Akwa Ibom News Online Commentary

“A customer driven sector-wide plan to achieve stable power supply” is the subtitle for the recent Roadmap for Power Sector Reform announced by our President, Dr. Good luck Jonathan. “Customer-driven” is perhaps the most innovative phrase in the document. For the first time, it seems our public policy leaders appreciate who is the real king in a federal system of market economy – the customers. While customers could be defined in several ways, it is fair to assume here that the Roadmap’s meaning of the customers is the ultimate consumers of electricity and gas in Nigeria. To this end, it can be posited that indeed the Roadmap is the Nigerian Energy Thrust at 50. However, it can also be argued that at 50, bolder energy policy goals such as: less than 20% of Nigerians should lack stable power supply by 2020 (i.e a 20/20/20 electricity target) and 15% reduction of firewood usage and transition to natural gas usage by 2015 (ie, a 15 by 2015 gas target). If the federal government set such targets, enable and regulate the private sector at the state and zonal levels to comply with such goals, Nigerians will be the better for it.

Nigerians (the customers) can be indulged for being simultaneously enthusiastic and skeptical about the Roadmap. They have seen such grandiose federal proposals come to naught before. Nigerians have seen succession of different government announcements and budgets that was supposed to give them “stable power supply” before. Even the loudest critics of the Roadmap would agree that it is a step in the right direction but wonder if it can be implemented appropriately. As the Americans would say, the devil of such high powered very promising proposals is always in the implementation details. By appointing Professor Bart Nnaji Special Advisor on Power and also Chairman of the Presidential Task Force on Power (PTFP), it seems the President has also overcome the square peck, round hole syndrome. Professor Nnaji’s Aba Power Project, previous ministerial appointment and his exposure to how the American power sector functions puts him in a position to midwife this new Nigeria Energy Thrust at 50.

Our country does not lack bold initiatives like the Roadmap. As a matter of fact, Lagos was one of the first places in the world to produce electricity in 1896 just fifteen years after this form of energy was introduced at a commercial level in Great Britain. It was only in 1946 (50 years later) that a Nigerian public policy on electricity was implemented when the Public Works Department (PWD) was given the responsibility for power supply in Lagos. Six years later, the Electricity Corporation of Nigerian (ECN) was created to consolidate the previously existing electric ventures. With this singular legislative action, the previously existing individual electricity power ventures scattered all over the emerging towns in the country (most of them capitals of the contemporary 36 states) were eliminated. Some of these ventures were Federal Government bodies under the PWD, some by the Native Authorities and others by the Municipal Authorities. In retrospect, this was the beginning of the over centralization in the sector and thus monopolistic inefficiencies and corruption of the successive federal government driven instead of customer-driven power companies.

As if the ECN consolidation was not enough, in 1972 ECN and the then Niger Dams Authority (NDA) were merged to form our famous National Electric Power Authority (NEPA). Nobody at that time of military domination of the country could even think or dare say that this new found NEPA will come to be known as “Never Expect Power At-all”. With NEPA, the national electric power sector was now vertically integrated. Vertical integration is the industry’s term for the concentration of the generation, transmission and distribution of electricity in one entity. While vertical integration has the advantages that justify the formation of NEPA, it also harbors monopoly related weaknesses that is anathema to customer choice in a polity with a capitalistic free market. To complicate things, NEPA was created just two years after the civil war right in the thick of the reconstituted unitary-military benevolent dictatorship of the “no victor nor vanquish” General Gowan era. Needless to say those were no days for the voice of the customers. So for over 50 years beginning with the PWD policy, Nigerians had to live with the federal government monopoly of the electricity industry through NEPA till the dawn of the contemporary People Democratic Party (PDP) civilian administration.

The passage and signing into law of the Electric Power Sector Reform (EPSR) Act of 2005 could be seen as the first time a Nigerian energy policy agenda would ever seem near what can be termed customer and private sector oriented albeit not customer-driven. With learning from other countries, policy makers saw the need not only to unbundle the industry from vertical integration but also to begin the process of privatization. Six so called generating companies (these are merely power plants when compared to generating companies like Calpine in the USA for example) were created along with a national transmission company and 11 distribution companies. A master stroke of EPSR in Nigerian context was the creation of an independent regulatory body – the Nigerian Electricity Regulatory Commission (NERC). However, the so called unbundling was in name only since the 18 new companies were and are still under a renamed NEPA known as Power Holding Company of Nigeria (PHCN).

