The Interview Editors
In this interview, the Managing Director of the Transmission Company of Nigeria (TCN), Usman Mohammed, takes a long, hard look at the power sector and carefully narrates the journey so far, and the miles left to cover. His insight is electric:
The power sector in Nigeria has remained stagnant for over two decades. Why?
I don’t agree with your statement that the power sector is stagnant. It has never been stagnant. There are several changes that are taking place. At least we have moved from a public monopoly to a largely liberalized sector.
That is movement. We have also privatised those companies. The distribution companies and generation companies have moved to private sector. This is movement. We are now at a time where private sector is generating electricity and they are selling to the grid. It is movement. We also have open access where you can connect to the grid. It was not like that before.
From the point of view of the consumer, is it not stagnant?
Even from the point of view of the consumer, I don’t think it is stagnant. There has been substantial increase in capacity. Look at the distribution company when this government came in; the capacity was not more than 3500mw.
And we recorded a combined effort of the generation, distribution and transmission companies of 5224 under this government. The first highest peak was in February 2016. We recorded the highest again in December 2017, which was 5224. That is also movement.
If you create that kind of law that you have completely stopped estimated billing, you are going to create so many court cases that will be difficult to manage. It is the reality.
You are saying 5224. Often, the Power Minister claims 7000mw. Where are these figures coming from?
The 7000mw the minister was referring to is the capacity of transmission and the capacity of generation. Even that one has changed. The capacity of generation now is 7450mw. The capacity of transmission is 8100mw. So even that has changed. It is not what it was before. When you say stagnant, it is not stagnant. Things are changing.
Since coming into office, you have had several stand offs with senior staff of the company. Is this affecting the operations of TCN and its ability to deliver its mandate?
If it has affected it, things would not have been changing. You know we have been expanding. Before TCN used to be the weakest link in the power sector value chain. Today, you can’t claim we are the weakest link.
Of course, we have not solved our problems, but everywhere we have a problem, we have a plan on how to mitigate that problem. You have to also understand that anywhere there is change, there has to be some level of resistance due to even communication problems.
For some of the problems, it is my fault that I didn’t communicate properly. But there was no shut down as a result of disagreement between union and staff. And if you look at that disagreement, it was actually between the national headquarters of the union and the branch. The national headquarters thought that TCN was supporting the branch. That is a misconception. But it has nothing to do with the management.
It appears that consumers are paying for the poor relationship and lack of coordination between electricity generating companies and TCN on the one hand; and between the TCN and distributing companies on the other. Is that you are incapable of transmitting all generated electricity?
Of course we are capable of transmitting all the generated electricity. But the problem like I said is that the power sector is a connected relationship where each one of the parties has to perform optimally, otherwise the other parties and everybody suffer. That is how it is.
If you have a generator that generates 20kva and the load inside your house is only 5kva, if turn on the generator, it will only generate 5kva. It will not generate 20kva. That is how it is. The capacity in distribution is only 4000 plus or 5000. All the capacity of the generation and transmission cannot be optimised.
You are promising to raise transmission capacity to 20000mw. Of what use is this when the country can only generate 4000mw.
In all the sectors, the most difficult to fix is transmission. Fixing distribution is very easy. The right distribution is five metres this way and five metres that way. It is very small. If you look at distribution equipment, many of them are manufactured here in Nigeria.
Now, for transmission, none of all our equipment is manufactured in Nigeria. That is one. Second, the right of way for transmission is 25metres this way and 25metres that way. And also, for 132, it is 15 metres this way and 15metres that way.
Right of way is also difficult to reach a consensus with people who are owners of property and land across the country. It is easier to build a generation plant now. Within a period of one year or six months, you be able to have them on barges, put them across sea and start generating.
But for you to build a transmission line, you have to do a right of way survey, pay people compensation and agree with them. If we decide to wait until distribution is fixed before we fix transmission, does it make sense? No. We should fix transmission and then distribution can be fixed.
And for your information, all the investors that are knocking on our door that they want to come to Nigeria, I can tell you, most of them are coming because they see transmission is being fixed. If you fix distribution and you don’t fix transmission, it is just a waste of time.
You know we outsourced the management of TCN to Canadians. Manitoba Hydro was the company managing TCN. The thinking was that Nigeria doesn’t have the capability to run the transmission. But unfortunately, Manitoba didn’t do well for the four years they managed TCN, they couldn’t do a single audit.
For those four years, they also had a competing management team. TCN still had a managing director. Wasn’t Manitoba frustrated out?
