Nigeria’s nascent power firms are facing a new and dangerous problem.
Historically, political and infrastructural issues have plagued the electricity sector, but this time around, a dangerous market problem is surfacing, which is trouncing all other problems the sector has faced in the past. Customers are not paying for the power they consume, and as a result, electricity firms are facing huge revenue problems.
Increasingly, power firms have been reporting mounting commercial and collection losses, as their revenue is failing woefully to meet up with targets.
The firms are grasping for breath and they might not be around for too long if the current conditions persist.
The problem in the electricity sector has clearly moved from the supply side – providing electricity for the masses, to the demand side. The challenge now is in collecting the money from those who already access electricity.
Information from a source familiar with disco operations suggest that prepaid customers are posing a greater risk. The source claimed the number of prepaid customers who have not bought energy in the last 6 months range between 20,000 and 60,000 on the average depending on the particular Disco in question.
According to the Discos, this data point to an even more sinister problem. Some discos do not even have the resources to determine if their customers have not bought energy because they are yet to exhaust their usage, or if they have not bought because they have bypassed their meters.
Prepaid customers bypass their meters by either breaking them and connecting their entire energy load directly, or connecting equipment with heavy connection directly and thus increasing the losses Discos incur.
The fact that these 20,000 – 60,000 customers had not bothered to recharge their electricity accounts in 6 months, while still having access to electricity means that they have been gaming the system.
The numbers are even more gory is places like Benin, Kaduna and Zamfara. At some point, even the Federal government (its agencies actually) did not pay for electricity.
While the distribution companies are striving to roll out prepaid meters in batches to end the estimated billing that customers have been bitter about, there is now the genuine fear that the more the customers migrate to the prepaid metering system, the higher the potential energy losses and commercial losses the Discos will face.
And the losses piled up by the Discos is cascading down the entire electricity value chain, right down to the point of power generation and gas supply.
“If you ask gas producers how much they are being owed by power generation firms, they would tell you it is a lot of money. Also, the gas-powered plants are being owed by DisCos, which do not have enough money to pay for the electricity they buy from GenCos”, says the Group Managing Director of Aiteo Power, Ransome Owan.
“This means that gas pipeline vandalism is not the only critical problem in the power sector. The issue of debt, arising from inability of the operators to pay for gas is another major problem besetting the growth of the sector”, he said.
So, for the paying customers, it is not hard to imagine that tariffs might have to double in order to make up for the losses. Another key power sector issue that has gone unreported is the extent of sabotage done to the sector by legacy staff who are not taking the privatization lightly.
Electricity sector analysts are saying that if the conditions persist, the electricity sector could fail, as the basic economic case on which their business model was built will crumble.
One solution that analysts see as a solution to these power sector problems is to declare acts of sabotage (like running a meter reading scam) an economic crime, in which defaulters will be severely prosecuted.