Amend EPSRA, PIA to fix distressed power sector, El-Rufai warns

Sopuruchi Onwuka

Former governor of Kaduna State, Mallam Nasir El-Rufai, declared that the laws governing operations in the power and petroleum sectors should be aligned to salvage the increasingly distressed and illiquid electricity supply industry.

Mallam El-Rufai stated that the Nigerian Electric Power Sector Reform Act 2023 and the Petroleum Industry Act 2021 should be further amended to create alignments that address gas supply transactions enable commercial efficiency in the NESI.

The former Director of BPE during the administration of former President Olusegun Obasanjo blamed the operators of power distribution companies for the liquidity crisis and pointed at the inability of the companies to implement mass metering of customers as the prime factor for poor revenue returns from the market.

In pointing at high rate of distress among the power distribution companies, he said government should use the prevailing receivership position with banks to replace the failed investors with fresh resources that flaunt convincing pedigree in running power distribution business.

El-Rufai who was nominated by President Bola Tinubu for ministerial position in the new government of the All Progressive Congress (APC) told the National Assembly during his screening that that the full policy intentions for the reforms in the electric power sector are currently jeopardized by poor management of revenue streams in the industry.

The failure of the revenue relay system that governs commercial operations across the full value chain, he said, cost government over N1.6 trillion in sovereign guarantees to safeguard investments in the upstream and midstream sections of the operating chain.

Multidisciplinary El-Rufai who claimed to be part of the teams that initiated the legislations that supported the prevailing reforms in the petroleum and power sectors of the economy stated that the huge redundancies in the Nigerian electricity supply industry (NESI) are prime consequences of commercial failure and worsening distress in the distribution companies.

The Oracle Today reports that despite installed generation capacity of 13,000 megawatts of electricity per hour (MW/h), the country’s national grid delivers paltry 4000 MW/h for Nigeria’s 200 million citizens due to weak and inadequate transmission and distribution systems.

In addressing questions around low supply capacity, illiquidity in the system and frequent funding interventions by government, El-Rufai who headed the Bureau of Public Enterprises (BPE ) of the National Council on Privatization (NCP) from 1999 to 2003 blamed the privatized distribution companies for exposing government to liability of about N1.6 trillion linked to sovereign guarantees provided for investments in the sector.

He called for evaluation of the issues that stall activation of full generation capacity and bottlenecks that limit flow of power from generation plants to homes and businesses, adding that no commercial and industrial venture in the sector would be a viable proposition without adequate and reliable power supply.

He blamed the high redundancy ratio in the generation arm of the industry on low gas supply volumes, limited transmission capacity leading to frequent system collapses, and inefficient distribution companies that are financially distressed.

 In proffering solution to the NESI problems, El-Rufai pointed at the original aim of listing government’s 40 percent equity in the 11 successor distribution companies on the stock markets to diversify shareholding and tame financial recklessness.

He noted that most of the distribution companies owe huge debts to banks, and that about six of them are currently in receivership by lenders whose major interest, he observed, is to recover their funds.

“The last time we did a stress test on the distribution companies, only about three of them out of 11 are doing well,” the former governor lamented.  

In describing distribution as the last end and commercial life line of the electric power sector, he said the marketing companies have consistently failed to meet payment obligations to the generating companies due to poor commercial practices.

“If they don’t have enough metering, and they don’t collect enough money, then they will not be able to pay for the power supplied by the power generation companies. And when they fail to pay, the gap is what the government pays otherwise they will revoke the partial risk guarantee posted by the federal government,” El-Rufai explained.

The Oracle Today reports that billing disputes account for over 90 percent of collection losses recorded by the distribution companies; and several directives and interventions by government on mass metering have failed to significantly reduce estimated billing by the distribution companies.

To address the problem of billing disputes and related revenue losses, Mallam El-Rufai made it clear that estimated billing is no longer acceptable, emphasizing that every customer must be metered. He also condemned electricity stealing by customers bypassing installed meters.

He told the law makers that electricity is no longer a social service since it has been sold to the private investors who necessarily need returns on cost of production and services.

He said the liquidity crisis in the industry must be addressed by cost reflective tariffs, adding that “even the ownership of these electricity distribution companies may have to change because right now the banks own about six of them. They control 60 percent of them. And banks are not good at running companies. They are good at taking out whatever they need to recover their loan.”

He made it clear that the NESI must attract fresh capital, “new investors with technical and financial capacity into the distribution chain so that it can be expanded.”

With only three of the 11 distribution companies in good financial health, El-Rufai called on government to seize their prevailing opportunity to change the ownership of the distribution companies.

He called on the National Assembly to amend the Nigerian Electric Power Sector Reform Act 2023 and the Petroleum Industry Act 2021 with a view of creating an alignment that enables efficiency in the NESI.

On bridging the capacity gap between electricity generation and supply, Mallam El-Rufai pointed at transmission, saying that “things can be done. There is money to expand our transmission infrastructure. We just need to organize ourselves and remove politics from transmission procurement.”

He also called on states to seize advantage of the new EPSRA 2023 to step into the fray and extend connection of grid power to rural and remote communities. He also suggested that state and local governments explore deployment of resources in renewable energy sector for off-grid power supply by utilizing solar, wind and nuclear generation.