I don’t think like so. When I came here, there were also Nigerians here. The same people they claim were frustrating Manitoba. Were they not here? I worked with them from February 2017 until August 2017. I worked with the same team.
It was with them that we achieved frequency control of 49.5Hz and 50.5Hz, which had not been achieved in Nigeria for 20 years. Manitoba could not achieve this. It was with the team that we established Transmission, Rehabilitation and Expansion Programme, which we are implementing now. It was with them we started what we call in house installation.
So, if you say it was the fault of those people, are they not the same Nigerians that we have worked with? I can tell you, if they were still here, we would have continued to work like this and continue to achieve results. So, I don’t agree with you. If the head is rotten, there is no way things will move. That is the reality.
But how does the rural electrification fund come up? If you read the Act, it is stated clearly how those funds can come in. Those funding cannot come in because the market is not yet liquid. The market is not yet sustainable.
Over N700bn was provided to electricity generating companies as part of the power assurance guarantee. Is it fair to say the government is subsidising privately owned companies and is this sustainable in the long run?
Of course, it is not sustainable in the long run. But when you say government is subsidising privately owned companies, in utility, any money that enters utility, somebody has to pay for it. That is why even from the West African Power Pool, WAPP perspective, we took a decision in our last board meeting where we went to our general assembly and it was approved, and we sent it to the committee of heads of states for them to approve.
One of the directives we sent to the committee of heads of states was that government should provide revenue requirements of all the utilities, which means they should give tariffs that is cost reflective for all the utilities in West Africa.
Where government cannot agree to provide revenue requirements for all the utilities, then government should budget for the shortfall. So, I’m not saying N700bn is a subsidy. But I can tell you that if the government cannot provide cost reflective tariffs, then it has to provide any form of support that will make the sector to continue to work.
That is how utility works. If you put your money as a private sector investor, you have to get your money back. If not, you can’t make additional investments. It is either government or the regulator gives you cost reflective tariffs or the people pay.
GENCOs also owe gas suppliers billions in debt. Add that to money the government has so far spent on the power sector, would you say it was a mistake to have privatised the generation and distribution companies?
No. It was not a mistake. We did the right thing wrongly, particularly on side of the DISCOs. We implemented the correct thing wrongly. That is what I will just say. Now, for the generating companies, it is working.
Before the private sector took over Kainji, how many of the units were working? Now, if you go there, you will discover we have excess capacity there. How many units were working in Egbin before the private sector took over?
What about Delta, how many units were working? Many of them have put in so much money and they have rehabilitated some of those units. That is why we have excess generation as at now. If you look at what we have done, if we have met some problems with the privatisation, the option is not to cancel.
The option is for us to make it work. That is why you agree with the decision that this government took not to tamper with the privatization. If the government had tampered with the privatisation, there are two things that would have happened.
First of all, government will pay contingent liability which is a lot of money. Second, government will send a wrong signal to the market that it’s against the private sector. Whether we like it or not, there is nowhere we can have a sustainable energy sector without the private sector.
Now we have a problem, we have to fix the problem. If you look at transmission, was transmission like this before the coming of Buhari? No. Transmission was the weakest link. It was even weaker than distribution companies.
Is transmission where we expect it to be? No. But at least we have a plan on how to move out of this. If you look at this meter here (points to the metre at a corner of his office), it is the frequency metre. This is the first time that the MD of TCN would have a frequency metre in his office.
What does that say? As I am sitting here, I can monitor the quality of power that is transmitted in Nigeria. If the quality is deteriorating, you would see me making phone calls. I would even stop this interview and tell you I have a problem to solve. This is the frequency control.
Before the coming of this government, all focus was on the quantity of power. There was no focus on the quality of power. This is the first time that Nigeria has taken the broad step to look at the quality of power.
That is why we took a decision to enforce what is called the free governor control in May 2017. When we enforced it, people said it was going to be temporary. It wasn’t going to last long. But we sustained it.
We achieved frequency control of 49.5Hz and 50.5Hz for 90 per cent of the time from May 2017 to November 2018. And from November 2018, we took a decision to take the next step. We now moved to enforce the NERV standard which is 49.75Hz and 50. 25Hz. From December 23rd till date, we have enforced 49.75Hz and 50.25Hz for 80 per cent of the time.
This is the first time in the history of Nigeria that this thing has ever happened. And we have not stopped at that. We have also enforced the WAPP grid code of 49.80 and 50.2 Hz for 65 percent of the time, which means we are at the same level with Ghana as at now. This is what we have done, some things have changed. It is not that we have remained stagnant.
