Babatunde Fashola, Minister of Power, Works and Housing: Interview

Interview :Babatunde Fashola

How successful has the privatisation of the power generation and distribution segments been?

BABATUNDE FASHOLA: What we are concerned with are long-term investments. The privatisation process is only the first step. Like every policy, it is not perfect and certainly has its weaknesses, but the idea behind it is one that we agree with. Private capacity, entrepreneurial ability and private capital will be defining elements for the sector in the future.

To that extent, it is a work in progress and you cannot legislate too rigidly. In our case, we have privatised generation and distribution but maintained control of transmission. No model has been set in stone; however, a common goal is for private partners to come into the sector, drive businesses forward and be commercially profitable.

What can be done to strengthen both transmission infrastructure and efficiency?

FASHOLA: First there is the need to understand the transmission business properly. There is also a need to find people who understand that transmission is no longer a social service provided by the government, but rather a state-owned business with private partners in charge of both generation and distribution. In addition, these individuals must be result driven and able to plan for the future.

Significant problems hampering the transmission system when we took over included low capacity, operational inefficiency due to lack of maintenance, and the need to maintain an inventory of parts that require frequent change. Having the right personnel to create a rigorous maintenance programme is crucial to its success going forward.

How can the development of independent power producers (IPPs) be incentivised?

FASHOLA: It depends on the nature of the IPPs and their source of fuel. When it comes to gas-fired IPPs, one of the incentives will be the adequate supply of gas. The amount of gas that is currently available within the domestic market is not enough for all existing turbines. There is certainly a shortage of supply that we need to address by investing in improvements to the way gas is gathered, processed, transported and supplied.

There is no one-size-fits-all solution because IPPs can also be hybrids that utilise both hydro and solar power, or they can be coal fired. The feedstock required for hydrocarbon-fired IPPs is different from that which is needed for renewable IPPs. However, one common feature that helps to drive them all is that they can become self-recovering and self-financing. This means that once power is being generated, these investments should pay for themselves.

The government has recently taken a bold step with a payment assurance guarantee of N701bn ($2.5bn). Hopefully, this will take us to a market where payment is assured through market behaviour and contract performance.

In what ways might metering programmes be rolled out to electricity customers?

FASHOLA: Deploying metering programmes is a complex, long-term undertaking. Metering requires a lot of preparation and planning beforehand. The thorough gathering of consumer data, followed by appropriate energy consumption audits, is needed to prescribe the right meter to costumers based on how much energy they use.

These processes may not have been adequately explained to consumers in the past. If you do not have the right meter, you are likely to either overpay or underpay. Awareness programmes need to be undertaken with information about metering logistics. There is also a need for metering regulations and licences, which the regulatory commission is developing to help set the rules of engagement.