Updates on Nigeria Energy Sector Development and Reforms

Transcription

1 NARUC/Nigeria Electricity Regulatory Partnership Updates on Nigeria Energy Sector Development and Reforms DUBAI, MAY 5,

2 Outline Status of ongoing Power Sector Reforms: Why Reforms Objectives of Reforms Implementing Reforms Reform Expectations Where we are Impacts of Power Sector Reforms on: Service Quality Reliability, and Rates Challenges Future Prospects Highlight on Public Perception of the Power Sector NOI Polls Conclusion 2 2

3 Why Reform Some Characteristics of NESI Pre-reform: High Technical and Non-Tech. Losses (estimated at 45-50%). Low generation, transmission and distribution capacities (about 2000MW). Large No. of employees (over 47,000 in the industry). Poor maintenance culture. Frequent power outages. Insensitive to Customer Issues Lack of commercial orientation. The sector not commercially viable. No audited financial statements. 3 3

4 Objectives of FGN Power Reform To attract private investment into the Sector. To reduce the cost of doing business in Nigeria through provision of quality and dependable power supply for industrial, commercial and socio-domestic activities. To improve the efficiency of the generation, transmission, distribution networks and utilization of electricity. To provide Nigerians with basic and affordable infrastructure/facilities to enable them create employment for themselves. Creation of an electricity market that is private sector driven. 4 4

5 Implementing the Power Sector Reform Reform Era: NEPP was approved in October 2000 thereby paving way for the Reforms of the power sector. In 2005, the EPSR Act 2005 was passed by the National Assembly, which led to: o Unbundling of the state owned power entity (NEPA) into 18 Successor Companies (SCs) and transfer of PHCN assets to the new SCs; o Establishment of the Sector Regulator, REA, NBET, NELMCO etc; o The evolution of a market trading design and new rules such as MR, Codes, Regulations and Processes; o Handing over, in August 2012, of TCN to a Private Management Company, (MHI). o Privatization of the sector (New owners took-over on November 1, 2013). 5 5

6 EXPECTATION Reform Expectations Increased Access to Electricity. Increased competition. Increased Capacities and operational efficiencies in generation, transmission and distribution. Improved Customer Service Standards. Increased Consumer protection via Nigerian Electricity Regulatory Commission (NERC). As the industry tariffs are stabilized over a period, there would be tariff reduction in real terms. Better standards of living. 6

7 Where we are S/N DESCRIPTION STATUS 1 Moving into the Transition Electricity Market (TEM). 2 Open access to transmission and distribution wires, and the ability to trade power between buyers and sellers in an open market, are critical to achieving a competitive framework. 3 Developing Tariff Methodologies and setting Cost Reflective Tariffs for the NESI. On February 1, 2015 Ongoing Ongoing 4 Development of the Grid Code. Developed, issued operational and 7

8 Where we are 2 S/N DESCRIPTION STATUS 5 Development of the Market Rules. Developed, issued and operational 6 Development of Distribution, Metering and Safety Codes. Developed, issued and operational 7 Development of SO and MO Systems to ensure smooth operation of the electricity market in TEM. Implementation progress 8 Development of Consumer Protection Regulations. 4 Regulations developed, issued and operational 9 Development of NESI Monitoring Framework. New Framework & KPIs Developed in 10 Development and implementation of Bulk Power Procurement Guidelines. Developed implementation progress 11 Government Intervention to support Operators In progress and in 8

9 NIPP Plants (Geregu, Alaoji, etc.) TEM Trading Arrangement Sellers PRIVATISED SUCCESSOR GENCOS Existing IPPs (Kainji, Shiroro, Egbin, Afam, Geregu,etc) Future IPPs The TSP PPAs System Operator SPECIAL TRADER Nigerian electricity Bulk Trading Company plc Bilateral Contracts Market Operator Vesting Contracts Buyers DISTRIBUTION COMPANIES Abuja Benin Eko Enugu Ibadan Ikeja Jos Kaduna Kano Yola PHC 9 9

10 Impacts of sector reforms On Service Quality and Reliability Although the Reforms have brought about some positive changes such as attitude to work, slightly better response to consumer issues, hope for the consumers, generally the sector has not yet witnessed the much anticipated improvement in quality of service and reliability. A lot of work is being done by some of the Gencos, TCN private management and Discos to reduce outages and improve supply voltages. The SO is working to procure from the Gencos adequate ancillary services such as black start capability, Primary and secondary reserves such as online response to frequency (regulating reserve), spinning reserve and reactive power compensation. These ancillary services will ensure the stability, quality, reliability and security of supply to Customers. 10