If the price is to increase the tariff so that the market can become more sustainable, it should. In any case, the market is supposed to be driven by competition.
Why hasn’t all you are saying translated into more electricity in most people’s homes?
There is more electricity in people’s homes. There was a survey that was done recently by Channels TV and it indicated that from Nigerians asked about improvement in quantity of power, 73 per cent said it was positive. They have seen the improvement.
So, we can’t say there has been no improvement. And if you look at the bureau of statistics, this last report they released, they recorded 18 per cent improvement in power. Even on the distribution side, there has been improvement. It is only that the movement on the side of distribution is not to the extent that we expected. We need more resources on that side.
TCN is the only successor company of PHCN that has not been privatised. Why not?
I don’t know. Do we privatise for the sake of privatisation? There was an objective why the government did not privatise it at the time. But let me talk about models. Which model are we using to privatise TCN?
If you look at the Indian grid. Even with the achievement and the development of India, the grid is still 100 per cent owned by government. And Indian grid has a capacity of at least 320gw. What about in South Africa, is it owned by the private sector? No.
What about the grid of Egypt; Gridco of Ghana; or the grid of Côte D’voire? It means the grid can be managed by the public sector properly. It can also be managed by private sector properly. If you look at countries like America, there grid is in the private sector.
There are grids that are in the hands of the private sector and there are those in the public sector. All of them are working. But if you look at the current challenges that we have in the system, our biggest challenge in building transmission infrastructure is right of way. I can tell you, it would be difficult for the private sector to manage the right of way for infrastructure.
Even as a government where they don’t see a profit motive behind, there are difficulties. If it is the private sector coming with a profit motive, how will it work? Maybe going forward, of course we can outsource optometrist of our non-core essential services to the private sector to do it if we have the revenue to manage it.
But to say going private, as at now, I don’t know. The government can take a decision, but I don’t think it is the right thing to do. I don’t see the private sector acquiring the right of way easily and building transmission infrastructure.
Even the distribution companies that are there now, we have had to assist some of them to get right of way. Given our socio-cultural situation, people believe the elite are just reaping and enjoying and others are left behind suffering. In fact, even the Federal Government cannot easily build transmission successfully without the collaboration of state governments.
TCN has been spending millions of dollars to expand and rehabilitate its infrastructure. Is the company investing in the wrong places, particularly where distribution companies have no interest and are not profitable?
I don’t think distribution companies have no interest. If they have no interest, I don’t think they would enter into the business. They have interest in where we are expanding. Let me also tell you, the transmission, rehabilitation and expansion programme is based on a study.
There was a study that was carried out. That study was delivered by us. It is also one of our achievements. It is the first time in the history of the power sector. We are not expanding randomly. We are expanding based on a study and based on need. And the need was established based on that study. We are bulk transmitters of energy. We are not distributors of energy. You have to take note of that.
We recorded a combined effort of the generation, distribution and transmission companies of 5224 under this government. The first highest peak was in February 2016. We recorded the highest again in December 2017, which was 5224. That is also movement.
Whose need is it based on, the distribution companies, the transmission company or the consumers?
It is based on demand. There is what you call load demand study that indicates for example the load requirement in a particular place. There are so many people that are not connected to the grid. NNPC is not connected to the grid. CBN is not connected to the grid. But we believe that when we improve the quality of power like we are doing now, they will come to the grid.
So, the expansion of the grid is based on the load requirement whether it is connected to the grid or it is not connected. We believe that once the grid is stabilized, there is no way anybody can get cheaper power than what is on the grid. All those people will be connected and that is why we are expanding to put the necessary redundancy, taking into account all the stranded demand.
Many consumers still do not have metres and get estimated bills instead. And the DISCOs seem to like it that way. Is the National Assembly right to push for the criminaliSation of estimated billing?
I don’t know whether that will work because we have a lot of options inside the existing law to make things work. But if you look at what NERC has done, I think that has also made the action of the National Assembly unnecessary.
If you create that kind of law that you have completely stopped estimated billing, you are going to create so many court cases that will be difficult to manage. It is the reality. What do we need to make sure that metres are available?
Metering is a business that can be franchised. Anybody can do it. If you get somebody, licence him and make sure the metres he brings are compliant with requirements, and put them in front of Abuja DISCO; people will come and buy the metre. Don’t you think so?
What NERC has done is that since the DISCOs have no motivation or they don’t have the money to provide the metress, NERC has now licensed metre service providers which they call MAP. You can go and apply for the licence. You will supply metres.
You will be allowed and you run the metre as a business. DISCO are obliged, since it is a regulation to allow you to do that. Very soon, you see metres all over the place. That is the intention and that is what NERC is doing.
