The Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors, Mr. Sunday Oduntan, in this interview with TUNDE AJAJA, speaks on the lingering disagreement with the regulators, the challenges of the distribution companies and the way out of the crisis in the sector
The altercation between the Minister of Power, Works and Housing, Mr. Babatunde Fashola and the DisCos, or ANED, came as a shock to many and somewhat a reflection of the goings on in the power sector. What is the origin of the dispute?
On July 9, 2018, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, SAN, addressed a press briefing where he made some pronouncements. Thus, we were compelled to reply, to clarify and debunk some of the assertions that were heavily and clearly distorted, so that we can make some issues clear to Nigerians, especially given the significantly distorted pictures that had been painted of the Discos by the honourable minister. So, it was only fair that we replied. We recognise the challenges of the Nigerian electricity supply industry and we only addressed the issue in form of newspaper advert to highlight the issues. But surprisingly, on Friday, July 20, 2018, the minister issued a strong-worded press statement where he engaged in a vicious personal attack on the person of Mr. Sunday Oduntan (myself), who of course is the spokesperson for the DisCos and their investors. The minister went very personal but didn’t address the issues. Again, we decided that we won’t descend to that level of name calling and personal attack. It’s not about Mr. Fashola, it’s about our country. If we choose to address him frontally as a person, we have a lot to say but we won’t do that. It won’t be in the interest of the country. He’s a minister of the Federal Republic of Nigeria and he’s our own minister. We have personal interest in that sector and we decided that we should not engage in that sort of method adopted by the minister. The honourable minister should tell the world whether we lied in the responses we have provided. That was what we expected from him, but he decided to make me a scapegoat, the enemy of the state and a bad man. In areas where we know a lot has been done, we commend the government because we want the Federal Government to succeed. We implore the politicians not to drag ANED and this industry into the murky Nigerian political waters.
The minister also said he doesn’t know you as an investor. How do you respond to that?
I work for ANED, which is owned by all the DisCos in Nigeria and was incorporated in 2015, legally operating as an association, just as we have MAN, NBA and others. Outside the country, in the UK, for instance, they have Energy UK, which is the equivalence of our ANED here. The minister knows me very well (pointing at the pictures of him discussing with the minister at a programme). But you know some people in Nigeria look like demigods when they get to power; they know all and to them, the downtrodden must not talk. However, we believe in conversation and the success of this industry requires that all stakeholders should have a conversation. And I have to confirm here, like the minister rightly said that I’m not an investor in any DisCo, but I’m a consumer and a stakeholder in this industry, and of course I represent the DisCos and their investors.
We learnt he also once threw you out of a meeting. What was your offence?
It is true that he threw us, not only me, out of a meeting. Even the representatives of the generation companies were also sent out. What the honourable minister did not say in his press statement was why and I will tell you. He started this monthly sectoral meeting, to which ANED was invited and accredited. We loved the idea and we attended. We had attended seven and the eighth one was in Sokoto. We were running adverts around that time to tell people about energy conservation, energy theft and the issues of the debt owed by MDAs. So, it was in that same week that we ran an advert on MDAs’ debt, because we feel that government and its MDAs should pay their bills. We thought we were on the same page with the minister on that, because he too had made the statement before that people should pay their bills. So, we ran an advert. In the course of the programme, we saw the permanent secretary of the Federal Ministry of Power, Mr. Louis Edozien, taking that page of the advert to the minister. Mr. Fashola looked at the advert and stood up to accuse us of embarrassing the government. He then said we should leave the meeting. I would have expected him to tell the world that he asked us to leave because we have the audacity to ask debtors to pay their creditors. The GenCos and DisCos have representatives and they have an association. They are free under the law to associate, as long as what we are doing is not illegal. We are out to cooperate and collaborate with the government. It’s very unfortunate that a discussion on how to save the power sector has been reduced to conflict between Mr. Fashola and Mr. Oduntan. Mr. Oduntan is so small, like the David, to fight the Goliath.
The minister said power generation has increased to 7,000 MW and that Nigerians should ask DisCos why they are still not getting power. So, why are Nigerians not getting power?
