HOW WE TACKLE ELECTRICITY DISTRIBUTION CHALLENGES –ENGR AYODELE
How we tackle electricity distribution challenges – Engr Ayodele, COO, IBEDC
Engineer John Ayodele is the Chief Operating Officer, Ibadan Electricity Distribution Company (IBEDC). It is responsible for electricity distribution within the southwestern zone (Oyo, Ogun, Osun and Kwara as well as some parts of Kogi, Ekiti and Niger states). In this interview, Ayodele reacts to some key issues in the area of his operation in particular and Nigeria’s electricity sector in general.
With respect to the way electricity distribution situation across the country, would you say there has been an improvement in power generation?
The way I see efficiency and effectiveness in power generation, I want to ask people, do you have electricity as and when you need it, because, saying that power generation is 4000 megawatt is irrelevant. It is when I get home and I turn on the light and I see the light. Customers need to see power supply available before they can say it is 10,000 or 50,000 megawatts or so. So, me I want to see it from the point of availability of power supply to the customers.
There are two groups: some will say that they never enjoy electricity, while others will say they have been enjoying electricity supply for the past six months. So, it depends on who is being approached to say something.
Majority of the people may fall into the group of those who don’t have light, but from experience, having stayed in this industry for about 40 years, until people get power for 24 hours a day, it is no power, it’s either zero or 24 hours a day. Even if they get it for 12 hours a day, it’s still no power.
I’ve seen somebody who came to complain and said that for the past three months, they did not have electricity in their place. But, I asked him to take me there, and as we were approaching the place, there was power and he said, maybe they just brought it! I asked people around and they told me that it was the day before that power went off and that it was restored that morning. So, a lot of people will agree they have power supply only when it is there 24 hours. If it is not there 24 hours, they can’t see the power supply. It’s either zero or 24 hours a day.
Where are we now?
I know some areas where there is no shortage of energy as a result of the system capability.
For example, if you go to Jericho in Ibadan, Lafenwa in Abeokuta, and Baboko in Ilorin, they all have different stories to tell. The Jericho people will say they enjoy 18, 20 hours every day. But, Lafenwa may not say the same thing, while Baboko in Ilorin may say they get light every other day. For that reason, it is difficult to generalize.
I believe from the analysis and results that we get, because we have to pay for electricity that we use, we know how electricity has been increasing in terms of what people use. Should we be correct if we conclude that the increment you talked about means improvement in the sector?
There is an improvement in the sector, there is no doubt about that. If anybody is doubting it, the statistics are there to show that there is an improvement. But, like I said, any improvement that is not 100 percent is still not there. We are still progressing. I think very soon, we will get there.
What have been the major challenges affecting the steady power supply in your area of coverage and in the country?
To start with, there are three major segments in the electricity distribution supply industry. There is the generation company, there is a transmission company. In power plants, they generate at a voltage that cannot be used by the people, so, there is an intermediary that does the bulk transmission of power, before we in the Discos get the power.
What we find out is that there is a gap between what we need and where we need power, and where TCN can supply power.
Let me take, for example, Sagamu. In Sagamu, line entering Sagamu cannot take less than 70 megawatts. My load in Sagamu is about 150 megawatts. So, even if I want to give power to the people, it is not possible because of it of the limitation. There are programs that TCN has that will help. Unfortunately, they are not there yet. When they are there, you will see that there is the improvement between 6 to 8 hours added to what Sagamu presently has?
That notwithstanding, we still can’t meet the load demand, because, Sagamu and Otta which are the industrial hub of the country, they need a lot of power, and sometimes, they need not just power, power that is steady, that has quality in it, not one that comes and goes after three hours. Many of them, their production lines cannot cope with that. So, they need reliable power.
But, beyond that, it’s the funding that exists. As we speak, there is no Disco that is flowing in the market less than N140 billion, because of two things. There is what we call market shortfall and tariff shortfall. Because it is not cost-reflective, it does not cover the cost of service, that is a tariff shortfall.
