Electricity distribution companies in Nigeria have called on the federal government to intervene in the power sector in order to avert an increase of over 200% in electricity tariff.
According to the operators, the intervention which is needed to address over 800 billion Naira revenue shortfall can come like subsidies to consumers or provision of special access to foreign exchange for the operating companies.
The average energy rate across the country is 22 Naira 8 kobo per kilowatt, but distributors say this may increase to between 70 Naira and 105 Naira per kilowatt if the revenue shortfall persists.
The Chief Executive Officer of the Association of Nigerian Electricity Distributors, Azu Obiaya, reportedly said the debts owed to power distribution companies by private electricity consumers, businesses and government authorities have climbed to about N568 billion.
He added that those debts are affecting the operations of the distribution companies and many are no longer able meet targets and service consumers.
Reports say a proposal for the increment of electricity tariff has been sent to the Nigerian Electricity Regulatory Commission.
An electricity tariff approved by the NERC took effect in February, 2016.
The commission also removed fixed electricity charges ordering that Discos should only bill consumers for what they consume.
NERC said “although, the new tariff regimes comes with an increase in energy charges, all electricity consumers (residential as well as commercial) will no longer pay fixed charges, so their total bills will depend on the electricity they actually consume and may be reduced when they conserve electricity.”
With the ongoing reforms in Nigeria’s power sector, particularly the privatisation of generation and distribution companies, there are expectations of a truly liberalized market in which consumers will mostly pay for services that they enjoy, while service providers will strive for quality operations.
The Nigerian Electricity Regulatory Commission, NERC, was set up to undertake technical and economic regulation of this industry.
The commission is to license operators, determine operating codes and standards, establish customer rights and obligations and set tariffs.
NERC Chairman, Dr. Sam Amadi, is our guest on this edition of ‘View From The Top’.
Despite the threat of a nationwide strike by electricity workers come November the 1st, the federal government says it would go ahead with the physical hand over of the company’s assets to the new owners on that day.
The Permanent Secretary, Ministry Of Power, Mister Godknows Igali, announced this after a meeting with Vice President Namadi Sambo, on the power privatisation process.
He added that the federal government had made significant progress in the payment of the disengaged workers, saying 40,093 out of the 47,913 identified disengaged PHCN workers had been fully paid their entitlements which he put at 294.4 billion Naira.
It will be recalled that President Gooduck Jonathan had formally handed over the Power Holdings Company of Nigeria, PHCN, to private organisations that bought it, with a pledge that they would take over the companies without any liabilities.
The President who personally gave out the licenses and share certificates to the investors at the Aso Rock Villa stated that liabilities of the PHCN would be managed by Nigerian Electricity Liability Management Company, NELMCO.
Lagos State Governor, Mr Babatunde Fashola (SAN) on Thursday commissioned the 10.6 mw Alausa power project that would power the entire State Secretariat, Alausa and Obafemi Awolowo Way.
The Governor who spoke during the commissioning of the Alausa power plant which was carried out in conjunction with Oando Gas and Fidelity Bank Plc., explained that several places and landmarks like the Carter bridge which was abandoned for many years because it was unsafe has now been lit and made safe.
He added that 12 streets have been recently lit up in Alimosho area and is already having enormous benefit because market women who usually close at 5 or 6 pm are now trading into the wee hours of the night, with sales already improved by over 50 per cent from what it used to be.
Governor Fashola reiterated that the solution to unemployment and creating improved economic situation lies in made in Nigeria goods. He expressed happiness that the Alausa power project is another made in Nigeria project, delivered by a Nigerian government with two Nigerian companies using largely Nigerian personnel to solve a Nigerian problem.
“I see a lot of good coming out of the gloom and sorry stories. I see a lot of good. Those who continue to put our country down should continue, but some of us can see the Nigeria of tomorrow and it would not happen by magic but by hard work. Some of us, especially members of my team dared to dream and as long as they continue to dream we would deliver stuffs like this”.
“I welcome you all warmly to the first secretariat that would run its own power without diesel, but on natural gas and clean fuel in the Federal Republic of Nigeria. This could not have happened without Public Private Partnership (PPP). Go and check the balance sheets of Oando Gas and Fidelity Bank and the number of people they employ and you would see the gains of PPP”, he emphasised.
