RE: Playing Politics with Power Sector

On the 28th June, 2020, a well respected journalist, Simon Kolawole, in his ThisDay Column “SIMONKOLAWOLELIVE!” wrote a piece titled “Playing Politics With Power Sector”, in which he expressed his opinion on the state of the Power Sector.

In the Column, Simon Kolawole, while establishing the age long known excuses and shenanigans of the Power Sector, cunningly made attempts to defray the major and immediate challenges the sector faces.

In one of the opening paragraphs, Simon Kolawole laid this foundation, and I quote:

“But why are we still here? We can list a million reasons. When we were awarding contracts for the building of power plants in 2005, we did not think of how gas would get to them. We only remembered we needed to build gas pipelines after the turbines had arrived. Even when the turbines arrived, governors forced work to stop, arguing that the funding of power projects from the excess crude account was illegal. The multi-year tariff order (MYTO), designed to gradually phase out electricity subsidy and make the industry commercially viable, was not implemented for political reasons. The TCN does not have the capacity to “wheel” the power generated by GenCos. And so on.”

He further went on to question the motive behind the AdHoc Committee on Discos Ownership, formed by the National Economic Council(NEC), and headed by the State Governor of Kaduna State, Mallam Nasir Elrufai(who was also the Head of BPE while Privatization of the Old NEPA structure was being implemented). The Committee, (whose terms of reference was to determine the Equity Stakes of the 3tiers of Governments in Nigeria in the Electricity Distribution Companies,) in its report, had recommended that a forensic audit of the Discos should be carried out, and this was after establishing the simple fact that the 3 tiers of Government has not been effectively represented in the Boards of Directors of all the Discos.

Mr. Kolawole waved off this cogent reason, alluding the effort at Audit of the Discos Books. In his words: “But the undertone, as I understand it, is that the government wants to reverse the privatisation of DisCos or dilute the ownership and take control of the entities.”

This is not good enough, as it distracts from the noble intention to ensure transparency in the spending and governance structure of the Discos.

Again, readers should note that the call for the Audit of the Discos Books and Governance Structure is consistent with the Terms of Reference of the Adhoc Committee.

It would be interesting to know if Mr. Kolawole did submit a Memo containing these views when the Committee asked for a Public Submission in December 2019.

Simon Kolawole’s columns have built an enviable reputation for dispassionate reviews of the nation’s politics and contemporary events. In this particular case, it is apparent that his analysis is spiced with pro….. propaganda. It is a no brainer to know whose drum beats Simon was playing to in his audacious write up on his knowledge of the sector. An investigative journalist like Simon Kolawole should have gone further to discover that it is the DisCos that consistently fail to pick up this load; that of the little they pick, they only make settlement for about 20 to 25 percent. How can the supplier of a commodity who never fails to make the supply be the bad guy while the seller who makes a return for just a quarter worth of the commodity delivered to them be the good guy? It is strange that Simon sees nothing wrong with Ikeja DisCo, for instance, entering into an agreement with a segment of its customers, at more than double the prevailing regulated tariff but views NERC’s tariff order as unacceptable.

To drive home his point of “pointing fingers” at the power generating companies as well, he further went ahead to ask why we did bother to sign PPAs(Power Purchase Agreements) with the Gencos in the first instance. In his words, “Why did we enter into PPAs with GenCos, some of which obligate us to pay millions of dollars monthly to one company, when we knew very well that the TCN did not, does not, and will not, have the capacity to take power from these companies in the life of the contracts? Even if we produce 100,000mw today, TCN can only take 4,000mw, otherwise their system will collapse and the entire country will be in darkness.”

Some history lessons on how the power sector works will be beneficial to the well-respected journalist especially on his call for a forensic and technical audit of the GenCos and TCN. The GenCos generate power after a day ahead declaration to the system operator, who communicates to them how much they can transmit subject to the nomination from the Discos (mind you, power is instantaneous- must be consumed or it is subject to demand). On the day of generation, the generated capacity passes through verifiable check meters measuring the exact megawatts, which is then measured again at the TCN busbar before transmission to the Discos. The invoicing process equally follows a more stringent process with the Discos, GenCos, NBET and TCN verifying before the abysmal remittance is made. Does Simon recall that the Discos lack of performance led the federal government to rescue the sector thrice now? In essence, the 1.8 trillion is payment for discos inability to meet their invoiced amount. Research shows the FGN is subsidizing the Discos by 75% monthly. What has Simon got to do with the fact of financial under-reporting by the DisCos as was discovered during the open-book exercise by NERC prior to TEM?
The writer should be informed that the DisCos utilise multiple payment platforms for energy consumed. This has resulted in the creation of multiple accounting streams for the different payment channels. This presents a loophole for unscrupulous operators to divert and hence under-report revenue inflows. Some of the identified revenue channels operated by most of the DisCos for energy payments are:
1) Analogue meter bill cash payments through the DisCo cash offices
2) Analogue meter bill cash payments through designated banks
3) Estimated bill cash payment through the Disco cash offices
4) Estimated bill cash payments through designated banks
5) On-line payments for all the categories listed above
6) Pre-payment meter token cash payments through the DisCo vending stations

I will like to refer readers to an important piece of Data at this point. This is an historical Power Generation vs Power Uptake by the Discos since privatization in 2013. While available data showed that Average Generation Capability has increased from 4, 214MW in 2013 to 8, 145MW today, Average Power Uptake by the Discos has hovered between 3, 183MW in 2013 and 3, 987MW in 2020 (See attached).

