In April, we had the first of a series of conversations on the power sector in Nigeria. The conversation on Power and electricity in Nigeria follows a long historical thread that dates back to pre-colonial “Nigeria” in 1886 It is also a controversial and politically charged conversation – especially when election season rolls in. Understandably, this has resulted in apathy in terms of Nigerian’s willing to talk about the problem or even willing to pay for power utility services.
According to a report by Dalberg, published in June of 2019 by the Access to Electricity Institute, about 88% of Nigeria’s energy is produced by small petrol generators. The noise and smoke that comes with the electricity produced by the generators are a significant cause for concern. But Nigerians have few options to support their business, cool their homes, preserve food, and support manufacturing. Thus, the conversation on providing adequate power supply is far from over. Instead of newsstand level arguments, complaining every time utility workers come around or simply resigning to our fate, Nigerians should seek to understand why the power sector has failed despite the privatization of some utility providers.
Because of this, we have taken the initiative to start conversations that provide education and insight into the power sector and we have made it open and accessible for business owners, corporate executives, and householders or tenants.
We had our first conversation with NERC Commissioner for Legal, Licensing, and Compliance, Dafe Akpeneye. iSpark Magazine publisher, Chinedu Amah moderated the conversation. Here are the highlights…
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On the Siemens Project…
Chinedu Amah: Now, when you say the Siemens project, I’m one of those wondering, “What is the scope of the Siemens project?”
Dafe Akpeneye: What is the scope of the Siemens project? The scope of the Siemens project is basically expanding, dealing with the issues we have now to improve the sector from an observer’s standpoint. And in addressing your transmission bottlenecks and also addressing the bottleneck between transmission and distribution and working to also ramp up generation practices, so that’s it in a nutshell.
Chinedu Amah: So, Siemens is in Nigeria basically to drive up our generation and transmission capacity?
Dafe Akpeneye: and, the distribution, it cuts across the entire value chain. We have bottlenecks across the value chains that what we have now isn’t getting across, so other projects are to open up those bottlenecks to ensure that we can ramp up, generation can match distribution and transmission. We can start ramping up from the end. And you know the way this is designed, the largest capacity we are supposed to have is the distribution capacity, but we have the reverse in Nigeria.
On the number of electricity customers and metering
Chinedu Amah: Okay! Well, I won’t jump into that. The next thing I would like us to talk about is [inaudible] Given the realities that you shared, the Siemens project and all that, how many customers have we identified in Nigeria, who use power supply?
Dafe Akpeneye: Okay, so from a use standpoint, we always bifurcate between consumers and customers. Both of them use, but the distinction is that customers pay for what they use, consumers do not necessarily pay for what they use. So, from a customer’s standpoint, the customer base as of December, because of issues with January and COVID, there hasn’t been much traction, so, as of today, as of December 31st, it was 10.374 million customers identified at all the networks of the discos.
Chinedu Amah: Interesting! And how many of those customers are metered?
Dafe Akpeneye: As of today, 37 – 38% of the customers are metered. The metering gap keeps expanding as more enumeration is done.
Chinedu Amah: Why do we have that expansion in the metering gap?
Dafe Akpeneye: Let’s go back [inaudible] metering wasn’t something that was clearly achieved before the [inaudible] was completed, and it was one of the [inaudible] for the successful investors in the discos that is a key element in the performance agreement that the discos would meter. You’ve been in the sector for a while, you would have heard that one of the claims, one of the defenses the investors made was that, “Oh the data”, they didn’t have access to do their due diligence properly, to query the data, like the one that both of us are members in, a former colleague made reference to how a certain union prevented people from doing due diligence, so they came on stream without having exact knowledge, truth and figures of what they were getting into, and the customer population was one of that. So, they had committed to ruling out a certain number of meters.
But you know houses are being built every day, the population is growing, so what they met on ground wasn’t what they realized was serving. And in doing the cost enumeration, it’s been very slow, it’s not something that you can do remotely.
Based on the methodology, the customer’s premises have to be tied to the local distribution transformer, so it’s been a tedious process. So, have we been really pleased with it, because the customer population is what is required for planning the entire sector. So, we’ve pushed it, as I told you when you came to Port Harcourt when I resumed, it was over 8 million, now the numbers have gone up to over 10 million, and we’re going to keep pushing for that to go up, so as the customer population keeps growing, you will now see that the unmetered customer population would grow as well, so, that’s why we are where we are.
