Engineer Fortunato Leynes is the Managing Director and Chief Executive Officer of Ibadan Electricity Distribution Company (IBEDC) responsible for distributing electricity to Oyo, Osun, Ogun, Ondo, Ekiti, parts of Kwara, Kogi and Niger States. In this exclusive interview with OLAOLU BILAU, he speaks on challenges of power distribution, the current electricity tariff in the country, low level of supply from the national grid, the issue of prepaid meters among others. Excerpts:
State of Electricity Facilities When IBEDC Took over
When we took over the company, electricity facilities, I would say were in very bad condition, unfortunately, we could not do any immediate, major improvement as the available financial resources are not that big, we do not have enough money so to speak because of the high losses in the company, what we call technical and commercial losses that is practically mainly driven by these directly connected customers that are not being captured into our system and the high collection losses because there are a lot of customers that do not have meters, many of these customers do not want to pay because they are saying they are getting what they call crazy bills.
That compounds our problem in terms of getting enough cash from our customers for us to be able to finance all our expenses. We have to pay the market operator, pay the salary of our employees, and we also have to support the day-to-day operating expenses of all the officers here at the headquarters, in the 22 business hubs and centers.
Those things plus the lack of supply from the national grid further compounds our problem because when there is load shedding and our marketers are out to collect payment from our customers, because there is no light due to load shedding, people don’t want to pay. So, those problems taken together are quite a challenge that we have to manage.
Installed Capacity, Current Tariff
What we are getting in terms of allocation is 13 percent of the national grid. The estimated unconstrained demand, meaning if there is no shortage in capacity, all lights are on, all machines are running, the estimated requirement of the whole of Nigeria stands at around 9, 000 megawatts.
However, the available supply is at best right now 4, 000 megawatts that means more than 50 percent shortage is being experienced all over the country. The next problem that we are having is the high losses that is, technical, commercial and collection losses and the most critical also is what we call the incorrect tariff; the tariff given to us by the regulator, the Nigerian Electricity Regulatory Commission (NERC) are not cost-reflective, that tariff is not sufficient to provide the required revenue for us to support all our payments to market operator, payment of our salaries, operating expense and money to put into capital projects; to finance improvement of our facilities: buying new meters, transformers, poles, buying wires and vehicles that we need so badly to work more efficiently.
IBEDC Added 80, 000 New Customers
Little by little, our business hubs are doing their own enumeration and in the process we were able to put into the system about 80, 000 new customers from the time we took over the company, except that of these 80, 000 only about half were provided with meters. We were able to provide half of these meters because we went out full blast to encourage all our customers to apply for meters under the credit advance payment. When the customers are putting up the money to buy the meter they are advancing the cost of the meter, in the process, IBEDC will refund to the customer the cost of the meter on installment basis in not more than 36 months or three years and we also pay an interest in our refund to them and the refund is through additional credits of electricity units.
Getting Prepaid Meters is Much Easier Now
Soon, we’ll be coming out with adverts on how to apply for pre-paid meters. What our customers have to do is visit our business hub, fill out the form and go to the bank to pay for the cost of the meter. If it’s a single face meter, it is less than N35, 000 and 3-face meter is N50, 000. When they pay this initially, we will be refunding the cost of the meter through additional credit in the electricity unit when they top up their prepaid meters, It s much easier now.
We are still in the process of buying meters, our requirement for new meters is about 170, 000 meters and the cost of that is more than N4billion. It’s a huge amount and we have to take a loan for that. But just to fast track so that our customers have no problem of this crazy bills, what you can do is visit our business hub fill out the form, go to the bank and pay for the metering cost and installation and then submit to our office the proof of payment and then we are promising that within 45 days the meter will be installed.
Discos Problems with Banks
Banks are not that fast to give us money because they want to see our bottom line, our forecast cash flow and because of this incorrect tariff, we are having a difficult time convincing the banks that only if enough money were given to us to finance our purchase of meters, transformers etc that more customers can have power even, improve our cash flow. It’s like chicken and egg. Give us the money for us to prove to you that we will earn, but the banks will want us to prove to them that we will earn before giving us the money. So, you see our difficulty in getting the financial support that we need. But now things are getting better in terms of relationship most especially that our chairman is also chairman of Skye Bank.
IBEDC’s Current Installed Capacity
Our installed capacity if we will be taking power from TCN is at the level of about 1,500 megawatts or 1, 500, 000 kilowatts and our unconstrained demand based on our analysis, assuming there is no restriction or constraint in the supply of power, if all lights are on, all machines running, is about 800-850 megawatts coming from TCN. However, at the current level at best we get only 400-450 megawatts of power from TCN because of deficiency in the generation from the national grid.
In Nigeria, there is a lot of potential for growth, particularly in the power sector. Nigeria has a lot of room to grow and once the power supply condition has improved: more generators were put online, the transmission facilities improved, while at our end we are also trying to reinforce our network so that we will be able to take as much power as our customers need.
We Lighted up More than 100 Communities
Last November in commemoration of our first year anniversary, we lighted up more than 100 communities. We installed at least two new transformers in the 22 business hubs, so that’s 44. So that’s like giving back power to more than 100 communities. We are going to install additional transformers to bring back smiles to the faces of our customers. This year hopefully, at the latest may be May of this year we would be able to completely replace all those damaged transformers. What was reported to us was close to 300 transformers burnt. Last year, we installed 44, last December another 15, we are going to install another 200.
We Are Enhancing our Human Capital
We are further assessing the qualification of our employees engaged by the old company and we are also hiring new ones to complement our workforce and we already provide training for our line men. Right now we are training our engineers on meter inspection so that they will be better equipped to identify the anomalies in our meter installation. We also had training in customer service and we have lined up a lot of training programmes to really enhance our human capital.
Current Electricity Tariff Unsustainable
All the distribution companies have already raised an alarm to NERC that the tariff we get from them does not sustain our operation and if they do not give us the right support in terms of correct tariff, we will all die and once all the distribution companies fold up, then, we will be back to square one. I know that NERC is cognizant of our challenges, at the same time NERC has to play a very good balancing act; making our business sustainable, but at the same time, making the customers satisfied with the tariff they propose because people are saying, if only I have power, I will pay my electricity bill, just give me power. And that’s a challenge.
Assurances for IBEDC Customers
Because we are foreseeing that not too many additional power will be coming from the national grid, to put additional megawatts into the network in our company we are now in the process of putting up what we call embedded generation. These are small generating stations that can be put up within our distribution network to add more power so that our customers can have more hours of electricity. In fact, we are now in the process of raising the Expression of Interest from 65 companies, who want to put up the embedded generation within our network and once we complete that, we would be able to at the very least, provide more hours of electricity to our consumers.
We are working hard to be able to deliver the best possible customer service because we want to change the lives of our customers because that is our mission: distributing power, changing lives and we can do that through better customer service.