The other one is that, as we speak today, there are a lot of customers that are still on N4.00, known as R-1 customers. There are customers who are R-2, those on N24 to N26 by the time you add VAT, whereas the cost of electricity to us here presently is hovering between N19 and N22. So, you discover that there is no way we can meet up per kilowatt-hour, there is no way we can meet up at all . When you look at it, almost 40 percent of our customers engage in bye-pass or energy theft, or they willfully damage their meters. Even, when we started putting meters on the poles outside, they would take ladders and climb the poles and bye-pass their meters!
So, there is a lot of uncollected revenue out there that is very difficult to collect. Of course, the economic climate too, there are a lot of houses that we go and they will tell us to just disconnect them because they don’t have money.
There are also regulatory issues to contend with: government not giving what they promised, and that is compounding the funding problem of the sector. The infrastructure is there. Many of the infrastructure we have there are old and dilapidated.
What exactly are you doing to tackle the dilapidated infrastructure?
We have committed a lot of resources to network development. The infrastructure facilities include lines, substations, transformers. We have some of these transformers that are between 30 and 40 years old in service and they give up very easily because they have gone beyond their lifespan, there is a lot of them on the streets. We have embarked on a massive, aggressive upgrade of facilities.
First, we start from the substations. We have over 43 injection substations that we have completely modernised by changing all the equipment in them. I’m so proud to take people around to see some of the facilities that we have upgraded. We will continue to upgrade until we complete the cycle. But, basically, the main problem is funding.
You must have been hearing that they say Discos are not paying enough money into the sector, which led to the agitation that the licenses of some Discos should be withdrawn. But, when you look at it, take December bill for example. Before December, we got a bill of about N7.2 billion from market operators, which is what they say is the cost if energy delivered to us for distribution, whereas, all we collected is either N4.9 billion. We are saying about N2.4 billion is outstanding out there.
This month, we got a bill of N8.95 billion, because of certain responsibility of government with respect to IPP, and we are not likely going to collect beyond N5 billion, meaning that about N4 billion is outstanding. How do they expect us to pay N9 billion when we only collected about N5 billion? Inside that money, we have to pay staff salaries, they are asking for what we are doing to rehabilitate infrastructure, security. It’s a tough game, but I believe that the regulators are doing something to address that issue.
Is is true that customers have to buy polls, cables and transformers for IBEDC? Is it correct?
It could be true, but not correct. That something is true doesn’t make it correct. Like we’ve said, it’s still about funding. If I have a bill of N9 billion and I was able to collect only about N5 billion, you know that I am already broke. But, a lot of our people don’t know that the infrastructure is for them. They will watch people vandalising those infrastructures and they will not talk.
Yes, it is the responsibility of IBEDC to repair all infrastructure, including wires, poles, transformers and whatever is necessary to do. Customers are never part of the bills, it’s the duty of IBEDC to provide those things. But, what are we getting? If you go on the road to Lagos now, almost all the railings there, people have vandalised them, yet, people will say it is the duty of the federal government to put new rails. How many times do you think the government can continue to put these and people will carry them? This is the only country I see that public assets are being vandalised and taken away and sold back to the same public and we buy them again.
The rate at which our equipment are vandalised, it is impossible for us to meet up with the replacement, bearing the circumstances that surround this business of money not coming in. There are places you put new cables and in less than two weeks, they say that some thieves came in the night to remove them. Let us face reality, it is impossible for us to meet up all the obligations. I grew up in a village where we did all our electrification by ourselves, our waterworks we did by ourselves, the pumping and the laying of the pipes, we did, because such tasks are part of African culture, and I think this culture must have translated to people coming up to say we know you just change this thing last week, we will rise up to the occasion, because, when we use our own money, we must watch over such things.
A lot of people come up by themselves to offer service to their own communities to their own benefit when it is impossible for us to meet up the timeline.
