The Minister of Power, Adebayo Adelabu, should use the most obvious silver bullet solution to sort out Nigeria’s electricity sector’s penkelemesi, which his grandfather may have described as a peculiar mess.
Ministry of Finance Incorporated, the holding corporation of the Federation, also owns a significant stake in electricity generation companies and electricity distribution companies that it makes annual budgetary provisions for.
Adelabu, grandson of Adegoke Adelabu, stormy petrel politician of pre-Independence Ibadan politics, should quit explaining the shortcomings of the Gencos and the Discos and concentrate his efforts on expanding the capacity of the national grid that the Bretton Woods institutions should have advised.
Let the Nigerian Electricity Regulatory Commission worry about the tariff regime of the Discos. After all, NERC amply demonstrated its capacity to handle the electricity sector when it imposed a 200M fine on Abuja Disco for violating tariff regulations that you may describe as “over-invoicing!”
The enabling Act gave NERC ample power to enforce discipline and negotiate tariff changes with Gencos and Discos. So, the minister should maintain a dignified distance from the details, but wait to intervene if there is aught between consumers, NERC, Gencos, Discos and even the Transmission Company of Nigeria.
Maybe Minister Adelabu is probably getting himself into the fray because the TCN, operator of the degraded national grid, wants to pass its operational costs to the Discos that interface with customers. Also, because the special purpose vehicle, Nigerian Bulk Electricity Trading Plc which warehouses electricity produced by Gencos for resale, can’t offload to the national grid.
This would appear to put a lie to NERC’s explanation that the new hike in tariff is to keep Gencos in business. Gencos, according to NERC Vice Chairman, Musiliu Oseni, are having difficulties in paying for the feed gas needed to power their works.
Oseni observed that because payments from Discos to Gencos dropped, Gencos could not profitably maintain their operations. Also, the Gencos and Discos had to service the prohibitive bank loans. These obviously led to the need to hike electricity tariff.
The inability of the national grid to throughput electricity from the Gencos to the Discos led to the inability of the Discos to pay for electricity that the Gencos produced, but could not sell or supply. So, consumers will now be paying for the inefficiency of the TCN and its national grid.
Oseni refers to Section 126(2A) of the NERC Act which imposes on NERC the obligation to ensure that electricity companies stay profitable by ensuring the recovery of their capital and operational costs.
In October 2023, Executive Secretary of the Association of Power Generation Companies, Dr Joy Ogaji, affirmed that Gencos could produce 14,000 megawatts of electricity. But everyone knows that the inefficient national grid has the capacity for about 3,400 megawatts.
The national grid trips off as soon as it receives load beyond its carrying capacity. Add to that the inability of TCN to apprehend saboteurs who go into the bush to shoot down transmission lines so that vendors of electricity-generating sets can remain in business.
What this suggests is that the national grid is not in a position to deliver electricity beyond a threshold from the Gencos to the Discos. It is therefore failing in its statutory and constitutional obligation to the people of Nigeria.
Ikeja Disco and Abuja Disco have alleged that recent interruptions in their ability to deliver services to their consumers were respectively caused by load restrictions on the aged national grid and localised violent windstorms.
Already the manufacturing sector, for whom electricity is a major input, and their labour union partners, are in panic mode and are complaining over the 240 per cent increase in the tariff for Band A customers that are just about 15 per cent of the electricity market.
This development is expected to guarantee the neighbourhoods at least 20 hours of electricity supply per day. Nigerians, who are easily impressed, even when their legitimate rights are given to them, are already jubilating and celebrating an arrangement that everyone concerned should be ashamed of.
Some endorsers are already making the rounds on TV, trying to make Nigerians accept as normal what should be roundly condemned. This arrangement is an endorsement of services that are clearly below par.
A check of the wrongheaded deal is that the so-called Band A market zones are mainly in the highbrow residential neighbourhoods, and not exactly in the industrial estates that need a constant supply of electricity to deliver the productivity that will raise the country’s Gross Domestic Product.
If NERC thinks that it has done a great thing by temporarily excluding the tariff hike from the so-called Bands B, C, D and E markets, it is quite mistaken. It is just confirming that it has no capacity or imagination to creatively run the electricity sector.
Electricity has become a speciality or luxury item to be ceded to some highbrow neighbourhoods in some major cities in Nigeria. And those who cannot afford the high-end tariff will just sulk and hold their peace, with the hope that one day they too would move up the socio-economic ladder.
The Association of Senior Civil Servants, which probably has members who work for government-owned TCN, also thinks that by putting electricity consumers into bands or service categories, Nigeria is admitting that it has no plans for a 24-hour supply of electricity.
In any case, some honest Nigerians who live in upscale Band A market neighbourhoods are already admitting that they have not always gotten the so-called premium services for which they have already been paying the higher tariffs even before now.
If the government wants to remove subsidy, said to be N3tn of the 2024 Budget, it should go ahead. But it should get the TCN to massively invest in expanding the capacity of the national grid so that Gencos and the Discos can function more efficiently and optimally.
Despite the roundabout announcement of the removal of subsidy, Transcorp Power Plc, a Genco, formerly Ughelli Power Plc, reported an impressive financial return for year ending December 31, 2023. You want to know how that was achieved.
In the intermediate to short-term, Minister Adelabu should consider a mixed grill of ideas: Encourage government agencies to pay their debts to Discos, extensive upgrade and expansion of the national grid, if he wants to retain the current jinxed template that puts Gencos, national grid and Discos in silos.
He should stop extortionate estimated billing, install pre-paid meters to ensure fairness to customers, revisit Siemens talks, explore alternative sources of energy such as solar, wind, water and other renewables and let the government be an enabler and arbiter to the electricity sector.
Electricity companies in designated markets should have integrated generation, transmission and distribution works under one roof, instead of the current template that puts the three components in silos.
The minister should encourage more off-grid electricity producers, like the rural electrification schemes, throughout the federation. A good way to achieve this is to take advantage of the constitutional amendments that empower states to participate in the electricity sector.
He should push the service-reflective tariff, suggested by Nigeria Labour Congress President Joe Ajaero, just as he argues for cost-reflective service to attract more private investors with requisite managerial, technical and financial competencies to build new Gencos, grids and Discos.
But fixing the national grid is the silver bullet.