He added that the new Alausa power plant which will power all the offices in the Lagos State Secretariat would bring about efficiency in terms of the work output and lead to a resultant increase in productivity from the workers and the state economy.
Also speaking, the Group Managing Director and Chief Executive Officer of Oando Oil, Mr Wale Tinubu said the new Alausa Power Plant will provide 10.6 Megawatts of electricity to the State Secretariat and will be powered by gas through an environmental friendly Lagos pipeline.
The Chairman of the Technical Committee on power sector reforms, Atedo Peterside has denied allegation of corruption in the privatisation of the power sector by governors of Delta, Edo and Ekiti states.
The governors had on Thursday rejected the announcement of Vigeo Power Distribution as the successful bidder for the Benin Distribution Company by the Bureau of Public Enterprises (BPE).
The states are investors in the Southern Electricity Distribution Company which lost out in the bidding process.
Governors Adams Oshiomhole of Edo State, Emmanuel Uduaghan of Delta State and Kayode Fayemi of Ekiti State insisted that the process that led to the emergence of Vigeo Consortium lacks transparency.
However, briefing newsmen on the privatization process in Lagos, Mr Peterside said the allegation of fraud by Misters Oshiomhole, Fayemi and Uduaghan were pre-emptive as the Disco has not been handed to any of the bidders.
He said: “The 3 Governors appeared to be making their “complaint” because they feared that the Southern Electricity Distribution Company Consortium (Southern Consortium), which they favoured, might be edged out of the race to be declared as preferred bidder for Benin Disco by Vigeo Power Consortium (Vigeo). Obviously they presumed the latter to be the likely winner based on the outcome of the televised Commercial Bid Opening Ceremony which took place in Abuja on Tuesday 16th October, which event I presided over.
“It is pertinent to mention here that the NCP has not even declared a result yet and so no consortium has been announced as being the preferred bidder for any of the 11 Discos in Nigeria. At the end of the Commercial Bid Opening Ceremony, I explained that we still had to subject all the bids to a “material consistency/feasibility test” before making recommendations to the NCP.”
Mr Peterside, who said his team needed to clarify on the four allegations made by the governors, noted that “Southern Consortium is the only one of the 16 consortia that participated in the bid opening to have submitted multiple commercial bids for the same Disco.
“Their envelope contained two different commercial bids, both of which were signed by a Mr. Matthew Edevbie. The first bid was dubbed the ‘primary’ bid, while the other was dubbed an ‘alternate’ bid.”
He added that the alleged fraud was “a clear contravention of the Request for Proposal, RFP. We did not make a big issue of this on live TV because both the primary and the alternate bids fell below the bid submitted by Vigeo, and so neither bid would alter Southern Consortium’s ranking on the large screen. Instead, this matter was brought to the attention of the Technical Committee of NCP, which considered the breach and made recommendations to the NCP.”
The Nigerian Electricity Regulatory Commission (NERC) has threatened to revoke the licences of Independent Power Producer found to have breached conditions of contract to sanitize the sector.
The erratic power supply in the country has for many decades become Nigeria’s greatest handicap. Huge fund set-aside over the years to address the situation has apparently not yielded positive results, but the NERC have now come up with a renewed drive.
The commission hopes to address the gaps created seven years ago when licences were issued to about 40 independent power producers overtime without any results so far with the potential to generate electricity of 20,000 megawatts.
The Chairman of the NERC, Sam Amadi, who made the threat at a forum on the bulk procurement regulation in Abuja, said the commission has designed new sets of guidelines to avoid confiscation of already generated plans.
According to Mr Amadi, all the proposals were unsolicited and the resulting cost to the Nigerian power system and the consumer could be huge and unacceptable if the disorderly approach continues.
“We have set up some guidelines that clearly state how each of the actors, the bulk traders, system operators, market operators, the generating companies, the Discos will now be able to interface in procuring power,” Mr Amadi said.
He further said: “What this act does is that it dispenses the old form. In the past people just come to us and say we want to put 500 megawatts of power plant in Ajeokuta or in Imo State; they negotiate with different actors but that has proved ineffective.
“We have today about 40 to 50 licensees with a capacity to generate 20, 000 megawatts, we don’t have it, and it’s on paper.”