Impartial and concerned observers would be apt to ask what exactly hasve the Discos been doing in the last 7years. We have not even asked why the Discos has consistently been paying less than 50% of the Invoice Values from the Gencos. If Mr. Kolawole bothered to ask for these data, it would have been made available to him. At NO POINT has the Gencos received full values for their Market Invoice. This has accounted for the sub-optimal growth, inefficient operation and the current dire situation of the GenCos, which has huge negative impact on the entire power sector.

Allow me to also point out that while the Gencos has consistently been incurring costs for Gas, and in the case of the Hydro Plants like Mainstream Energy Services Limited(Concessionaires of Kainji and Jebba Hydro Power Dams) who has been paying an annual Concession fees of $50m(rate was around N160/$ in 2013 when they took over, now it is N420/$), the Discos has no similar liability on their books. The Story of GencosGenCos like Mainstream will still need to be told. The writer may want to appreciate that, every available capacity, whether dispatched or not, cost a huge amount of money to be maintained by the GenCos. There are massive fixed charges incurred to keep unutilised units available.

Mr. Kolawole went ahead to state the PPA signed with Azura, but what he cleverly omitted is the fact that Azura has NEVER received full value for energy supplied to the Discos. But hey! This agenda must be set.

It is also unfortunate that Mr. Kolawole would conclude that “From 2015 till date, we have paid about N255 billion to five GenCos under the PPAs for power not delivered — principally because TCN does not have the capacity to take it.” First, it would be interesting to know where Mr. Kolawole got this information from, and secondly, why he deliberately pitched the GencosGenCos and TCN together. I can allow our readers to make up their minds on this. It is a fact that GenCos, who are entitled to about 60% of invoiced energy bills, face the greatest risk in the electricity value chain with an outstanding unpaid invoice of over five hundred billion (N500bn) naira. If at all, they deserve pity rather than ridicule and unfounded allegations is not only unfair but misleading to the Nigerian populace.

“If we are sincere about addressing the power issue and stopping our treasury from continuing to service the pot bellies of the buccaneers, let us conduct a wholesale forensic and technical audit of the entire industry. We need to identify whatever is responsible for this shocking state of the sector, re-negotiate the suicidal deals we signed (the coronavirus pandemic will, hopefully, provide a force majeure), align the necessary elements, and take the critical steps to help Buhari’s renewed power initiative achieve the outlined goals and objectives. Renationalising the DisCos through the backdoor does not look like the magic formula to me. Let us not frog-jump from frying pan to fire.”

To be clear on this, I am not a lawyer, but my little understanding of declaring force majeure is in unforeseen circumstances. Are we now saying that almost 7years down the lane, the Discos are just discovering unforeseen circumstances? And how did Mr. Kolawole arrived at the “Renationalising the DisCos through the backdoor does not look like the magic formula to me” junction?

Yes, readers who are able to read between the line would agree that Mr. Kolawole clearly played his card too openly, and as one of the comments under the publication rightly said, “Mr. Simon, either does not understand, or as usual, would rather obfuscate, what ails Nigeria as is evident in the power sector, as well as other service sectors”. There are other similar comments to the publication.

To my chagrin, Mr. Kolawole ended the piece with these words: “I’d be honest and confess that I am enjoying stable power supply where I live. Our estate has an agreement with Ikeja Electric which is going very well despite a few hitches — caused mostly by you-know-who: the TCN. We are not under MYTO, so we pay double the regulated tariff, and we are guaranteed at least 20 hours of power supply daily”. The mere fact that Mr. Kolawole concede that the Power Purchase Agreement signed with Ikeja Electric is not under the MYTO should have told him that though the regulators might have turned a blind eyes to it, THIS IS ILLEGAL. But because he enjoys an average 20hours power supplies at the detriment of other, and because he could afford it, he could care less about others who might have not been fortunate enough to afford it. I also wonder how many Transformers Ikeja Electric had to install in the PPA zones to make this magic possible.

To be clear about the illegality of the Premium Power Agreement, which is not in the legal MYTO framework for Billing, I advise that Mr. Kolawole should go check out the daily power uptake of Ikeja Electric, and see IF it has increased, or simply if it is same power that should have been equitably distributed is just being redirected to the rich folks. These data from August 2019 is ready available from TCN and published weekly.

We are all bothered about the situation of the Power Sector, and continuous engagement of all the stakeholders is ongoing, but we should not protect our friends to the detriments of the nation.

Mr. Kolawole at no point mentioned the plights of Customers and the inability of the Discos to Meter customers, replace faulty Transformers, improve quality of service to customers, etc.

The advent of Service Reflective will expose all these inadequacies, and it is my prayer that we would not have to continue this escapists arguments. And this is in no way advocating for reversal of the Power Sector, in fact, I have covered these issues and offer several recommendations in solving our Power Sector Challenges.

God Bless Nigeria.

Adetayo Adegbemle is a public opinion commentator/analyst, researcher, and the convener of PowerUpNigeria, an Electric Power Consumer Right Advocacy Group, based in Lagos. (Twitter: @gbemle, @PowerUpNg)

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