Before TCN used to be the weakest link in the power sector value chain. Today, you can’t claim we are the weakest link. Of course, we have not solved our problems, but everywhere we have a problem, we have a plan on how to mitigate that problem. You have to also understand that anywhere there is change, there has to be some level of resistance due to even communication problem.
There is a perception that the National Electricity Regulatory Commission is not protecting the interest of consumers. Is that so?
I don’t think so. If the regulatory commission is not interested in the right of the consumer, why did they come up with metre service providers? They started talking of metre service providers a long time before the National Assembly thought of criminalising estimated billings (crazy bills).
The only thing is that regulation requires a certain level of consultation. For anything you want to come up with, if you don’t follow the consultation procedure and you go and declare anything, somebody can go to court and render anything you do useless.
If you remember the tariff of December 2015 was challenged by somebody in court. And on the basis of lack of consultation, they got judgement. So, the reason it has taken time is because NERC did extensive consultation to ensure there is no mistake. It is not that they have abandoned Nigerians to estimated billing.
In the past rural electrification was central to government’s development plans. Today, with private companies setting the agenda, many in the rural areas can’t afford to pay the current charge for each unit of electricity. Is profit the only criteria in deciding who gets electricity?
No. Rural electrification is supposed to be funded through a certain way. Unfortunately, that funding can only take place when the power sector becomes sustainable. There is what they call rural electrification fund, which is also supposed to lead to the development of a rural electrification strategy, which in turn is supposed to be approved by the president.
That has been approved. But how does the rural electrification fund come up? If you read the Act, it is stated clearly how those funds can come in. Those funding cannot come in because the market is not yet liquid. The market is not yet sustainable. That is the problem.
As soon as the market becomes sustainable, it is not only rural electrification, there is also what is called the Consumer Assistance fund. It means that even in the urban areas, you have the urban poor who cannot afford electricity. They are supposed to be catered for by the Consumer Assistance Fund.
The rural electrification fund is to take care of poor people in rural areas while the consumer assistant fund is to take care of poor people in urban areas. All these cannot be operational unless the market becomes sustainable, meaning the market can pay itself.
Within a period of one year or six months, you will be able to have them on barges, put them across sea and start generating. But for you to build a transmission line, you have to do a right of way survey, pay people compensation and agree with them. If we decide to wait until distribution is fixed before we fix transmission, does it make sense?
The generating, distribution and transmission companies all complain about the tariffs. Yet Nigerians pay one of the highest tariffs in the world for electricity. Do you think the current tariff needs to be revised?
How did you come with the conclusion that Nigerians pay the highest tariffs in the world? I am the chairman of West African Power Pool, and I can tell you Liberia, Sierra Leone, buy energy between 20 and 25cents per kilowatt-hour. So how can you say our own is more expensive.
The highest, the most expensive generation that we are crying of is Azura. It is either 10 cent or nine per cent per kWh. And we are crying that it is too expensive. There are countries buying at between 20 and 25cents/kWh. So, how can you say Nigeria is the most expensive?
It is not even one of the most expensive because if look at it, somebody is even buying at three times our price. You look at the average of our generation, if you look at the hydro, their tariff is around four cents or five cents. Now if you look at places like Agip and Shell, it is around five cents also.
So, if you do the average, the total energy of Nigeria is six cents per kWh on the generation side. So, you can’t say Nigeria is the most expensive in the world. Even if it is, what is the option of no electricity?
You go to all those mini grids that people are subscribing to, how much are they paying? Sometimes, they are paying up to N100 per kWh. If you look at those that are generating electricity by themselves like Hilton, most of them are generating at a far higher cost than what they are getting from the grid.
If the price is to increase the tariff so that the market can become more sustainable, it should. In any case, the market is supposed to be driven by competition. We are not yet there. Let me also tell you, when MTN started, was the price not very high? The price was very high. When investment came in, it crashed the price and it became very sustainable.
The power sector is the same thing. At the initial stage, there will be a lot of losses and the cost will be high. When we allow competition, and competition will mean that Abuja DISCO can contract energy with anybody it wants to contract, and people will be given the option of whether to go on the grid or off the grid, to pass through disco or to build their own line.
You will discover that the cost will crash. But that will not happen unless we have cost reflective tariffs. And cost reflective tariffs include the current inefficiencies that are in the system, unfortunately.
That is why we have what is called a performance-based contract. That means when the term is declared, the DISCOs are supposed to reduce the aggregate technical and commercial losses for a period of five years.
