Here goes....

Why don’t we have light?

A thread

It is a spiderweb.

So the Nigerian power sector is like many others in terms of how the product(energy/electricity) is moved from source to final user, you have your:

Manufacturer/ wholesale (Gencos)
Distribution(transmission)
Retail(Discos)
Final consumer (you and I)

Gencos are power generation plant like Egbin power plant, they run on fuels/ steam engines.

Transmission is handled solely by TCN. And their job is to increase the voltage of the power and send it to the discos .

And then you have the discos like
Eko disco and Ikeja Electric

The tariff that you pay for your electricity is set by NERC. They set the different prices depending on the amount of power you consume, where you live, transformers etc.

There is something called ATC & C losses that is a key factor in the value chain. This stands for aggregate technical, commercial, and collection losses.

It is the difference between energy injected into the system and the energy for which payment is made.

Imagine you are an ice cream seller and you are delivering ice cream in the hot sun. Some of it melts on the way to your customer and they tell you they are only paying for the frozen part, that melted ice cream would be your ATC & C loss.

Technical losses are incurred when the electricity is moving across transmission lines, typically there are losses and it’s a power company’s job to make sure they are as low as possible, think of when you drink Capri sun or Ribena and there is some residue in the straw.

Commercial losses are vast, and be anything from billing errors, meter misreadings, meter bypassing, illegal reconnection and even straight theft.

Collection losses are losses incurred when someone on a postpaid meter refuses to pay for their bill. Either because they feel they are being over charged, cannot afford it, or just refuse to. This often results in your Disco cutting off your power supply.

So the goal of every disco is to reduce these losses as much as possible so they they can at least recoup their money spent, the reason why a lot of discos aren’t profitable is because they cannot minimize their ATC & C losses.

Now remember the value chain and think about how revenue will be paid from one part of the value chain to the next. It is typically:

End user disco
Disco transmission
Transmission Gencos

Remember, these losses start from the Gencos, but the first to receive

Payment are the discos, will that disco be able to pay in full when they have not maximized their own revenue? Will the transmission company be able to pay the generation company in full?

If no one can maximize their revenue how can they cover costs? And distribute more power?

Issue 2

Everyone has been complaining about NERCs increase in power tariffs, and while I agree that the timing could be better, the current power tariffs are not cost reflective for distribution company’s.

That means that even if their ATC & C losses are 0%, the tariff prices will not be able to cover all their costs of doing business. And there is no power subsidy like there is or was in the oil and gas sector.

So when the tariffs are not even cost reflective, why will the discos and transmission companies spend more money upgrading the infrastructure to become more efficient?

It would only make sense if they could increase the tariffs right? Which is what Ikeja electric is doing

With premium power, if you speak to anyone who lives in magodo estate, they will tell you they get about 20-24 hours of light per day. And their increased tariff is still cheaper than alternative means of power.

What you will see over the next few years is more initiatives like this, where people that can afford power are the ones getting most of it. 80-20 rule.

I am sure a question that a lot of you reading this have is “why can’t everyone get prepaid meters?”
At least that way, you pay for power before you get it, and you are completely responsible for what you do with your power!

The issue is that pre paid meters are expensive, who is going to pay for them? Is it the discos? End users, government?

They are also not produced in Nigeria and typically cost around $100, what happens when the naira gets devalued as it usually does every few years

and the price doubles? These are some of the difficulties that a nationwide pre paid meter scheme would present.

In summary:

Outdated infrastructure with no one investment for upgrade

Atc&c losses

Metering

Lack of investment in the sector

Non cost reflective tariffs.

There are a few others but these are some. It’s a huge spider web!