We do not understand the constant references to the increase in generation capacity to 7,000MW from 4,000MW for the period of 2015 to 2018, which has been used as the basis of defining the DisCos as incapable of taking on more power – the stranded 2,000MW. But a review of Nigerian Electricity Regulatory Commission’s Daily Energy Watch for January 28, 2015 showed the generation available was 6,421MW. In other words, it is misleading to state that available generation has grown from 4,000 in 2015 as a measure of progress, given that slightly under 7,000MW already or previously existed, prior to the beginning of this administration. Furthermore, there is no stranded 2,000MW. While there is an available capacity of 7,000 MW, the best that can be generated at this time is 5,000MW. This is because there is insufficient gas to power the thermal plants due to gas line limitations, like the non-completion of the Oben pipeline and the absence of a commercial framework that would encourage gas exploration. Generation that is constrained by gas amounts to an average of 1,500MW daily, and of note is that 25 out of 28 generation plants are fuelled by gas. In simple terms, the often-advertised and pronounced DisCos limitation to take on 2,000 MW of additional generation is not consistent with the facts or reality. When we did 5,074 MW, for how long did it last? I can tell you that it happened for less than 24 hours. We at ANED cannot afford to mislead the public; that is why we are giving out the figures.
Many Nigerians have gone through a lot in requesting prepaid meters, but DisCos seem to be feeding fat on estimated billings, while many consumers are crying. Why is it difficult to supply metres?
Nigerians need to know that the minister, who of course is controlling NERC, has directed NERC to come out with Meter Asset Provider regulation. They have taken metering out of our hands and so it’s no longer our primary responsibility. Anything that has to do with meters, please ask the honourable minister. It’s no longer in our hands, but we are still metering because we already have our own metering plan that is ongoing. We are not stopping that. People blame us that they don’t have meters, that is why we were very astonished that the minister went back again to say we are the ones to provide meters. That is part of the inconsistency in policy we talk about; you say something is no longer somebody’s business and you now turn around to ask the person why it is not available. But we are willing to cooperate with them for everything to become successful, because the sector is bleeding. The moment customers have meters, the issue of estimated billing and all those contentions will not be there. We know where we too have a lot to do and we are just saying that to be able to do this well, all other factors have to be in place. I have said this often that you cannot take me to the track for us to start running, but just before you blow the whistle, you tie my leg.
What is the major issue in the all important energy sector?
It is the liquidity crisis in the sector and we are saying how do we deal with it and get this thing done. We are not interested in any naming and blaming or attacking anyone.
Talking about the liquidity issue, the Federal Government said you should deduct the about N70bn you are being owed from the about N800bn you DisCos are owing MBET. Isn’t that fair enough?
Sometime around August last year, the Federal Government after its verification said it would pay the MDAs debt to MBET, which is our own creditor and we said no problem. But has anybody raised the question whether the MDAs have continued to pay their bills from last year till now? The answer is no. We are not antagonising anybody, but what we are saying is that we need to put Nigeria first and in doing so, all of us must work together. It shouldn’t be like a headmaster addressing pupils and then the pupils go back to their classrooms after the address. It should be about discussion; that is where ANEC stands and we are not anti-government. We are ready to discuss the issues. We have a lot of things at stake. If there is sufficient power supply and there is efficient distribution and we do all that we are supposed to do, we would make more money. Our own inefficiency, the inefficiency of the market and the whole value chain, the inconsistency by the regulator, the lack of independence of NERC and the intrusion by the Federal Ministry of Power are all hampering progress in the power sector. So, it’s in our interest for all of us to work together so everyone can be happy.
Why is there lack of cooperation?
When you look at the value chain, you have to look at what the challenges are, as they affect the three; generation, transmission and distribution. Let’s start with cost. Electricity is a product that has its cost of production, and that means there is a landing cost. So, when the generation companies receive their invoices from the gas suppliers and they prepare their own invoices that would go down the chain, through MBET to the DisCo, when you look at all the costs, what is passed down to the DisCos is higher significantly than what the DisCos pass to the customers. That means there is a mismatch and a simple arithmetic should make it very clear. In this case, we are buying the product (power) for N80.88 and we are only allowed to sell the product for an average of N31.56. Let’s say N80 and N32, on the average. There is a shortfall of 48 and that means even if you want to pay 100 per cent, you cannot pay N80. Let’s break it down because this is at the heart of the crisis. Take a loaf of bread as an example. The baker sells a loaf of bread to you at N80 and the state government says you cannot sell bread more than N32 per loaf. There is a problem, and that is the issue here. Assuming everybody that buys the bread pays, and let’s even put recurrent expenditure aside, it means the highest you can pay back to the bakery is N32 out of the N80. With that, you are causing problem for that person because the ability of that baker to remain in business is cost recovery. But we are not even able to collect the whole of the N32 in this case, where we have the aggregate technical, commercial and collection losses, like energy theft. And where you have such leakages, it means you cannot even collect the whole of that amount. That means there is need for alignment, which is not possible without collaboration. You can’t force this thing down people’s throat and pretend as if the rate applicable since 2016 should remain the same. You cannot say inflation rate as of February 1, 2016, when this tariff took effect, and exchange rate at that time have remained the same. These factors combine together to change the narrative when you talk about pricing. And please remember, there is a huge forex component to this business. When you talk about our equipment, most of the things we use are imported, so there is a forex component. This means that for our regulator to take a decision on what to do next, there is a need for them to listen to us and even the GenCos and transmission companies and that is missing. But once you stay on top of the pyramid, which is so high and others are nobody, then there is a problem.