Admittedly, since the EPSR of 2005, several other policy actions has been taken by the federal government but by all metrics of uninterruptible power supply, very little results are on ground to justify the massive expenditure. For a country of 150 million people, we are yet to see many viable private sector business venture focusing on electricity and gas delivery to residential and non-residential (institutional, commercial, governmental and industrial) customers at rural and urban centers as done in the developed countries. It is not that Nigeria lacks the resources, the manpower nor the demand for electricity and gas. In term of resources, we have abundant supply of coal and are still flaring natural gas. In terms of money, it is an open secret that some individual Nigerians are richer than some of the 36 states of the federation. In terms of manpower, there are several Nigerian working in the industry across the globe and with over 100 year’ history of electricity production and consumption in the country, there is sufficient local labor for the industry. So what is the problem?

A critical review of the situation seems to suggest that the problem is paradigmic in nature. At 50, we need a shift in energy paradigm. The shift must include a movement away from government subsidy based unreliable energy infrastructure to profit driven business based service provisioning as done in the USA and other advanced countries. Another shift is transitioning from a sole focus on large national outfits like PHCN and NNPC to state and regionally (zonal) owned and operated profitable energy companies that can be funded as pilots during the transition period. A paradigm of long term sustained investment of Nigerian money by rich Nigerians (who own foreign accounts) in Nigeria for Nigerians. How can we ask foreigners to bring their own money to invest in our basic infrastructure when we are reluctant to do so? Perhaps a full implementation of the EPSR and the Gas Master Plan through targeted piloting of public-private-partnership (PPP) at State and Zonal Levels can help to spur this shift in paradigm for the Nigerian power (electricity and gas) sector. To me, this should be the corner stone of the Roadmap implementation.

Through the full implementation of the EEPSR Act of 2005 and the Gas Master Plan (ultimately the passage and implementation of the Petroleum Industry Bill), I believe that the framework for the Nigerian energy thrust at 50 is in place. At 50, it is time Nigeria become a true federal economy based on state and/or regionally owned profit driven energy businesses regulated by small but smart national bodies like NERC. State and regionally owned infrastructure will also drive accountability and shared ownership at the local levels. It will also spur positive governance and investment competition among the governors who would like to be seen as producing the highest level of democracy dividend. Moving forward, both the federal and state government must take the lead by providing the stimulus money to fund such PPPs even as the Obama Administration and several state governments did and are currently doing in the USA.

What needs to be done – Immediate Pilot Results
Knowing that power infrastructure requires huge financial commitments, I suggest that the Jonathan Administration identify and partner with some states like Akwa Ibom, Niger, Rivers, Enugu and invests to establish pilot viable Power Supply/Utility Corporation as a start. Such corporations must have valid and easy to implement business plans (not just feasibility study and project plans) that provide for local power generation (where economically feasible), integration to the national transmission grid (again where economically feasible), local distribution and utilization services to the end use customers. Once such corporations begin to generate earnings (not just revenue), they can be taken through Initial Public Offering (IPO) for any and every potential investor in the Nigerian and global market place to take equity position under the free market processes. The initial state/federal government driven investment should be the anchor for immediate results as a pilot using Public Private Partnership (PPP) – the investment need not be cash but can be leasing or outright transfer of existing PHCN assets to such pilot PPP to function as a customer-driven local utility companies regulated by NERC in the short term but regulated by state public service commissions or equivalents in the long run.