As I said, we have the R-1, R-2 customers that pay less than the cost that we pay, can that takes care of about 62 percent of our running cost? In the real sense, who is paying for doing all this losses? The person I’m supplying power and I know I’m already losing money, even if he pays me back 100 percent, I’m still losing money, and yet, your transformer is damaged and you come and I say I must come and repair it, from where will this money come from? So, it’s a big task and that is why I said there are regulatory issues that we need to concern with, because when the business itself is not cost-effective, then it’s a problem.
Do those equipment bought by customers remain IBEDC properties?
If you do an infrastructure and you want to hold on to it, it means that when there is a problem and you need to change things, then, it is your own to address it. But, it’s not profitable if you ask me to do it. Even if you do it and bring it to me, it might not even be an asset; it could even be a liability, because there are a lot of transformers that cannot pay for themselves. Every energy coming out from that transformer cannot even pay for itself, let alone my own cost.
So, when people construct equipment and say it is for public use, what are you saying? You can’t say it’s for public use and still want to hold on to it and when there is a problem, you want IBEDC to come and work on it. So, those who do it will agree from day one; is it your private equipment so that we don’t go there, or if you’re donating it as part of public use? Then, in that case, we have to take it over.
One of the major outcries of people across the country is estimated bills. How is IBEDC confronting this?
This business is no business without meters. It is in the interest of the business itself to meter, it is totally not in our interest not to meter. People talk about estimated billing, I can tell you, estimated billing is not even favourable to us, because, at the end of the day, we are still collecting only half of what we are getting. It’s really not an issue. But, we have worked with the regulator to agree that metering can be taken up as a separate business, and therefore, they’ve introduced what they call Meter Asset Provider (MAP), where third parties provide metering facility and it is very easy to deal with. All you need do is fill the form and the next thing they do is to come and assess your property and determine whether it is single-face you need or three-face. Once that is done, within a week, you’ll get another message for payment. If you cannot pay once, you’re free to restructure your payment over the years, but with additional 21 percent charge.
What I will advise all our customers to do is to please, key into this MAP program and get meters, because, if you don’t get meter, you cannot be using electricity free and will not be estimated. Estimated billing is not good for us, it’s not good for the business, we will advise all our customers to key into MAP scheme.
Who are Meter Asset Providers and are they meeting their obligations under the scheme?
We went into contract with NERC-approved Meter Asset Providers, we went through the due process, and we have seven people approved. We have contract with seven Meter Asset Providers to supply us. So, we’ve distributed the various business units to the people, because, if you choose only one, he might not have the capacity, so, we try to make it sizable.
People are buying into it, but it’s very slow. I think majority of the people felt that government propaganda before is that meter is free. The first month that we began, we registered more than 38,000 customers, but, when it came to the point of paying, they were saying they thought it’s free and if it’s not free, they don’t want.
As we speak today, we have only about 10,000 that have been fully metered. It took time to garner speed, but it’s gathering momentum now and I believe in the next three years, everyone will be metered.
There is allegation of non remittance of about N231 billion by Discos, is that true?
It’s correct to an extent, but it may not be true in terms of why it is correct. When I told you about funding gap, as we speak today, there is nowhere we can meet the funding gap. You give me a bill of N9 billion and we generate about N5.2 billion, if I keep going to the bank every month, after two months, they will say no, you have not paid the one you borrowed. So, we cannot give what we do not have, that is just the truth. Even the regulators know that we do not have. It’s just that people tend to pretend they don’t know what is happening in the system, so they can go to any length to say Discos are not remitting, Discos are stealing money.
We have three auditors that come to audit us, NERC will come and audit, BPA will audit and we have internal auditors that also audit us. Why have they not found anything grievous against us? You can’t steal such money and people won’t know. Is it possible for me to take N100 million to the bank today and the bank will say they are not aware? The bank is fully aware of even N1 million.
