Vandalism, corruption frustrating power sector reforms – Neil Croucher, Abuja Disco CEO

LATEST UPDATE: Vandalism, corruption frustrating power sector reforms – Neil Croucher, Abuja Disco CEO

FROM DENNIS MERNYI, ABUJA

November 1, 2014, was exactly one year the private sector bought over Nigeria’s power generation and distribution companies. The hope and assurance was that the sector would record significant improvement under private sector management meaning there will be light for all Nigerians. But the story in Abuja, the Federal Capital Territory, is that electricity consum­ers are still gropping in the dark and the situation is moving from bad to worse.

However, Daily Sun recently engaged the Managing Director and Chief Executive of the Abuja Electricity Distribution Company (AEDC), Mr. Neil Croucher, to explain to residents of the city and its environs why they have to remain perpetually in darkness one year after the take over by new investors.

Excerpt.

Why AEDC can’t guarantee stable power

Of course, this is a massive transformation and the whole world is watching because it is prob­ably one of the ambitious transfor­mation going on around the world. But there are many links in the supply chain of electricity. And each of those links need to improve to get better quality to the customers at the end of the day. It is also, a very big ship and a big ship will take a while to turn around. So managing it with public expectations is very challeng­ing of course, because transformation does not come overnight.

In reality, a big sector like this will take time to become a world class entity, but of course, the public quite rightly can expect to see some changes immediately. So, I believe that change is already evident. So, to me and outside, there is much that has been done to improve the quality of electricity supply and quality of service. We have carried out the maintenance that was never done before not to the extent that was necessary. Taking the past, 12 months for example, we cured the servitude relics of something about 4000 kilometers of lines and we have seen the benefits of doing that when we have storms, and wind blow, we have lesser altitudes. This lines stands. We also have done numer­ous maintenance work and also reactionary maintenance. So things like these have been put in place. We have also put in place a 24 hour dial call center which is manned at all times by five operators to receive call from customers. The information is logged directly into our computer system and we immediately dispatch to the field so that there can be quick response. In addition we have a back-up office so that there can be a follow up and close up on all of the issues raised. We see the increase in number of the contacts we make with these companies starting to come through it. Ultimately, we would want it to be the dominant way in which customers feel that the contacts have been given to them for quick response. So there are many ways in which things have improved already.

Agonies of estimated billing in the absence of prepaid meters

Customers are not particularly happy with the estimated billing system and not having meters. And we feel same with their expectations. It is not acceptable for customers to have estimated bill, because we believe it is the right of every customer to be accurately metered for the electricity that is given and is required to pay for. So certainly that way we have to get to as quickly as we can. More than half of our customers do not have meters and that is certainly unac­ceptable. But before we can carry out the massive roll out of meters, we need to ensure a platform on which all of that is based is sound and solid and it has the integrity and it has the ability to check fraud and corruption because there is a very high level of that as we speak. So again, what we have been doing, is to analyze that platform, in the case of our pre-paid meters which are going to be the dominant which is going to the method of metering for domestic customers certainly going forward. We had five different platforms which are in existence. And these different platforms didn’t communicate to each other, so a cus­tomer had to be in a particular area to buy electricity and could not buy electricity anywhere on our system. It could be from poor management of information system from our five different information systems not communicating. There was a lot of opportunity for fraud and corruption to take place on that system. Because we encounter so many people inter­facing on that.

We have already taken a decision to roll out one platform only and that project is already on the way. And that single platform should be up and running within a matter of weeks from now. Work is already on the way. And once we have the single platform, then customers would be able to purchase power anywhere on our system but they will have to do that within a particular area. With one system in place now we can start heading all the various convenient methods of payment on to that system. We could not do it before because when we have all the different system had only one we will be taking on all these kinds of e-payment, single out internet and the rest onto that system. So that is on the metering side. On the billing side, we also have six billing centers on our all unit platform. When a cus­tomer pays money on his bill, receipt has to be manually taken and entered manu­ally into the computer system. We need something like 85 staff for our data computer system we need to do away with the corruption in the system.