The NERC Chairman said that the new guidelines will change the game plan, saying any operator found wanting or breaching the rules will be shown the way out.
“If an operator is serially in breach of his covenants, we can revoke his licence through due process and dispose of those assets,” he said.
Only recently, another major step was taken in the battle towards stable electricity in the country as successful bidders for the unbundled Power Holding Company of Nigeria (PHCN) generation firms were named, but Mr Amadi said the solution goes beyond successful biddings.
“We are not just concerning about the bidding but also on the quality and technical capacity of whoever wins because they are going to come and face the regulatory rigour in this market,” he said.
The big question now is, will these new developments in the sector finally resolve the protracted power problem of the country?
The Federal Government Friday said it has concluded arrangements for the privatisation of five power plants including those in Ugheli, Sapele, Gereku, Kainji and the Shiroro. Briefing State House correspondents after the meeting of the National Council on Privatisation (NCP) chaired by Vice President Namadi Sambo, a member of the council, Peterside Atedo said eight companies were successful in the bidding process and that the bidders attained the pass mark to qualify them for the financial bidding which will take place on September 25.
Phoenix Electricity, Transcorp and Ampiron Power Distribution Limited were listed as successful bidders who scaled the technical evaluation hurdles for the Ughelli Power Plant.
“For Ughelli Power Plant, we have the following bidders who attained the pass mark of 750: Phoenix Electricity, Transcorp, and Ampiron Power Distribution Limited. They are the ones that will proceed to the financial bid opening,” Mr Atedo said.
Two bidders scaled the hurdles for the Sapele Power Plant. They include; CMEC Energy and GPN Nestoil Power Services Limited.
The two bidders, he said attained the pass mark of 750 and above to qualify for the financial bid evaluation stage.
Ampiron Power Distribution Company also got approval to proceed to the financial bid evaluation stage for the Gereku Power Plant.
Furthermore, Mainstream Energy Solution Limited was announced as the preferred for the Kainji Power Plant, while Shiroro Power Plant has North South Power Company Limited as the preferred bidder to proceed to the financial bid stage.
“They will proceed to financial bid opening but they will have to make some submissions, including security before the financial bidding”.
The NCP said it will notify the successful companies on the requirement of what they have to put up as regards security before coming for the financial bid opening.
“Some of them may have to travel here and in accordance with the tradition of BPE and in the spirit of transparency, the financial bid opening will be televised,” Mr Atedo said.
Mr Atedo disclosed that among the criteria used to evaluate the firms include technical expertise and financial strength.
The negotiation between the Federal Government and the employee’s union of the Power Holding Company of Nigeria (PHCN) has been postponed till next week Tuesday. Briefing journalists after a closed door meeting chaired by the Secretary General of the federation, Anyim Pius Anyim, the president of the Trade Union Congress (TUC), Peter Esele said the government continues to insist that the labour union is mis-informed.
“Our position on the matter is clear. We are not telling the government not to privatise or carry out the reform it wants to carry out in the power sector. Our position is, for you to do this, the severance package as enshrined in the condition of service is followed to the letter,” Mr Esele said.
“If government does that, then there will be no problem at all,” he added
The labour activist therefore disclosed that a full representation of all parties will meet on 28 August to find a middle ground and iron out the issues once and for all.
Meanwhile, the employees of the PHCN continue to maintain that the Federal Government must pay its workers the 25 percent demanded for their pension before privatizing the power sector.
Islamic wealth manager Lotus Capital and Nigeria’s bourse (NSE) on Monday launched a debut index of Nigerian Stock Exchange-listed companies that comply with centuries-old Islamic investment principles.
The NSE Lotus Islamic index, which covers 15 equities with combined market capitalisation of around 2.87 billion naira ($18 mln), excludes banks, companies with high levels of debt or leverage and other stocks that conflict with Islamic principles.
The stock exchange said the new index is designed to attract Sharia/ethical investors to Nigeria’s fledgling stock market, particularly those from the Middle East.
The new index is weighted towards fast moving consumer good, cement, oil marketing and manufacturing sectors and includes heavyweight Dangote Cement.
No sector will be allowed to account for more than 40 percent of the index, Lotus said, noting that the index will be reviewed every six months.
