IN
continuation of Vanguard Newspaper’s ‘Power Series’ the Managing Director/
Chief Executive Officer of Ibadan Electricity Distribution Company (IBEDC), Mr.
John Donnachie, took time to explain the controversial issue of “crazy billing”
and he
also expressed a belief that electricity distribution companies
(DISCOs), electricity generation companies (GENCOs) and the Transmission
Company of Nigeria (TCN) as key components of the value chain must learn to
stop playing the blame game and focus on providing electricity to the citizenry. He spoke to our Energy team, Sebastine Obasi
and Ediri Ejoh. Excerpt.
ELECTRCITY
distribution commands the most populous customer base. What is the
profile of your customers?
I put the industrial and commercial together when you
are talking about our demography because they are similar.
About 20
percent of the power that we receive goes to them while 80 percent of the power
that we receive goes to all others, which is very unusual because in a normal
environment your industrials and your commercials get a lot more power, but our
power mainly goes to the residential class.
In most countries, in order for you
to develop your economy, lowest cost production, your industrial plants get a
lower price and they take the bulk of the energy to create businesses and the
ripe environment for job creation and economic development.
All companies
have their power generation, because the quality and quantity of our supply is
not adequate and that leads to higher cost to them.
Revenueperspective
From a
revenue perspective, it is 30 percent for commercial and about 70 percent
residential.
Meter manufacturers have accused DISCOs of non patronage.
What do you have to say about it?
MOMAN is
the only manufacturing factory here. The others engage in assembly. However, we
fully support local manufacturers and suppliers. We keep MOMAN in
business. All local suppliers are fully
supported and we are very proud of that. Anybody that wants to come and talk to
us and want to be part of our business has to, in one way or the other, be
compliant with what we want, which is to create jobs in Nigeria. We have been
talking to a lot of people to facilitate production locally. Meters are a big
problem.
The problem is that, when we took over, most people were not metered
and those metered, were using deformed meters.
That is the problem. We want to
meter all customers, which is the right thing but the cost of a meter is about
N40, 000 and it takes me a minimum of 20 years to get a return on that meter.
Before I see profit out of a meter, it is 20 years. Why do I say that? The
average bill that goes to a prepaid meter is two and a half thousand naira and
20 percent of all prepaid meters are not vended. We all know what they are
doing. When we analyse crazy bills, 30 percent complaints are crazy bills. When
I calculated crazy bills, about 68 percent of all crazy bills are around N7000.
Now, if you run one air conditioner for 2 hours a day, for thirty days, your
bill is going to be five to six thousand naira. The problem is that most people
are used to paying N1000 and N2000 for electricity.
Cost of runningelectricity
Some of them work for the government and haven’t been paid and there is high
cost of living. Electricity is the only product you can buy without paying for
it. Believe me, there is no product that can be sold for free.
Customers don’t pay us. They bankrupt us and
we don’t get meters. So they complain about high bills, which is not true. In fact, if you look at the cost of
electricity currently at N28, it is essentially cheap. Ghana is 10 times higher
than what we have. If you look at the price, with current operations, it should
be N57 per unit.
What do we gain from crazy bills? They don’t understand the
cost of running electricity at home. That is the problem. It is not crazy
bills. Customers don’t understand the cost. That is why they see it as crazy
bills. Everybody understands the cost of food, provisions and other things, but
not electricity. I am not saying we don’t have problems.
Yes, we do. In our
Forum there are complaints and all of that, and we need to address all of these
issues and we follow all of these issues and we have a good process that
follows them, because I will like to know the peoples’ need.
We want to provide
meters. We need and have to meter, but it is a 20 year – process. Now, in order
for us to meter our customers, I need N60 billion to do that. The multi-year
tariff order, MYTO, gives me N5 billion a year to meter. MYTO is the financial
tariff model that allows me so little as N5 billion a year.
Where do I get the
balance money? When we bought IBEDC (Ibadan Electricity Distribution Company),
everybody knew how we financed it.
We were promised tariff to cover our cost.
It is in MYTO and we were promised a particular amount of electricity to be
generated, which is 5.5 gigawatts. We have never received that in three years.
When I go to the bank to look at my financials, I am not encouraged. Last year,
there was 50 percent drop. We had major problems in the electricity gap. Last
year, we had over 20 system collapses.
So I don’t get what I need to get to
keep the business afloat. Instead of collecting 100 percent, I get 50 percent.
Now when I sell that 50 percent, I only get 25 percent. If I collect a hundred percent of everything
that I get and I bill, I would still be at a loss of N2.6 billion every month
which is $8 million and I haven’t paid salaries.
Now, how do I run a business
with such deficit? How do you get
better electricity without paying for them, and who is going to pay? And that
problem is not going away for three years.
What are the plans and measures put
in place to mitigate the losses of theft in your network?
The problem is so
inherent that everybody wants to take the cut of everything across the
business, and that applies to every business.
Energyflow
But we are putting
more billing systems in place, metering as well, transformers, energy flow. For
example, it took me a year to cut off one line to meter and fix the problem
because it was a high tension problem. The Manufacturers Association of
Nigeria, MAN, has been paying the old tariff of N26 instead of N42 because they
have an injunction against us. Does the public get a court injunction because
the cost of newspapers, for example, is high? The answer is no. It doesn’t
follow. I have a customer that owes me N1.6 billion. How do I find money to buy
the meters, system and processes? Though, it is not stopping us as we are
fighting hard. Currently, we have put
over 190,000 meters since inception and it is not enough as we know.
What other
options are you exploring to move forward?
We have to get harder on sanctions,
putting people in jail, educating and working with the communities. My list of
transformers is way over 500. We are working closely with communities to say we
cannot develop their communities if they don’t pay their bills. We really made some effort to do that. We
have changed a lot of systems in January that would have caused a lot of
challenges. We have got some bit of flooding recently, which is becoming a
problem. These are all of the development we have been putting in place both
internal and external, but the main thing is working with our customers and
communities to give them better service and that can only happen if they pay
their bills. We can’t go to banks for loan because the Central Bank of Nigeria
has placed restrictions. We genuinely want to meter our customers and we have
to do it.
Power purchase-agreement
The public has been misinformed. We were
allocated N27 billion but we only received N11 billion because the balance was
paid to legacy bills. We operate according to the rules in the books and it is
done transparently.
Transmission Company of Nigeria, TCN, sometime ago stated,
“DISCOs need to improve their monthly remittances, failure which their accounts
could be escrowed and their security deposits called up in the event of any
default.” How do you react to this?
TCN is an integral part of the value chain
as well as an operator in the power sector. We must learn to stop blaming
anybody. I have explained my financials, how do I change that? Generation
companies can charge a capacity fee in the power purchase agreement, PPA. They
should be guarantying us 90 percent minimum of power. We have never received
close to that not even once. Have we ever complained about that? No. TCN has got such major backlog of projects
to get the system up to a world class standard. They are so far behind, and I
don’t complain about that. Power supply is not where it should be, and we need
to work very hard on that. I lost $50 million in January. I am not saying I don’t
want to pay, but I am saying we should work together and stop the blame game.
We need to work together to solve the real problem and address the root
courses.
Source: Vanguardngr
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