So, we all looking at the upgrad­ing to a window space system, much more one single system so that we can remove these opportunities for errors and corruption so that when a customer pays it reflects immediately into the billing system. So that deci­sion should be taken within weeks on which platform then should be implemented.

These are all necessary before we can do a massive roll out of our me­ters. And our plan on the meter side is a hundred thousand meters per year. So we can quickly wipe out the back log. If we can do it faster, then we can do so, but then it has become logistically challenging. We can do it as fast as we can. We will quickly get to a point where every customer’s confidence is restored, so that what is paid for is metered accurately. So, I believe things are getting better but there are so many links in that supply chain. And starting from gas, water, the primary energy source, and all of that, you know we are the last link in the supply chain and we are the ones that collect the money which feeds the entire supply chain. Most of the money we collect is feed to the supply chain. We used to pay the generators, the transmission company, the gas compa­nies etc. so we need every link to improve.

Every company is com­ing with everything been privatized. It was a bidding process which all of us had to put in forward our plans on how we would transform the sector. In our case, we can say we would spend something in the region of $200 mil­lion in the next 5 years on capital, apart from bringing in the resources and skills. We will spend $200 million on improving the system and the networks. Other Discos and the Gencos have some other plans. And they all need to make money. So there is no doubting the fact that this transformation will work. We have gone well beyond the point of no return. This will work. It is not going to happen overnight but it would be steady improvement.

Available power TRC Abuja Disco

It is the problem on the side of the primary energy source which is gas supply. The daily power load is very low. On allocation, we only receive 11 per cent daily which is grossly inadequate. But even be­fore the oil workers strike, there were other problem on the supply side. We also had low water levels at the hydro stations. But again, there are a lot of partners coming to own power stations. I read recently in the papers about a partner looking at the 226 megawatts power station. That will take time. There is a big market. And for customers, we need to just make sure we can beat the many cases the cost of diesel generators because that is what a lot of people use when there is low power. So there is a good market here for generators to come in. We are also encouraging them because in our case we are not into generation business but distribution. We are encouraging companies to come into our areas as well with smaller level generators with better generation so that they can generate locally so that we can increase that level of power for our customers as quickly as possible to avoid load shedding.

Impact of FG’s hold on transmission

On the transmission side, it is fairly typical in countries where they have privatized power sector. Transmission remains in gov­ernment’s hand. It is a natural monopoly. You don’t want to duplicate those wires because they are very expensive. So, it is quite typical, it is monopoly and it stays in government’s hand. I have seen here, government is contemplating some level of private sector involvement in transmission. May be the situation will change. It is true because it is one those links in the chain and a very critical part of that link in the chain. It has under investment previously so there are many facilities that will be required. For example there has not been sophisticated control centre that can control such big and expensive power network. Those are essential tools for transmission on this side.

There are many other ar­eas now that need investment and increased capacity. They are bottlenecks in the systems that have been tackled. We are fortunate in Abuja to have less bottlenecks like others, so in effect, if we have some constraints on the system, we get to take some more power than our 11 ½ percent alloca­tion because of constraints elsewhere. For our system currently, we can receive 47 items per megawatts of power and the highest we can take is between 550 megawatts. But we want to make sure that for our area of supply, we stay ahead of that game so that we are able to stay with whatever generation that will come our way. And that has been the case to date.

There are many substations government has bought like the NIPP substations, which we look forward to taking over in the coming months, we have already taken over six of them that have been commissioned and are in ser­vice. There is another phase of 20 to go that would also assist us with our connection to our transmission system to ensure that we can receive any power and also ensure that the qual­ity of the power is good. Since we commissioned this substa­tion at Gwagwalada, there has been immediate improvement as we link up to the voltage and the quality of supply in those areas is good.

