‘Why It’s Difficult To Privatise TCN’

  Business

Usman Gur Mohammed, the Managing Director of Transmission of Nigeria (TCN), in this interview with Mohammed Shosanya, spoke on issues in the power sector and how best the country can get it right. Excerpts:

Could you tell us TCN’s scorecards since you came on board?

We have installed over 40 power transformers in less than two years, we expanded the grid capacity from 5000MW to 8100 MW as at December 2018 when we did the last simulation.

You hear some associations saying that we are lying, but tell them to bring their own evidence that we are lying. We don’t just announce any figure, even as the Managing Director, unless it is validated by the system planning unit with credible evidence to show that this is what is happening. But when we have several associations, there will be distortions. These associations are formed to create distortions and protect their own people who paying them.

Under the normal rule, as a liberalised sector, we should have been seeing competition among them but you cannot hear that they are competing because the market is not at its best. Instead, they recruited some associations to defend them collectively. Does it make sense? No!

We have removed 775 containers out of 830 containers that have been hanging in the ports for over 15 years. Some of them have been auctioned. We have expanded the grid by adding 3100MW and we have achieved frequency control that has not been achieved in the history of Nigeria.

Some stakeholders have been calling for the privatisation of the TCN, what is your take on this?

There are different model of transmission ownership across the world.

There are models that are government-owned and there are some that are privately-owned. All of them will perform if they are run properly and implemented properly. But in Nigeria, we have a peculiar problem that you have to take into account before you privatise TCN.

The problem is that it is very difficult to get a right of way (RoW), for 330KvA, you need 25meters distance and for 132KvA you will need 15meters. If you privatise TCN today, the owner may not get RoW because this is very difficult in Nigeria. Because it is still under government control, we have been able to partner most of the state governments where we are doing projects.

If it is privately owned, the state government may charge arbitrarily because private business is for profit making. It is left for us as Nigerians to judge whether it is the right thing to do.

What measure are you putting in place to eliminate transmission losses in the system?

Transmission loss is inevitable because if the loss is more than 8.05, we lose money. TCN loses money. It is our duty to ensure that we fix the transmission losses. Part of what we did to fix the transmission losses is that we restructured the grid metering department.

Before, this department is controlled from the headquarters, we have now ceded the grid metering to control of regional managers. Inspectors from the headquarters visit the regions from time to time to inspect them to ensure they are doing the right thing.

We are also going to meter all our lines and all our substations and we are beginning with Lagos so that at any point in time, we will know who is contributing the highest losses to the system.

What are the options of funding available for your projects?

The best option should be our Internally Generated Revenue (IGR), but unfortunately it is not so because of our tariff. When we came in 2017, we made a case for tariff review, and NERC agreed that our tariff is less than what we are supposed to get.

Unfortunately, they could not review the tariff. Before now, we are getting less than 30 per cent of our tariff and this is not sustainable to raise money in the industry for investment.

We don’t get appropriation for our operations. Appropriations are for those contracts included in the National Assembly budget which are mostly tied to constituencies of members of the national assembly.

We need sustainable money to finance the network. The only option that we have is to go multinational donors because they have long gestation period. Most times, they have five year monitorium period and 20 years repayment period. That would give us enough time to be able to do other development activities that will make the TCN to be able to pay this money by itself. And that is why we have gone to the multinational donors and we have raised $1.661billion.

Those are monies are World Bank $496million to be used for existing substation lines, targeting brownfield projects

You recently advocated the need for the discos to recapitalise, and it doesn’t seem they have the capacity to do this. Do you think the Federal Government has what it takes to take back the asset from them? System collapse is still a major issue, what are you doing to address the challenge?

We have never told anyone that system collapse will stop because there are things you have to put in place to stop the system collapse. 

The decision to stabilise the grid is a journey. It is a journey that we have started and it is better than before right now. For instance, we need to have the spinning reserve. This is a must to stabilise the grid, up till now, we don’t have the spinning reserve.

As at this stage, the spinning reserve that we supposed to have is 10 per cent. If the average generation is 4000MW, the spinning reserve supposed to be 400MW. What we have procured is only 260MW which is not adequate. 

The second problem is that we need to have an international SCADA so that we have register of events that will show whoever misbehave on the grid and can adequately punish.

Some DisCos were suspended from market operator administered market in recent weeks. How has their non-compliance to the rules affected the industry?

Any organisation or association that there is anarchy, there is no way the best can come out of such association.

So, complying with the rule is the most important. The market say to be at its best because people (operators) are not complying with the rules. They have signed an agreement that they are going to comply with the rules, so you cannot in the middle and say you cannot comply with the rules. That’s the reason we took a decision to enforce the rules.

We would have taken that decision earlier than now but you know ‘he who goes to equity must go with clean hands’.

So, we have to show some level of performance given the historical background of TCN before we can try to enforce those rules. And that’s why we started enforcement and it is yielding result. People are complying and working according to the rules. But don’t forget, it is not just we started rules enforcement, if you remember in 2017 when we came in newly, Nigeria has never enforced the ‘Free Governor’ rule. What is a free governor? You know the industry is not like water where you can put tank and store it.

Some Discos are of the opinion that your policy is having adverse effects on their business. What is your take on this?

All the discos have universal licenses and not a restricted a license. Secondly, the aggregate technical collection and commercial (ATC&C) losses, based on the performance agreement they signed included poor people and rich people.

To prioritise supply to some areas at the detriment of others does not make sense because their license is not restrictive.

We are not expanding grid based on hearsay. If a disco tells you what we are doing is affecting their business model, ask also that which study did they conduct that gave them that policy they are doing. We have conducted a credible study which is called 20-year Disco-Transmission Expansion Plan.

The plan looks at the needs of the distribution companies and come up with a report that says this is how you should expand.  To escape from their failure of lack of investment, most of the Discos will say we are putting capacity where they don’t need it. We are not just putting capacity; we are also adding redundancy for electricity to be stable.

Electricity stability requires what we called redundancy and the least you can is N-1 which means any place where they need 60KvA, you will give them 60KvA x 2 and that is what we are doing under the programme.

There is nothing like we are giving supply to where they don’t need it. What is happening is that some of them are gaming the market. They refused to put prepaid meters in some places, supply them energy for few hours and charging them on filthy charges (estimated billing or crazy billing).

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