We are not in a position to remit the full amount, that is true, but it’s is not true that we don’t have the capacity to pay because we are siphoning money. The money is not there and we can’t give what we don’t have. We don’t even have money to do a lot of planned programs. All our staff need training. Our staff studied Electrical Electronic, but they are not useful in this industry, so we had to retrain them all over again. And we have a lot of dilapidated structures that we need to deal with.
You have expressed so much concern about the financial constraints deterring the progress of the industry. Are you making any profit at all and can you share the level of your indebtedness with us?
No is the answer, total loss with no profit. There is no Disco in Nigeria today that is talking of making a profit, due to the fact that there is an inherent tariff shortfall that. For example, 2017 tariff is what we are using till today, no change in the tariff despite the fact that the economy has changed. The tariff we are using today is based on the exchange rate of N197, whereas we can’t even get it less that N360 for a dollar, and some of the bills sent to us to pay are denominated in dollar, which we cannot transfer to the consumers. So, we don’t even have enough to break even, not to talk of making profit.
Are there other creative ways through which you can bridge the funding gap?
All over the world, seeking for fund is almost the same. They look at the cash flow of the company. You cannot get money anywhere if the cash flow book is in red. If I take my balance sheet to any bank now, I don’t need to see the manager. The gateman there will just tell me the manager is not around! They won’t even allow me to see the manager. So, there is no way to raise funds in an environment of total loss. There is no Disco today which account is not qualified. No investor will want to put his money when he sees that your account is in the red. That is the problem. But, as I said, the regulators are trying to resolve that matter by going through the business plan for everybody and see what the market looks like in the next five years. By the time we finish and they come back, we expect that some of those debts that are not due to Discos but due to the system that is not working well, will be discounted off and then we can say that we have a balance sheet that we can carry about to look for funds.
The other ways of getting things is to get out of the regulated business. For example, if I can get an investor that will generate funds and we just negotiate and they do what we call public buyer, public seller. I’m sure you heard of what Ikeja Disco is doing in Ogudu and Magodo in Lagos, it’s because they operate unregulated business. We too would have done the same, but we don’t have the facility.
Is it true that there are bad eggs in your organization that extort money from people and if true, what are you doing about them?
In every organization, you have bad eggs, but we have zero tolerance for corruption. I think in the last four years, we must have dismissed nothing less than 110 staff. Even when some of them take us to anywhere we told them this is a performance-driven company and we do not allow corruption to enter into us because we are already losing money, and when corruption enters, it will take everything away.
What initiative have you put forward to develop your human capital?
Everybody knows that to run any business, human capital development is about the most important. If your human capital is deficient, you’re running a bad business. We have identified that and we have a lot of programs for developing our staff. We have a training school where we conduct regular training, especially in HSE (Health, safety and environment), because, if you don’t do that, you’ll notice that somebody will be dead almost every three months. We’ve not had more than one casualty in the last seven months, which to us, is still too many, because, it’s zero casualties we are struggling for. Right now, there is a lot we are doing on HSE, no staff without some form of HSE training.
We do not limit it to HSE, even technical courses, both at home and abroad, because, we may not have the technical capacity here to train on certain things. So, wherever we find it, we send our people there to go and train, because along that path, they are going to mix up with more industrialized nations. That way, they will acquire something different from what we are doing here, whether in admin, finance, audit.
Some were staff rewarded for sterling performances?
This job is performance-driven. When it is performance-driven, it’s easy to see where weaknesses exist. What we do is every month, we evaluate the performance of staff and we allocate some resources and responsibilities. We started a system where we recognize those who have met their performance target in various ways. For example, there are some who go as high as 120 percent of their target. Those ones were automatically promoted. Those who met theirs 100 percent,we give them payment, those who made anything 80 per cent and above, they get some incentives in terms of other training programs or we give them extra money to develop their own infrastructure to bring them better service. We remunerated them in different categories. Almost 108 staff benefited from upgrading and another 58 benefited from other incentives.