Chinedu Amah: Okay, now, we also know that a large percentage of electricity users in Nigeria do not necessarily own their own homes. Thus, given what you’ve just shared that homes are being metered, I will then ask you if I’m the customer who is without a meter today, why should I pay for the meter?
Dafe Akpeneye: Okay, if you look at the requirement for even metering, it’s not the customer that is metered, it is the property that is metered, so the issue is, most of the time the owner of the property doesn’t feel the pain because he has let out the property and as far as he is concerned, he has completed his commercial transaction until the next rent is due. The person who has rented the property in other for him to have peaceful and livable possession of that property, he needs power to his house, so this now becomes a conversation between the landlord and the tenant. Besides, in metering the property, the property is not going to be metered in the tenant’s name, it’s going to be metered in the name of the landlord. The person that should be responsible for paying for that meter is the landlord because the meter is tied to the property.
Chinedu Amah: As expected, I’m asking for the benefit of some of our people who just joined, and who are not very conversant with some of the technicalities of the sector, but it brings me to my next question. What has been the success rate of the Meter Access Provider Program so far?
Dafe Akpeneye: Okay, so the Meter Access Provider Program, it’s gotten off the ground, there’re some apprehensions and doubts there that we need to clear. It’s a dispute driven process, not a regulator driven process, and if it was a regulated driven process, it will be very difficult because there will be in treason. Because the discos own the network and it is their core responsibility. There is no basis for them giving you power if they cannot meter or record how much power they are giving you. And the customer too has to have the basis by which you agree to pay for that power which is on the basis of having a meter. So, the discos did it. And about the time they were to take off, there was a massive country sweep in that the import duty for meters, customs increased it, and that really impacted.
Chinedu Amah: Was there a reason for that increase in import duty?
Dafe Akpeneye: The point is, you know the government is large, sometimes, not everyone knows what everyone else is doing.
What does it take to make a meter? Meters are something you can produce locally, so in other to satisfy low production. That was one of the steps taken. When you consider the urgency in which we are faced, in that customers need these meters now, and you cannot readily backward integrate overnight, things have to be put in place to enable importation of meters to come in. so that happened and that delayed, and some discos also had issues with their internal processes with the rule out. But the stealing issue has been addressed and the commission has worked closely with the ministry of finance and a special dispensation has been granted for a window so that the meters importers can bring in their meters to the country, and the deployment can start in earnest across the country.
On the commission’s response during the pandemic
Chinedu Amah: So, given today’s reality, what is the outlook of this policy shift?
Dafe Akpeneye: What do you mean by today’s reality? Do you mean the COVID or the change? There are different realities, there are economic realities and there’s a public reality, so which of the realities are you talking about?
Chinedu Amah: The COVID reality.
Dafe Akpeneye: Oh, the COVID reality. Besides the public health issue, the sector is tagged as essential services, and people in the sector have been going to work every day since this issue started. The ports are still open, and people can get their goods into the country, and people are still operating.
The commission issued operational guidelines on safe operational procedures during this period.
On the power sector post-pandemic.
Chinedu Amah: Where do you see the industry going to post the corona pandemic? We understand that with a marked increase in the tariff rate in Nigeria, it’s going to be riskier for distribution companies’ staff to reach out to customers because you do not know who you are engaging with. Are we going to see a regimen for increased smart meter deployment which can reduce personal contact? Are we going to see an increase in franchising especially for community areas so that management can be at a community level? So, what is the thrust, what is the outlook? Has the commission had some sort of strategy session to start to look towards that point for all of us?
Dafe Akpeneye: Okay, the commission issued continuity arrangements for the industry, and the way our industry is designed, there is minimal interaction with a minimal person to person interaction except at the distribution level. It is now for the owners of the distribution business to now get innovative on how they interact with the customers and the payment platforms, so, a customer may have two interactions with the disco. One, when I’m paying my bills, two, when it’s at fault. So if you can create an avenue whereby even a post-paid customer or an unmetered customer, you have a means of sending him the bills on his phone, or by text, using USSD or whatever and they pay you by transfers or by going to an ATM to make that payment, you limit the person to person interaction, so it’s not for the commission to re-script it on what they need to do. The last order we issued clearly stated that there are options discos can take to run the business and they have responsibilities for running the business and this is where you now need to come and demonstrate innovation required to run the business.