Sixteen days into 2020 Nigeria’s national electricity grid collapsed throwing the country into darkness. The grid had collapsed four times before the end of January in 2019.
There have been some blames games across the value chain, among the generation companies (GenCos), the state-owned Transmission Company of Nigeria (TCN) and the electricity distribution companies (DisCos), Sam Amadi, former chairman of the Nigerian Electricity Commission (NERC) told BusinessDay in an earlier phone interview.
This phenomenon points to at least four perennial problems that need to be solved to prevent persistent grid collapses.
Limited use of technology – the Supervisory Control and Data Acquisition (SCADA) mechanism, a computer system for gathering and analysing real-time data at National Control Centre in Osogbo, Osun State has not worked for many years. This handicap slows communication to and from Abuja, where the Systems Operator is headquartered.
This makes delays the relay of communication to sub-stations as operators have to make phone calls to engineers in the event of a problem.
Poorly capitalised DisCos – the has made DisCos to underinvest in their networks such that they cannot take and utilise all available generation, which results in load rejection and excess pressure on the grid.
Since the power sector was privatised by the Goodluck Jonathan administration in 2013 the 11 electricity distribution companies have technically gone bankrupt and carry a debt burden of over N713 billion. This makes a case for recapitalisation to reinvigorate distribution networks so that DisCos can take more load and ease the pressure on transmission lines.
But the Federal Government with a 40 percent stake in the DisCos continues to bail out the sector. This retards the need to start taking requisite action to check the excesses of the investors.
Unattractive domestic gas market – pressure from the government to meet domestic supply obligations (DSOs) remains intense in Nigeria. The current administration’s policy is to not award or renew licences for companies that are failing to meet their DSO.
But suppliers don’t just want to find any off-takers, they want to find reliable off-takers who demand a steady supply of gas and will pay the regulated price of US$2.50/mn Btu.
Non-payment for gas remains a chronic problem and the power sector is the major culprit. The sector deficit from 2015 to 2016 was nearly US$2bn. In 2017, the government established a central bank facility of US$2bn over two years to ensure that generators are paid.
This, in turn, should help them pay their gas bills. But the facility will need continual replenishment as long as the industry lacks electricity metres and below-cost tariffs are maintained.
Review of the Multi-Year Tariff Order (MYTO) – cost-reflective tariffs ensure that players on electricity supply value chain are able to recoup operational costs with some profit margin that can be reinvested into the business.
The MYTO 2015 specified the electricity distribution tariffs for the period 2015 to 2024 but had an effective commencement date of 1 February 2016.
NERC was also required to carry out biannual minor reviews of the tariffs and vary it accordingly, taking into consideration changes in certain macroeconomic variables outside the control of electricity distribution companies (DisCos) in line with the requirement of the MYTO Methodology.
These variables include inflation rates, foreign exchange rates, gas prices and available generation capacity. The MYTO has missed more than six reviews.
