that was agreed, but also to ensure that the power will get to the customers of the disco. As at March 2007, NERC are shopping around for a company to enter into a management contract to manage the National Grid on behalf of the transco; I assume that once a company has been decided, the next step will be to set up contracts between the gencos and discos.
This arrangement also creates other issues that will need to be dealt with. For example, it also looks as if initially, there will be one disco per locality - in other words, it will be a local monopoly. This could be problematic if the disco does not deliver good quality service but still insists on charging its customers. The hope is that NERC will ensure that the discos stick to an agreed level of customer service - but it also means that the transco should be able to guarantee that their infrastructure is in good working order so that it is able to deliver the electricity to the disco's consumers.
Since the discos will initially be operating as local monopolies, this raises the question as to what the tariff will be for a unit of electricity. NERC will likely have a hand in setting this - presumably, it will strive to achieve a balance between ensuring the operating companies can make a profit and ensuring the consumer is not 'exploited'. It is possible that some form of initial subsidy may even be required to achieve this balance, at least in the initial stages. Certainly, the tariff will have to rise over time, because the current tariff isn't economic for the operating companies.
But even though the discos will be starting as local monopolies, the expectation is that eventually it will be possible for more than one disco to operate in the same area so that a customer can switch from one disco to another. The difference between discos will be in matters like customer service and the prices that the various discos can offer as a result of deals that they make to buy power off gencos. But this will only happen once power generation has reached a level where it can satisfy consumer demand. And while the consumer will be able to switch between the disco that handles their billing and buys electricity from the genco, they will still remain with the disco that handles the distribution of energy to their property. In other words, there will be a separation of the disco's distribution and billing functions.
Then, the disco also has the challenge of dealing with customers who refuse to pay and worse still, customers who set up illegal connections to steal power - but again, the hope is that it will find a way of dealing with these issues - perhaps through monitoring systems and pre-paid meters - as the alternative is to rack up losses and eventually go out of business.
Also, since the amount of power being supplied is much less than what is in demand, the discos will need to find a way of rationing the power that they buy from the gencos so that it will go round their customers. While this may not lead to uninterrupted power supply, the periods of power supply will become more predictable so that customers can plan their lives much more easily. Of course, the hope is that more gencos get involved in power generation as they see that there's money to be made, and the supply will increase to the point where consumers get uninterrupted power supply.
But while all that is being thrashed out, the nation is still being plagued by power shortage problems. PHCN officials have reported this as being due to vandalism on the pipelines supplying gas from the Delta to the various thermal stations. This highlights the not only the insecurity of the supply network but the extreme dependency on it. Perhaps alternative means to supplying gas to stations - such as barges or supertankers - should be explored. This isn't an issue that is going to disappear, even when the operating companies start trading with each other.
Of course, there is always the possibility that some new technology will come along and completely rewrite the story so that the reforms in their current shape are no longer necessary. For example, let's say that the capacity of batteries is improved to the point where a single battery holds enough energy to power an average household for several weeks. Then this might lead to a scenario where people go to their local power plant to charge their batteries and use the charged batteries to power their houses. This would mean that there would be a massive decentralisation of power generation, with a power plant directly serving customers in a suburb, for example. Of course, this is not as convenient as having lines run directly to consumer's houses, but it is certainly much more flexible and robust.
But for now, the government should press ahead with the restructuring. There will definitely be initial pains as the tariffs go up and as people still experience outages (because the generating capacity doesn't yet match demand and there's not yet enough capacity). But the hope is that as gencos see that there is money to be made from selling energy to discos who will sell it on the consumer at a profit, they will be attracted to set up more and more stations and thus not only increase capacity but bring down energy per unit prices.
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Posted by Robot| 10.03.2007 17:55