The power sector of the energy ministry is worried over the state of the industry, which seemingly has defied all measures for a turnaround. It is seeking for the intervention of the private sector through investments.

The Minister of State for Energy (Power), Hajia Fatima Ibrahim, has listed the challenges of ensuring stable power supply, describing the cost as prohibitive. She noted that the distribution units of the unbundled power utility company, PHCN, still remained unattractive to investors.

She enumerated the challenges of the sector as including lack of operating space, low tariff, poor revenue collection and inadequate gas supply as well as energy losses.

"Currently we have 14 available generating plants, three hydro and 11 thermal with an installed capacity of 7876 megawatts (mw). But available capacity is about 4361mw with an output of just 3000mw" adding that the biggest plant is Egbin with an installed capacity of 1320mw.

"Most of these plants have very low availability partly because of limitation in gas supply but in most cases also because of the current features of these plants. Most of them are at least 20 years old and unfortunately to our chagrin, in those 20 years some of them have never had turnaround maintenance. You can imagine the status of the industry," she said.

The minister noted that some parts of the transmission network are so long and over-loaded. For instance, the 3,600km, 3,000km radial lines, such as the one from Kaduna to Maiduguri, which has a single 132 kv line. She observed that transporting power through such a distance was a big challenge with attendant technical and non-technical losses, adding that the whole grid can only wheel about 4000mw of power.

"On distribution, the lack of operating space, low tariff, inefficient revenue collection in the system and the highly technical and commercial losses constitute major challenges.

Said the minister: “We are aware that power is a highly capital intensive venture and one of our major challenges is the capital cost of power installation because we need from generation to transmission at least $1.5 million per megawatt and in most cases we need at least two years to install a transmission line. And for hydro power it takes a minimum of five years for the kind of hydro power we envisage, about 2600mw”.

Hajia Ibrahim identified gas supply as a major constraint to the power sector. She expressed displeasure over the development because of the abundant gas deposit in the country. "With all the gas deposit, we are unable to satisfy the demand of the electricity market. Most of our old plants cannot operate beyond 60 per cent. The new plants we have; Geregu, Omotosho and Papalanto among others, cannot give out more than 60 per cent of their available capacity. Of the 14 plants we have, 11 are gas fired. At the same time all our six new National Integrated Power Project, NIPP (Greenfield projects) are gases and of the 23 licensed IPP by the Nigerian Electricity Regulatory Commission (NERC), 22 of them are gas. With that in mind, the debate within the IPP licensees is on how they would get the gas even when the plants are installed and who bears the risk of gas supply. Is it the producer, International Oil Companies, IOC, Nigerian Gas Company, NGC, the government or the offtaker (the Power Holding Company of Nigeria, PHCN). The debate, she said is very on and the ministry has not found an answer to it.

Another issue the ministry is contending with, she said, is the current power purchase agreement (PPA).

"Our current PPA is heavily titled towards satisfying the needs of the independent power producers and currently we owe them a lot of money, which is quite unsustainable to the power holding company and the government could only afford to subsidize the industry. The issue of PPA and gas supply should be stated out before more interests can be shown in the sector", she said.

She also identified power securitization as another challenge noting that all the registered companies have held back because they feel the payment voucher and tariff don’t support PPA and are waiting for the ministry to fine tune the securitization aspect before installing their power capacities.

Hajia Ibrahim said government is increasing the gas pipeline structure to supply gas to power plants at the existing and new ones and to reinforce the transmission structure so that they can wheel at least 10,000mw of power from the current 4000mw. There is the introduction of the rural electrification agency with the shared responsibility of the local, state and federal governments in developing electricity infrastructure in rural areas.

She said the implementation of the NIPP has been quite low adding that there is an initiative to reform the power sector and make it more robust and able to intervene in the economic development of the country. "But the power sector reform itself has been virtually highly centralized, vertically integrated with poor commercial performance because the generation and distribution companies are still heavily supported by the government.

Lack of adequate coordination in achieving the results of the transformation and distribution, generation and transmission companies have really not been attractive to investors.

"We need the intervention of the private sector because the costs are very prohibitive. For us to develop the partnership with the private sector, they need to have competitive bidding concession and acquisition by bidding for our build, operate and transfer (BOT) model or rehabilitate, operate and transfer (ROT) in generation.

"In the transmission, we have come out with two initiatives – to have an open wire policy whereby the moment a company is able to generate and our own system cannot carry that power, the company would be given the opportunity to build a transmission line and sell some of the power to us. We are also trying to encourage on grid, mini grid and off grid power supply. Currently, we have a large number of companies that have come in to intervene in the generation aspect. We are planning concession or to sell part of the distribution companies to individuals and allow them sell power either to special customers or to large areas of the distribution network," she said.

"However, these don’t give comfort to an investor. The major thing we are doing now is finalizing the multi-year tariff order, a price-searching model for generation, transmission and distribution that will ensure fair price charge to consumers and allow operators to adequately finance their activities and obtain reasonable earnings. This is part of the securitization framework, which would assure an investor of recouping his investment.

"We looked at models and agreed that some kind of guarantee is necessary within two to four years before the sector stabilizes. That kind of guarantee would be provided as well as infrastructure that will ensure that whoever sells power within the industry can get paid. The PPA is heavily skewed and that is sending the wrong signals to the industry. It is being re-examined and we will come up with a template that to enable a win-win situation for the offtaker and the investor."

The minister said the President’s establishment of the implementation committee under the supervision of Dr Rilwanu Lukman and the establishment of the National Energy Council (NEC) that is chaired by Mr. President are part of efforts to solve the prevalent power problems. The interim report, she said, has been submitted to the President and very soon the president will declare the emergency on power supply.

"Programme of action in short and medium terms will be to rehabilitate the infrastructure to enable us by the first quarter of next year generate at least 5800mw, complete the ongoing transmission system so that at least 10,000mw can be wheeled out in the short term and complete the NIPP that will bring in 5000mw, and privatize as much as possible the generation and distribution companies and enhance the on grid and mini grid generation.