An energy value chain player and distribution system investor has warned that Nigeria is stagnating in the power sector.
Chinedu Amah, founder and CEO of Spark Online (a power sector communications and investment group), told BusinessDay in the week that the rural areas still remain not in any serious national energy supply scheme.
In an interview in Port Harcourt, Amah, who renders consultancy services as well as helps customers procure prepaid meters said rural Nigeria is still being left behind because they cannot afford to pay for electricity. “I don’t think it makes sense that the distribution companies are focused on cornering franchise areas that they surely are not looking to serve.”
On what is not being done, the expert who now builds systems to cater for off-grid customers and rural areas regretted that state governments who have the rights by law to get into these spaces have not done much.
He urged them to seek solutions with the National Electricity Regulatory Commission (NERC), the Distribution Companies (DISCOs), the communities themselves, and interested service providers to get in and develop that leg of the market.
He said it is important that nobody is left behind on Nigeria’s collective quest for growth.
Talking about the plight of the rural areas, Amah had long ago referred to statistics from the National Bureau of Statistics (NBS) where a total of N438.6bn was spent on light/fuel by Nigerian rural dwellers as far back as 2012.
“This captures the total expense on energy with a large percentage of this figure being channelled towards provision of power in the homes.”
He said the cost of producing power by hydro then was about N13, while by gas it was about N21.
He had said: “When you add transmission and distribution costs to these numbers the cost per unit of power will come to about N33. Today’s Residential One (R1) customers tariff which covers the poorest Nigerians goes for about N4; this forms about 30 per cent of payments for energy supply paid for by customers.”
He went on: “The Residential Two (R2) customers who make up the middle class currently pay about N30 per unit, if you take an average of residential/R2 tariff across the DisCos. This group makes up about 60 per cent of bill payments in the power sector. Since the privatisation of the power sector, gaps have existed because DisCos have been unable to cover the cost of energy.”
The meaning, he said then, was that the masses paid N4 per unit or pay 30 per cent of payments collected while the rich paid N30 or 60 per cent of energy bills recovered.
From time immemorial, he stated, collecting money from consumers in Nigeria has been difficult.
Amah gave the following reasons; “Regulations which do not allow a Disco to charge actual cost of tariff with mark ups to ensure profitability; Inability of government-owned Transmission Company of Nigeria (TCN) to improve transmission capability; High cost of gas which is driven by the dollar (gas for power generation is charged in dollars while the tariff is in naira, dollar fluctuations mean that generation cost has more than doubled since current tariff was set); and a cross subsidy regime was in place to enable the DisCos charge commercial customers more, this extra was used or is used to subsidise the shortfall based on losses accruable from individual customers.”
He said the new FG policy through the NERC which now allows the commercial customers to purchase power directly from the GenCos thus implies that the 10 per cent that pays for the rest of the customers is off.
“This means that the cross-subsidy regime is in trouble; the DisCos must then charge the actual cost of power to stay in business. Thus, the poor or rural Nigerians may end up without power.”
Already, rural dwellers are screaming due to the decision by the Discos to charge commercial rates per transformer. Some communities now get as high as N1m per month, causing crisis of collection. Some communities now have as high as N10m debt hanging on their necks.
Amah had scuffed at the plan by the FG few years ago to pump N700bn into power generation saying it was going to be an aberration which he feared would further distort the balance of funds within the sector. “Improving generation when transmission is unable to improve capacity will not solve the problem; taking away the commercial customers from the DisCos will rather worsen the matter. At the heart of this problem is a population that cannot afford to pay for the services they need. Taking away the subsidy and fixing the top of the power chain is a pointer to a planned failure of the entire industry.”
Now, he said the challenges facing the sector have not changed since privatisation. “We are transmitting less than generation. Distribution capacity remains sub optimal. Over the past five years, I sincerely cannot say there has been any growth in the energy sector, in my opinion. This is because supply still stands at the same level and sometimes it even gets worse.”
The CEO said metering is not as hard as the industry experts make it look. “There is capacity to expand and improve on metering if we are willing to enable more flexibility in the industry.
“NERC has asked distribution companies to begin the refund for meters procured under Meter Asset Providers (MAP) scheme. This means that the sector has so far been funded by the customers, so why can’t we expand the funding pool by enabling fintechs, energy support service providers, and solution developers to come into the system and build solutions around metering?”
He said technology solutions to support increased meter offtake in the market is tied to a key factor that the market has overlooked over time and this is ‘you’re your customer (KYC). “The customer account is tied to the property owner even when a high percentage of electricity customers do not own the homes they reside in. If the sector can enable KYC to identify the person being served by the distribution company, then surely solutions around customer funding for meters will be readily available in the market.
“Just the same way as improved KYC opened up the loan and insurance markets, KYC can drive and ramp up meter adoption given that customers have been assured that they can and will get a refund by the regulator.”