11 Impacts of Sector Reforms On Service Quality and Reliability TSP is working to install more system compensators such as Capacitor Banks, Reactors etc. at some strategic nodes to help improve voltage quality of electricity supply. TSP is also working to improve the transmission system protection coordination and SCADA / Communication facilities. When this is completed, it will enhance the reliability of the transmission system to a great deal. Better coordination and system load management has been introduced by the SO to ensure balance between generation and load (frequency balancing). The Commission has developed 4 Customer Regulations to ensure Customer Satisfaction: Customer Complaints Handling: Standards and Procedures Regulations. Regulation on Procedure for Disconnection of Customers. Regulation on Customer Services Standards. Meter Reading, Billing, Cash Collections and Credit Management for Electricity Supplies. All of these are expected to impact positively on Service Quality. 11

12 Impacts of Sector Reforms On Rates The Reforms have brought about the creation of NERC that is responsible for tariffs and to a great extent this has impacted positively on the comfort needed by investors. MYTO was developed to provide comfort and assurance to attract private capital into the sector. NERC has made frantic efforts using MYTO to ensure that tariffs are cost reflective. NERC in liaison with other Agencies is working to provide better incentives to investors in the power sector which is expected to cushion the impact of the rise in tariffs. 12

13 Challenges Securitization of PPA between the Gencos and NBET as the Envisaged World Bank PRG has not fully materialized. Till date only one major PPA major with AZURA was signed based on project financing. Unable to attract more private funds. Inability of the new owners of the Gencos and Discos to invest in the system and increase capacities. Consumers still facing serious outages and unsatisfactory performance. Gencos are not incentivzed enough to provide Ancillary Services to improve Reliability and Quality of power supply. Fuel supply to thermal power plants is still under serious threat; vandalism and inability of the Gas Suppliers to make available gas to the power plants despite the upward review of the gas tariffs. Generally, Slow pace of development of power infrastructure. Although the electricity market is in TEM since February 1 st 2015, some (about 4) Distribution Companies are still unable to post LCs as required by the Market Rules to enable them participate in the market. Inadequate metering of consumers. Audit of CAPMI is ongoing! Monitoring is still ineffective and inefficient. Although about to engage inspection firms to support the Commission. Regulator being influenced by Government thereby increasing political risks. NEMSA Bill is under consideration by the National Assembly threatening the existence of the Regulator. 13

14 Prospects for Future Developments Although there are still very serious challenges in the NESI, there is a promising future prospect. During TEM, Medium Term and Long Term stages, it is expected that the electricity Market is characterized by rules and contracts. Therefore, compliance with the Commission s rules, regulations and standards including reliability and quality standards would be greatly enhanced. Furthermore, as the market develops and becomes more competitive, more stringent reliability and quality standards will be introduced and enforced. And, the consumers stand to gain from better service quality and competitive rates. We expect to see more investments into the power sector going forward after the Elections. 14

15 NOI Polls on Public Perception of the Power Sector Performance Including Reforms Source: NOI Polls 15

16 There is a high level of awareness of the ongoing Power sector reforms with almost 8 in 10 aware in the month of June Source: NOI Polls Nigerian Power Sector Poll Report, May

17 There is a poor level of perception of the privatization process with almost 4 in 10 Nigerians saying it is not transparent Source: NOI Polls Nigerian Power Sector Poll Report, May

18 Average number of hours of electricity supply (April - June 2013) Source: NOI Polls Nigerian Power Sector Poll Report, May

19 Almost 9 in 10 Nigerians use an alternate source of electricity (April June, 2013) Source: NOI Polls Nigerian Power Sector Poll Report, May

20 The cost of using alternate sources of electricity has increased drastically over the last year (June, 2013) Source: NOI Polls Nigerian Power Sector Poll Report, May

21 Perception of Power supply to households remains poor (trended over six months: Dec 2011, Feb 2012, May 2012) Source: NOI Polls Nigerian Power Sector Poll Report, May

22 Almost 9 in 10 Nigerian are willing to pay more for steady power (as at May, 2012) Source: NOI Polls Nigerian Power Sector Poll Report, May

23 Conclusion Although a lot of progress has been made in the reforms of the power industry in Nigeria, it is yet to impact positively on Service Quality as expected. Much is being done on development of rules, structures and processes by the Regulator and implementation by Operators to ensure improvement in Service Quality. Hopefully, Customers will start witnessing the impacts of these initiatives this Year

24 THANK YOU Adamawa Plaza, Plot 1099 First Avenue, Off Shehu Shagari Way, Central Business District, Abuja Website: