Credit: Tunde Leye

Tunde Leye: Power Sector Reforms Or Deforms, The GENCOs & DISCOs

It seems there is suddenly no electric power anywhere in Nigeria at the moment. For the past two weeks, I have run perpetually on generator anytime I am at home. I leave home for work at 6:15AM while it’s still dark, and on my drive from home in Somolu, Lagos to Marina, it is perpetual darkness. I’ve made this drive for 7years, so I know this is one of the worst spates of lack of power supply in a long, long time.
When I wrote the piece on Nepa Nostalgia (Link Here) in December 2013, right after the celebrated handover of assets to the PHCN Successor Companies, I made a couple of points, optimistic about the possibilities the reform holds for the power sector and the economy which depends of power. But we are already in the process of bungling these reforms. But I will not join those that have already written it off. There is a baby in the bathwater, so I will not throw it all away. The reforms are the culmination of a long, arduous journey which has nearly derailed many times and providence kept making it righted again until we got to this point. Therefore, it is commendable. But some of the fundamentals of private enterprise are already missing in this privatization and the risk of rubbishing it because of these is very high. Let me paint a scenario.
Banks were once nationalized in Nigeria. At some point, they were privatized, and then the space was opened for new banks to come up. Imagine for a moment if this was how the exercise went – that areas were carved out and handed over to specific banks as their exclusive areas of operation. Then everyone in those areas was compelled by the necessity of everyday living to use the bank carved out for their areas, and only those. The banks were then empowered to charge everyone in the area a fee, whether they rendered any service or not to those individuals, and once you lived in an area, you had to pay whatever fee your bank (which you cannot change) charged you. No bank would be motivated to innovate and we would have rubbished our banking industry. Whilst the scenario about banking sounds like an absurdity, it’s exactly what is being done with the power reforms.
In my area where the power has been virtually non-existent since January, my electricity bill has remained the same, when compare with previous months. I bought an official from our DISCO a couple of drinks one day to find out why this was so. After a few drinks, the man was relaxed enough to tell me how things really ran. You see, each marketer covering an area is given a target by the DISCO. The first thing that marketer does is to make deductions of the consumption from all the prepaid meters in the area, since he does not have any way of affecting how much these ones pay. They basically pay for what they use. He then shares whatever the balance is, based on a predetermined formula to all the other postpaid meters in the area. Read that again. Irrespective of whether a single unit of electricity is used by the postpaid customers, they are slammed a bill. It is the reason, according to him, why they have made it virtually impossible for customers to acquire prepaid meters any longer.
The basis of any private enterprise that makes economic sense is that customers pay for only services enjoyed. In this case, the DISCOs are able to make revenue WHETHER their customers enjoy any electricity or not. They have no incentive whatsoever to improve power supply. If these reforms are not to become deforms, this anomaly must be corrected and speedily. It is a manifestation of the rentier approach to wealth creation as against the value driven approach that has been the bane of the Nigerian society.
Another key component of any private enterprise is choice. Customers must have the power to make a choice, based on the quality and/or pricing of services. Today, if I do not like what any of the TELCOs gives me, all I need to do is port my number. If I don’t trust the number porting, I simply buy a new SIM card and that’s that. We should have a similar arrangement with the DISCOs. Can we allow any DISCO terminate anywhere they want to and customers get multiple prepaid meters from different DISCOs, such that one can buy units on each of them and simply switch when one DISCO turns power off? It should be as simple as flipping from one line (pun intended) to the other.
There are two excuses I have heard given to explain the sudden drop in power supply. Both excuses are found in this Punch report http://www.punchng.com/business/business-economy/power-distribution-firms-lack-funds-nerc/
The first given by the NERC Chairman, Dr. Sam Amadi, is that the DISCOs do not have the funds to invest in the infrastructure required to grow power supply. The extension of this reasoning is that they exhausted themselves getting licensed and underestimated the quantum of investment they would require to get the companies running. If that doesn’t smirk of poor planning, nothing does. Imagine that MTN, Econet, Globalcom and Etisalat gave this type of excuses when the telecoms reform was carried out. “Hey, we can’t build base-stations to power our networks because we are unable to raise money, but keep paying us what you were paying NITEL”. Or a bank gives the excuse of being exhausted by acquiring its license to explain why it isn’t able to provide service to its customers. If it sounds absurd in the case of the Telcos and the banks, then surely it is an untenable excuse and the NERC chairman shouldn’t give it on behalf of the DISCOs. In fact, the system should be set up such that DISCOs who fall into this category are quickly outcompeted, as was Econet in the Telco space and many banks within the banking industry. Of course, as long as the DISCOs get free revenue, this will not happen, so this links right back to my first point.
The second excuse given is that of the pipeline vandalization which disrupts gas supplies for power generation. There are two issues I have with this excuse. One, the gas pipeline vandals have not suddenly become more effective after the privatization. Hence this does not adequately explain these shortfalls. The second is that there is double spending on pipeline protection already. The NSCDC is tasked with securing pipelines and they are paid with taxpayers’ funds. Tompolo and other ex-militants also have a pipeline security contract with the government, essentially doing the same thing that the NSCDC is paid to do. In spite of this double spending, we are being essentially told that we are still unable to secure our pipelines. Again, this does not make merit based sense.
A final point on the power reforms I have made repeatedly. There is almost zero citizen engagement on it. I remember the jingles on reporting robbery to the police (make una call police o), pipeline vandalization (no build on top pipeline) and co. I also remember how much the TELCOs and government put into engaging us about the telecoms reforms, in spite of the fact that a very small percentage of Nigerians used telephone services before those reforms. Doesn’t it then make sense that for a reform on the power sector, which the vast majority of Nigerian uses, should have an even more all-encompassing citizen engagement campaign? Shouldn’t expectations be better managed? Shouldn’t citizens know where to make complaints when there is a need and how the changes will affect their daily lives? To the average Nigerian, nothing has changed beyond the name of the company on their electricity bill. This is a publicity failure and needs immediate redress.
Reforms as important as the ongoing electricity one must not be allowed fail. Too much is at stake. Everyone in the value chain needs to wake up! NERC, GENCOs, Transmission Company, DISCOs, Gas Providers, and we the people.
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Tunde Leye @tundeleye is a fiction writer. He believes that the stories written form a priceless resource that is the basis of society, all the other arts (film, music, theatre, visual arts) and hence he is committed to telling stories out of Africa that show it as it was, is, and is going to be.

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