The Nigeria Electricity Supply Industry, NESI, requires investments of over $100 billion in the next 20 years, if the country, Nigeria must have 24 hours of electricity supply daily, stakeholders in the power sector have said.
The stakeholders spoke at a two-day power sector stakeholders’ seminar in Abuja to discus and determine strategic approach for development of the Performance Improvement Plans 2020-2024, PIPs, as recently requested by Nigerian Electricity Regulatory Commission, NERC.
The seminar was convened by Association of Nigerian Electricity Distributors, ANED, in collaboration with the European Union, EU, AFD, and USAID/Power Africa NPSP project, with the participation of DISCOs (board members and top management) and other NESI stakeholders.
A statement by Director, Research and Advocacy, ANED, Mr. Sunday Oduntan, said PIPs guidelines issued by NERC were a key element of the Power Sector Recovery Programme, PSRP.
Distribution inefficiencies, lack of funds, others hinder 8000MW target — NDPHC(Opens in a new browser tab)
He said: “According to a recent study published by the French Development Agency and the European Union, Nigerian power distribution sector would need to invest more than USD 10 billion in the next five years to reach reasonable standards in quality of supply and service.
“Indeed, NESI as a whole needs to invest more than USD 100 billion in the next 20 years, if Nigeria wants to cover 24/7 hours of power supply to its citizens.
“The preparation of the PIPs is an opportunity for DISCOs to set out what they intend to deliver to customers over the five-year period as well as the associated costs.
“It is an output-based plan that states the target outputs over the planning horizon, the programs and activities that will lead to the realisation of those outputs, the human and material resources required, the projected cost and analysis of the risk factors and their proposed mitigation measures.
“In this regard, PIPs will also be the basis for the defining realistic Performance Standards and Key Performance Indicators, KPIs, for the next five-year tariff period by the commission, with emphasis on improvement in energy throughput and delivery by DISCOs, reduction in Aggregate Technical/Commercial losses and overall improvement in service delivery to customers.
“Once approved by NERC, each DISCO’s PIPs will be a fundamental pillar of the major tariff review aimed at improving the Nigerian Electricity Supply Industry, NESI, as issued in the PSRP.”
“The process will involve a review of the application of the CAPEX in MYTO 2015 as the new revenue requirement of the sector should cover the investment and operating cost of efficiently providing electricity services to consumers.
“Other parameters will also be updated in this major review such as inflation, gas price, foreign exchange rate, energy generated, etc.”
“The approved PIP will be a public-facing document for DISCOs and it will be monitored by the commission to ensure that the DISCOs meet their commitments.
“PIP basically will cover four main plans that will be differently applied in the different market segments, which include Operational Plans Distribution Master Plan – how the network will need to be refurbished, upgraded and expanded to follow the needs of the market and huge investment that TCN is doing in the transmission network.
“ATC&C Loss Reduction Plan – which aims to reduce the technical, commercial and collection losses, Customer Service Improvement Plan – which aims to transform the vision of an inefficient NEPA to a modern utility oriented to its customers.’
“Management Improvement Plans, which is an internal plan that all DISCOs must implement in the short term in order to build the internal capacities (resources, technologies and processes) to transform their companies in the next five year.
“The first franchising pilot project in Kaduna Electric that will be developed by Konexa/Shell Foundation, will invest $25 million in two feeders that supply energy to only 10,000 customers. It is important to keep in mind that NESI as today, has almost 8.5 million customers registered.
“TCN/DISCOs interface project developed by TCN that is projecting that DISCOs would have to invest $4.2 billion in the interface with the transmission network in order to follow their expansion plan.
“Last but not least, the French Development Agency, the African Development Bank, the World Bank and the Central Bank of Nigeria, together with DISCOs private investors, will discuss finding ways of collaboration with DISCOs in order to finance their PIPs in the short term.”
A financial expert and former executive director of Asset Management Corporation of Nigeria, AMCON, Mr. Kola Ayeye has decried the level of default of of key operators in the Nigerian Electricity Supply Industry (NESI).
He therefore called for the creation of a platform that will enable the Central Bank of Nigeria (CBN) and commercial banks to collaborate with the Nigerian Electricity Regulatory Commission (NERC) to reposition the power sector for a quantum leap in performance.
According to him, both electricity generation companies (GENCOS) and distribution companies (DISCOS) are seriously exposed, stressing that the creation of the proposed entities when put up will allow for reconcessioning/reprivatisation either through voluntary collaboration with CBN/NERC/banks or through receivership where the operator refuses to cooperate.
Ayeye who is currently the managing direc tor, Growth & Development Asset Management Limited (GDL) stated that the time has come to admit the failure of the last power privatisation exercise, and recommended a new program where NERC, CBN and banks should, on a competitive basis, invite a global player in the caliber of GE (General Electric) or such similar player to commit to generate, transmit and distribute a minimum of 20,000 MW daily within five years, increasing same to 30,000MW daily by the 10th year.
All such GENCOs and DISCOs, together with TCN, he opined, will be concessioned to this new operator. The new program will require collaboration between CBN, the banks and NERC.
He said this radical reform in the power sector is necessary to address the abysmal performance of the present players who have failed to deliver constant power to users in Nigeria.
Speaking at an interactive forum in Lagos, Ayeye said, “We will be contracting to pay for power successfully delivered to the consumer rather than contracting for the execution of power projects. Execution of power projects has produced very poor results after huge investments in excess of $16 billion.
“The nation has invested massively in power projects with poor results so we should change the model. Rather than contracting to execute power projects, let’s contract best-in-class players to deliver power.”
He advocated that the contract with the new concessionaire will be backed with a 10-year payment guarantee for power delivered to the consumer which will be provided either by AfDB, World Bank or first class international banks.
Ayeye added, “Let us find a partner who will take over available power assets across the entire value chain. But our commitment will be to pay for power delivered to the consumer. This contract will be between $8 billion to $12 billion, and is definitely of a sufficient scale to attract a global best-in-class operator.”
Speaking on the country’s tariff structure, he said investors should not use the nation’s current tariff as an excuse for under- performance of the sector, saying “Tariffs are no longer a big problem. The current tariffs are already close to international parity. Existing tariffs are very close to international averages. Across the 11 Power Distribution Companies, if you add the estimated bills, they may in fact be billing paying customers’ more than international averages.”
Authored By: Chris Ochayi