Is that why you haven’t been able to pay the debt you owe MBET?
If we buy at about N80 and you compel us to sell same for N32 and you are expecting me to pay my bills, the issue of indebtedness in the value chain would remain there because of that same reason. Unless somebody comes out to say ANED is lying about this. They should come out to tell us how much it costs to produce electricity per kilo hour and how much we are told to sell it to customers. And is there subsidy in the system? I can tell you that the answer is no. We want these issues to be resolved and that is why we are staying on the issues and we won’t keep quiet about it because we are stakeholders and we are interested in the success of the power sector.
There are also reports that the DisCos are kicking against every move being made by the government to have constant power supply, like the issue of eligible customers, where certain people would be able to buy power directly from the GenCos. What is happening?
We are not against the policy; we are talking about the timing. I remember that when these entities were privatised, there were performance agreements that were signed between the Federal Government and the DisCos investors. There are things that government committed to do which they have not done and there are things the operators committed to do that are fully not done. For instance, government promised appropriate pricing, they call it cost-reflective pricing, but that unfortunately has not been done. We buy for N80 and we can’t sell beyond N32. Once you have such shortfall, your ability to be efficient is suppressed, but unfortunately, an average member of the public does not know that. They want to have power supply. When your book is in perpetual debit, no bank will lend you money. The way the pricing is structured is such that big customers, who pay the highest in terms of cost, are expected to cross-subsidise for the small customers. But if you come into my network to change that and take away the big companies, it means the small customers I have left would have to pay more at some point. This is one of the impacts of the policy summersault that we talk about. When you have a policy and you are not looking at the effect of that step and you are grandstanding and trying to be political, what happens is that you are doing more damage than good, even if your intention is very good. We should not turn our laws upside down. We should be seen by the outside world as a country that respects the sanctity of contract.
If the cost of power is N80 and you sell at N32, how have you been surviving?
It means we have been operating at a loss since 2013. That is the truth.
Given the back and forth on these issues, was there no provision for arbitration in your contract, because Nigerians are tired of the dram and all they want is power?
In the last five years, we have pushed for force majeure twice; we told them to come and take their licence and refund our money, because it was becoming impossible to continue. But on each occasion, the Federal Government refused. One happened towards the tail end of the previous administration and the other one happened after this government came into power. That tells you how difficult it has been for us. Even if you file for force majeure, like that of Yola Disco that was accepted and they have not been paid till today, that is another issue. But, as ANED, it should not be too long to determine how much is due to business men who spent their money in buying an entity. So, if I file for force majeure and you can assure me that the money would be paid on time, we would look at it. Again, we have always believed in dialogue. We are powerless and I think the question about finding alternative solution should be directed to the honourable minister. Some of his aides can confirm that I have taken this upon myself privately on various occasions, by urging people close to him to urge the minister that all the stakeholders need to sit down and talk sincerely; no politics, deceit and grandstanding. We are willing to dialogue any day, because our business is at risk. If the DisCos collapse today, some Nigerian banks would also collapse with them. In case people don’t know, when they were selling the entities, only one of the DisCos had foreign direct investment, while all the others borrowed money in dollars. Those who have put their money in an entity like this would be the first to wish that the system succeed because the failure of the system means their money is also going down the drain. So, I agree that we need to talk.
A statement credited to the Bureau of Public Enterprises few days ago said they may be forced to compel DisCos to reduce their stakes as a result of inefficiency. What is your reaction to that?
I can assure you that because the investors of these entities paid for them in cash in dollars, and because there was share sales agreement, and because there is performance agreement, when the time comes we would look at it together. And as they say, we shall cross the bridge when we get there. We would be more than happy to have investors join us; anything that can make it better, but we have to look at all the issues. What we cannot do is to pretend that certain things do not exist, just like somebody pretended that he or she does not know Sunday Oduntan.
Part of the shortfall you have as DisCos is due to the reluctance of customers to pay because of dissatisfaction over poor supply and huge estimated bills. Are you aware that people are not happy with the way their grievances are being addressed?
