10 LESSONS FROM FASHOLA’S PRESS BRIEFING

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The Minister of Power, Works and Housing, Mr Babatunde Raji Fashola (SAN), gave a brief on the current state of the power sector. He suggested that “in the period when they (DisCos) are not yet ready, willing, or able (to adequately serve their customers), life must go on and solutions must be provided. In pursuant to this notion and backed by Section 33 of the EPSRA, Section 32 (1) (a)-(g), the minister has directed NERC to act with a view to improved capacity to take up the idle 2000MW, enable other players to engage and provide improved services thus creating room for competition.

Here are the 10 talking points which we believe describes the changing face of the Nigerian power sector.

  1. The Government (at all levels; Federal, state and local) owns 40% of the shares of the DisCos. The government also took additional caution by setting up the regulatory body the Nigerian Electricity Regulatory Commission (NERC) tasked with monitoring and ensuring compliance of all power sector players. The Nigerian Bulk Electricity Trading Company (NBET) was set up to give confidence to the GenCos by guaranteeing to buy bulk power.

In real terms, the power that the DisCos sell does not belong to them; they are only distributors for a commission under a vesting contract with NBET. NBET pays the GenCos for the power and vests them in the DisCos. All these arrangements arise from the Electric Power Sector Reform Act (EPSRA) of 2005 which led to the privatization which took place in 2013.

 

  1. The Honorable Minister Stated that no DisCo is currently buying power directly from a GenCo. He went further to state that the DisCos in so doing knowingly avoid direct transactions with the GenCos because they cannot or do not want to pay for their energy costs.

 

  1. Generation of power has improved, rising from about 4,000 MW in 2015 to roughly 7,000 MW in 2018. This averages an increase of 1,000 MW each year. The ministry expects to add a total of 954 MW in 2018 and about 1,150 MW in 2019. The GenCos are undertaking various repairs, rehabilitation and expansion that will bring on incremental power.

To understand the workings of a GENCO, click here

  1. The transmission capacity has increased from approximately 5,000 MW in 2015 to 7,124 MW as at December 2017. TCN currently has about 90 Transmission projects in various stages of construction and many are to be completed before the end of the year. This will aid in transporting power generated by the GenCos. There is also a 10-year Transmission Expansion plan which Government is committed to implementing.

To understand how TCN operates, click here

  1. Distribution has increased from 2,690 MW in 2015 to 5,222 MW in 2018, averaging an increase of 844 MW per annum. The DisCos have also done some work, however, despite the progress recorded by all components of the value chain, a major problem today is that the DisCos cannot distribute all of the power available. This leaves the sector with an unused capacity of 2000MW and additional 1150MW to come by the end of this year.

          To understand how DISCOs operate, click here

 

  1. NBET is owing to the GenCos ₦325.784 Billion which can be settled if NBET collects what the Discos are owing. To this end, the government created a ₦701 Billion Payment Assurance Guarantee for NBET. This has now increased GenCos collection from 20% to 80% payment on invoices. Before and during the current administration, GenCos and gas suppliers who produce the power were being underpaid by NBET. This was because the DisCos were under collecting or under remitting payment. GenCos were getting only about 20% of their invoices for the power they generated.

 

  1. In order to assist in the evacuation of 2000 MW (the deficit between what the GenCos can produce and what the DisCos can distribute), the Government asked the DisCos to submit their transformers and equipment requirements. As 40% shareholder, the government has committed to invest ₦72 Billion for procurement of equipment and installation to help get the 2,000 MW to consumers. This process has been advertised with encouraging responses from original equipment manufacturers, which are being evaluated.

 

  1. In order to bridge the metering gap, Government has settled an inherited court case and has been able to make available ₦37 billion to the Meter Asset Providers (MAP) regulation. This regulation issued by NERC looks to license meter entrepreneurs to help supply meters that the DisCos are under contract to supply but are as yet unable to fully discharge.

Click for more on NERC and NERC’s MAP scheme

  1. Small businesses who need very little power are not getting enough because the DisCos cannot take the power to them. Furthermore, the investment of GenCos is threatened because they cannot utilize the capacity they have installed.

 

  1. In order to improve service to small businesses, Government, acting through the Rural Electrification Agency (REA) is linking Small Power Entrepreneurs with markets like Ariaria in Aba, Sabon Gari Market in Kano, and Sura Market in Lagos. The markets contain approximately 37,000, 13,000, and 1,047 shops respectively. They are being metered by the small entrepreneurs who have offered to replace their generators with more efficient power and meters. There are 15 of such markets which if successfully implemented would provide power to 85,485 shops, empower 205,000 SMEs and create 2,000 jobs during the installation and after in operation and maintenance.
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