Reasons for a viable Power Supply/Utility Corporation
By taking advantage of NERC’s framework, the selected pilot states like Akwa Ibom, Rivers, Niger, Kwara can be supported to invest in a viable Utility Business (modeled for example after Pepco Holdings – the fortune 500 energy company that provides uninterruptible power supply to Washington DC – the capital of the free world where the author is part of the management team) to accomplish six customer-driven and shareholder strategic objectives:

1. Provide safe, reliable and uninterrupted utility services: Power distribution business is a basic utility service that the government must effectively regulate and/or invest in. For the foreseeable future when oil may have dried up and/or fail to have significant utility in the developed and/or developing countries, power distribution system will continue to thrive.
2. Leverage the electric infrastructure for Internet and gas supply services: A modern and reliable electric distribution system will allow the integration of local and renewable resources in order to enhance other utility services (Internet and gas) supply in across the utility’s regional franchise area.
3. Enhance Internally Generated Revenue (IGR) and employment opportunities: By investing in the Power Supply/Utility services, states will not only make money to increase its Internal Revenue Generation base, but will significantly create several medium-to-long-term employment opportunities.
4. Profits from such a lasting investment can be used to generate other investments, even as NERC has incorporated into its Multi-Year Tariff Order (MYTO).This is how Investor Owned Utilities (IOU) make money and grow in the USA - through return on investment and return of investment.
5. Acquire one or more of PHCN distribution companies in Nigeria: State-federal owned regional utilities will be sufficiently capitalized to institutionalize such a profitable business model in Nigeria by positioning to acquire one or more of the 11 distribution companies when the Federal Government decides to sell them.
6. Ensure long term alternative (to oil) revenue: By investing to establish a viable Power Supply/Utility Corporation capable of providing power generation, transmission, distribution and utilization services locally and to neighboring states and possibly other countries, both the state and federal government will have taken a major step toward diversifying from a purely crude oil-based economy.
7. Position the Jonathan Administration to address the Nigerian power and other problems: After decades of several failed attempts, individuals and corporate Nigerian citizens will overwhelmingly embrace any leader capable of trailblazing the provision of uninterrupted power supply.

Potential Implementation Strategy
One approach of accomplishing the above by any state may include the following (not necessarily in the order of importance – each item requires much more details and may not be needed for all pilot states):

1. Complete a business plan (not just a project that requires feasibility study);
2. Obtain Distribution/Trading licenses from NERC for the pilot State(s);
3. Build 110kV distribution network loop and fiber optics line (FOL) around the State;
4. Leverage the electric distribution corridor for natural gas distribution infrastructure;
5. Ensure 110kV to 33kV substation and natural gas mains in each LGA headquarter;
6. Run feeders & FOL from the Sub to schools, industries, hospitals, etc;
7. Create utility cooperatives in each ward for infrastructure protection and revenue collection;
8. Establish a USA styled full service Utility Business to operate the system safely & reliably;
9. Lease PHCN distribution assets similar to what was proposed under the Aba Power Project;
10. Tie existing power resources to the Utility Company and seek other PPA if more power is needed;
11. Release the Utility Business to run as a SEC traded NERC regulated Power Company and an Internet Backbone Provider that will expand to acquire more generation and distribution assets in other parts of Nigeria while paying dividend and tax to the State.

The above is one potential (out of many others) new paradigm needed to ensure a customer driven sector-wide plan to achieve stable power supply. It seems to me Professor Bart Nnaji is the Nigerian proverbial round peg in a round hole that can implement the Roadmap for Power Sector Reform announced by our President, Dr. Good luck Jonathan. Piloting PPP at State and Zonal Levels as outlined above should be the Nigerian Energy Thrust at 50. It will help shift our paradigm from federally driven subsidy based unreliable infrastructure service provisioning to Customer-driven profitable business based government regulated high service quality provisioning as we have seen in the cell phone phenomena across Africa.

While the Roadmap is a step in the right direction, the federal government need not continue to drive energy and other public policy issues that should be better handled at the state and zonal levels to meet unique circumstance of each individual area. Better still, the federal government should set broad energy goal such as the 20/20/20 electricity target and the 15/20/15 gas target suggested at the beginning of this article and ensure it accomplishment through appropriate monitoring and enforcement using public policy tools such as tax break and other similar incentives.

Dr. Victor Udo, a former member of the Governors Energy Task Force in New Jersey and a member of the New Castle County Planning Board, Delaware, USA, was interviewed recently in Baltimore, Maryland, by VICTORIA IBANGA, MANAGING ED

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