It is very easy to say why not do everything you can to satisfy your customers, but to do that, you have to give them energy, we have to reduce the incidence of estimated billing, which is a major cause of conflict and those two are tied to liquidity, even though that is not enough as an excuse. For the past five years, we have done a lot more in terms of customers’ engagement, we have set up customer care centres in all the discos but we agree that we have more to do, especially when it comes to attending to our customers. You see, part of what came with that tariff review of February 1, 2016 was that minor review was supposed to take place every six months. It is very interesting to note that under the watch of Mr. Fashola as the minister, none has been done, in accordance with the law. Once you don’t go back and do that review, which may be downward or upward as the case may be; depending on the inflation level, exchange rate and other factors, the cost won’t be reflective. Today, N25,000 won’t buy the things it bought in 2016. That failure to do what is right, review the tariff so our charges can be cost-reflective, led to the inability of the other party from doing what was meant to be an aggressive metering. Let’s say we have 4.1 million customers to go. A smart three-phase prepaid meter costs an average of N73,000. The total cost for producing four million meters, for example, is N299bn. In our plan for five year period for all the 11 DisCos, the capital expenditure is N305bn in five-years, and that amount includes expenditure for all capital projects, like poles, cable, transformers, meters and so on. And meter is only one of those, but that is easy now, since NERC has taken over the issue. Once MAP starts working, which we hope it would, people would have meters and there would be a reduction in conflict.
There are also reports that DisCos reject power and the minister said there are about 408 feeders that are not working. Could you clarify these?
On the feeders, that is very misleading. We conducted our own assessment and we have found his statement to be inaccurate. Let it be known that the DisCos are taking more power from the feeders. The problem with those feeders is at the TCN interface; where the TCN gives us power and we have a lot of bottlenecks. The ministry of power somehow views DisCos as a government parastatal. For those feeders that are not working, it’s mainly transmission bottlenecks. They also talk about DisCos rejecting load, how can I reject load when what you are giving me is far less than what I requested for. I need 120MW but you give me 20; that is a shortfall of 93. How then can I reject it? I should then add that the system should encourage government parastatals to pay their bills.
If they don’t pay, what stops the DisCos from disconnecting their supply?
They beat our staff and even come up with some security explanations. Ask Ikeja DisCo how much Ikeja Cantonment has paid for electricity bill from 2013 to date or from the time the minister purportedly paid the verified sum in August 2017. From that time till now, how much have they paid and what is the minister doing about that?
There is N213bn intervention fund but we hear that only N58bn is accessible by DisCos. What about the funds?
We refer to it as Nigeria Electricity Market Stabilisation Fund, which was a loan given to DisCos to pay legacy gas debt, meaning the debt on gas incurred by PHCN. However, not all DisCos have been able to access it because of the conditions attached, and the ones that have got it are paying back as a first line charge. People call it intervention as if it’s a subsidy, but it is not.
Going forward, when will Nigerians have stable power supply and is it achievable, which is the question on the minds of people?
I agree with you that all of us want sufficient power supply. We can have that and it is achievable, but for it to happen, all stakeholders need to come together. And the number one body that can make it happen is the Federal Government of Nigeria. There must be clear direction and non-politicised environment. We can get there only if we first deal with the existing liquidity crisis by bridging all those gaps and shortfalls, which is now at about N1.3tn. Also, we need to generate more power consistently, and that takes time. That is not the fault of the current government. We have had a 62-year problem and we can’t blame it on this government or the DisCos and gencos that took over five years ago. We cannot correct the adversity of 62 years in five years. So, we have to generate more, improve our transmission grid and stop the politics. I expect our national budget to contain a certain amount consistently for transmission every year, not to buy official vehicles. We also need a bigger distribution capacity. The current one is 6,288MW, according to the stress test done by TCN. Distribution companies are capable of distributing 6,288MW. Of course we have a very dilapidated infrastructure, which also needs heavy investment. Also, the DisCos need to clean up their acts and be more efficient and address the problem of energy theft, which is a serious issue.
So, it’s an all round thing that involves everybody – the service providers, consumers and regulators. We cannot be celebrating 7,000MW when our population is growing from 198 million to 200 million people and South Africa has more power than it requires. Federal Government can lead in making this possible, but don’t let us drill the impossible. You cannot have uninterrupted power supply in the next five years, because if we start today to build more power plants and other things, it takes time. And I must say that since 2015, a lot has been done by this government. However, we need to do more. We cannot serve our population with 10,000MW. So, if we are not aiming at 20,000 MW as at today, we are far away from getting there.