AEDC’s distribution capacity

We were very excited about the oppor­tunities we saw when the government went on a road show around the world to look for investors to come in for this privatisation. We were very excited and we also believe that the process that was followed was thought out and our confidence was high. There is no doubt, it is a well rounded process. We have seen the commitment of government, the projects used to fail us because of lack of commitment of government. You need to follow up and you show serious commit­ment in something like this and had confidence in that and every challenge that come along, that challenge has been quickly addressed and I believe most of the huddles that we encountered are behind us now. As far as our company is concerned, we did former consortium with the local entity and the company I come from is the one that has been in the power sector for 50 old years it is now private sector player that has gone through the transformation through the public sector to the private sector.

We also put a team together which is also so vast in the power sector. So we believe we have the right skills and resources within our group to make a success of the transformation. We are long term investors because we certainly don’t believe that you can come into the power sector and make a quick back and leave, this is a long term project and that is the com­mitment of our shareholders. We are here for s long haul. In fact the probability is that there would be no returns to the shareholders in the early years. Because we recognise that more money needs to come in but we got the key tariff stand. Ultimately, Nigeria needs to have a competitive tariff because it has good resources of oil and gas and it has unexploited hydro and of course a huge potential market. So with these basic things, ultimately I think the tariff should be competitive.

That on the other hand there is huge back log of investment, there is huge capitalisation that is needed in the sector. So the challenge for us is to balance up. So we have open shops so that it will help sufficient revenue that will be coming into the sector so that it can be transformed to give out a good quality. But as I said, we have a long term view of the business. NERC is working with the sector to see how we can smoothen our tariff adjustment and make it acceptable to customers and electricity affordable. So, hopefully we will be looking at the long term, stable tariff regime and to give sanctity to the market.

Challenges of business so far

We would never want to back out and we certainly wouldn’t do that. There are a lot of challenges but we tackle them with excitement and vigour. We sometimes get frustrated but it is gainful and we will not back out. Challenges coming in are basically that we didn’t have access to the business before handover. We didn’t have access. We only imagined what was in from what we saw and the environment and from the available information that was available. But we had a good idea of something well different. I think the asset were in worse condition that we thought and in most cases we found that about 200 transformers were left to rot in the field. So our immedi­ate reaction to tackle those things. There were complete absence of information and ICT networks.

That also made the company very inefficient, so that has changed the com­pany’s focus to start putting up information system. As we speak, there is information system on the metering and the billing system and these are they key information system that need to be put in place. There are many others as well. There is also staff reorganisation. The company was very delighted to be right sized because it is one whole oppor­tunity to create an efficient electricity sector. Yes, I believe jobs will be lost in the sector but the knock out effect of an inefficient electric­ity sector in Nigeria, the multiplier effect will create tens of thousands of times more jobs that were lost within the electricity sector in Nigeria in a short time. We must sieze this opportunity to create an efficient electricity supply system in Nigeria. So that is the summary of the standard features today but we are still extremely confident that we will turn it around. There are so many expectations but we can’t do it over night because I believe that we have already achieved much and we will be achieving much each year forward.

Plans for daily electricity supply to Abuja

Certainly there are plans in place for resolution of some of the gas supply constraints and in the longer term, there are plans for new generation capacity. What needs to happen is for all of us to follow through. At the moment, there are severe shortages but those are for the various reasons that need to be resolved because in Lagos, there many gas pipelines that are not working. But those are the short term problems that can be tackled. They are not infrastructure problems. I believe the problem we are having now are extremely to quickly resolve the low gen­eration and by the end of this year we will be getting back to the level we were before it went down by the beginning of this year.

Also, as we get other infrastructure projects commissioned by the end of the year, and during next year, we should an increase to the next level. It is our determi­nation to make sure there is no sleeping journey in any of these projects. From the outside, we are keenly looking out for other stakeholders and the generating companies. But for our customers, they need get access to power so we have to put plans and we have to support them in any way we can. But we are also looking at creating embedded generation in our networks. So we are talking with some independent teams who are looking to install various kinds of medium strong generation projects within our area of supply. Things like solar power, small hydro, those kinds of projects that will also assist in improving our level of power supply to our customers.

Daily electricity supply scope

We have been given a schedule by the TCN of how much power we must take. But the increasing lim­ited resources in the country at the moment, each disco has allocation.

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