Electricity: No crazy bills, customers don’t understand the costing

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 pay N1000 and N2000 for electricity.

Cost of running electricity
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 purchaseagreement
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.