The current impasse over the takeover of management of the Transmission Company of Nigeria, TCN, by the Canadian firm, Manitoba Hydro International, has brought into sharper focus the challenge of implementing power reform that would ensure provision of adequate and stable electricity for millions of Nigerian businesses and homes.
Electricity workers under the aegis of the National Union of Electricity Employees (NUEE) have vowed to resist the takeover of power installations by private management interests, and last week took to the streets yet again in protest against the management contract of the TCN.
In a move that speaks to their determination to resist change in the country’s despondent power sector, the unionists had set up blockades, resisting an alleged scheduled inspection visit of the Minister of Power, Barth Nnaji and officials of Manitoba Hydro International to the corporate headquarters of Power Holding Company of Nigeria (PHCN) which houses TCN in Abuja.
NUEE had alleged that the July 31, 2012 scheduled takeover of TCN management by Manitoba as contained in the three years management contract between the firm and Federal Government of Nigeria (FGN) runs contrary to agreements as reached in their series of dialogue with government as overseen by the Hassan Sunmonu-led negotiation panel.
The Minister of power, Barth Nnaji on Monday said that the staff of the Power Holding Company of Nigeria (PHCN) cannot hold the entire nation to ransom over their agitations against power sector reforms, adding that anyone who wants to cause problems would be sacked.
The Minister disclosed this while speaking at the signing ceremony of a three-year contract between the federal government and Manitoba Hydro International of Canada, in Abuja.
Mr Nnaji assured the workers that the intention of government is to improve electricity supply in the country and not to lay off any staff.
He said “The management company is coming in with only eight people and there is no way those people would take over the jobs of thousands of PHCN staff. What they are going to do is that these eight people will only be taking over eight senior management positions which the eight people there now would act as deputies.
“While deputising, it is only when they refuse to cooperate with the management that they will be replaced. The system will work as normal; there will be no retrenchments and no reduction in salaries although the entire system will be private sector-driven.”
He pleaded with the union members in PHCN to give peace a chance as union membership does not empower anyone to abuse or hurt another person. Also speaking at the signing ceremony, the Director-General of the Bureau of Public Enterprises (BPE), Bolanle Onagoruwa, said the arrangement with Manitoba intends to improve the services in the power sector.
“We have done everything in our power to bring the unions to the table and discuss with them. We have responded to all their demands. We started off by paying them their monetisation which amounted to over N50 billion. They received 50 per cent increase in salary. We have done everything possible to take care of their concerns.
“So, unless a few people who are workers of PHCN, who are not even up to 40,000, are going to take the whole of Nigeria to ransom. over 160 million are crying for power, I think the time has come for us to really understand what we need to do to take Nigeria forward. The unions cannot say we have not met with them; we have had about eight meetings with them in the last 14 months and each time we meet they would come up with new demands.
“Their last concern is the most unreasonable. In terms of severance, we have told them what have been made available for them. We have said that their demands have to conform to pension law. The Pensions Law of 2004 actually makes it clear that the pension is contributory: they pay 7.5 per cent and the federal government pays 7.5 per cent to bring it to 15 per cent. We even agreed that the federal government would pay both their contribution, which they had not paid as their own contribution, but they insist that they want 25 per cent, which is against the law.”
On the contract signing, Ms Onagoruwa said that out of the entire contract the sum of $23million, $2.5million has been paid to Manitoba Hydro of Canada, the management contractor, for which they provided an advance payment cover guarantee and the contract is to run for three years in the first instance.
She said the key objectives of the management contract is sensitisation of the grid, to reduce electricity losses during transmission, provide for the achievement of certain predetermined targets that would improve grid security and general performance, culture change and staff orientation and instituting reward and penalty clauses as incentives for success.
Other objectives, according to her includes to provide efficient management of government investments, to ensure adequate and equitable generation dispatch according to a fair merit order based on sound regulatory principles, to ensure fair market settlements between electricity traders and provide for skills and expertise transfer to Nigerian counterparts who will serve in deputy and other positions to the management staff of the management contractor.
With the signing of the agreement, Ms Onagoruwa said, the management contractor is expected to mobilize and resume on Monday, July 23, 2012, with all the eight key personnel and the associated support staff.