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Original Post Date: 2010-11-29 Time: 11:00:02 Posted By: News Poster
By Ms. Bolanle Onagoruwa
Protocol,Background
This workshop on power sector reforms for members of Labour Writers Association of Nigeria celebrates the visible cordiality and cherished partnership existing between the BPE and a critical privatisation stakeholder, the fourth estate of the realm.
The third in the series of workshops for specialised beats, today’s programme underscores the resolve of the Bureau to actively engage and share ideas and information with all stakeholders through meaningful interactions, regular consultations and sustained dialogue. On behalf of the Bureau therefore, I feel most honoured to welcome all distinguished participants assembled here to this auspicious forum.
It is no longer news that over a period of two decades Nigeria invested about $100bn in public enterprises with subsequent transfers to these enterprises amounting to $3bn (1998), $800m (1999), $1.4bn (2000), $4bn (2001). Yet returns over the period were 0.5 percent.
It is unquantifiable what the Nigerian economy loses every year due to the inefficiency of the public power supply. The consequence of this inefficiency is borne by the Nigerian worker and the economy as a whole. The reform programme for the power sector is designed to substantially reverse the frustrating experience Nigerians have had to endure in service delivery in this sector.
The program for the reform of the power sector has led to the unbundling of Power Holding Company of Nigeria (PHCN) into six generating companies, one transmission company and eleven distribution companies. The successor companies are slated for privatisation. The idea is to continuously inject private capital into the various operations of the privatized companies. Such capital injection and efficiency have been inadequate in PHCN over the years resulting in grossly unreliable/non-provision of adequate power supply to the economy.
It must be stated that while the BPE labor policy takes care of the direct and immediate needs of workers, the reform and privatization program rightly focuses on the big picture, that is, the impact on the economy as a whole and ultimately the greatest good for the ‘opening up of hitherto government dominated sectors to the private sector as well as divestiture of government interest in such sectors.
This approach reflects the underlying philosophy which sees public enterprises as instruments for the improvement of the quality of life for the citizenry, encompassing a myriad of stakeholders – the general public (which ought to benefit from PE services), the government (and therefore tax payers) which own PEs, the economy as a whole (that ought to gain from PEs efficiency) and of course PE workers. The incidence of PHCN’s efficiency or inefficiency, for instance, reverberates beyond NEPA workers. So do the resources expended on underperforming PEs which could have been channeled to improvements in social services such as health, schools and infrastructure.
BPE has taken the informed position to involve workers and their unions in program design and implementation, in the full realization of the strategic and indispensable place occupied by labour in the economy. We are also intimately aware, that, Nigeria is a very vast, heterogeneous and complex country. That being the case, workers’ perception and understanding of government’s reform programs, like privatisation, is invariably influenced by the perception of the likely impact of such programs on their welfare.
Labour Policy Framework
A policy framework for dealing with knotty issues of worker redundancy, severance pay, pension and end-of-service benefits was articulated by the National Council on Privatisation (NCP) in 2002. The policy serves as guideline for the resolution of labour issues in privatized enterprises and is aimed at ensuring fairness, affordability, efficiency and transparency.
In line with this policy, the BPE has, between 2000 and date, made good the following liabilities in favour of Nigerian workers:
Perception Of The Power Sector Reform By Labour Unions In PHCN
That said, there is the need to address certain ideas being canvassed by the unions in the electricity sector and their sympathisers. The Nigeria Union of Electricity Employees (NUEE) had argued that “if the government is really serious about the sector, it should allow the 25 licensed companies to operate alongside PHCN, like the Nigeria Electricity Supply Company (NESCO.) NESCO has been operating in Nigeria since 1929, generating its own electricity without taking over PHCN.” The fact is that due to the structure of the electricity industry, it is not possible for private operators to build their distribution facilities to compete with the extant distribution network of Power Holding Company of Nigeria (PHCN.)
It is important to note that the structure in power generation allows for many participants unlike the structure for transmission and distribution networks. One can set up separate generating plants using any fuel source (hydro, gas, coal, etc) that is economically viable. At any point, you can have many players. Transmission network is such that it is a natural monopoly given that you cannot ask every operator to build its own transmission network. It is uneconomic, not sensible and, in the end, counterproductive.
In fact, the design of the Nigerian Electricity Supply Industry (NESI) is such that the Transmission Service Provider (TSP) should give equal access to generators in accordance with laid down rules. It is in order to initiate this that the Federal Government has retained ownership of the transmission network.
The distribution component of the electricity industry structure also shares the element of monopoly with the transmission component. In Nigeria, the distribution network has been split into eleven companies. So asking all the generators to build different distribution networks as done by NESCO in Jos is wasteful and will make Nigerian consumers pay the unnecessarily high electricity tariffs.
Indeed, the Electric Power Sector Reform Act of 2005 recognizes the monopoly elements in the transmission and distribution chains of the industry structure. That is why the law gave the Nigerian Electricity Regulatory Commission (NERC) the power to set tariffs for both services so as to prevent consumers from being exploited. This is what is done in all electricity markets that are reforming.
It should be noted that the revenue that drives the entire value chain (generation, distribution, transmission-market operator and system operator) comes from consumers through the distribution companies. In this regard, any reform that does not address the challenge in the distribution network would collapse as there would not be adequate revenue to fund the rest of the value chain (that is, generation and transmission.)
NESCO as a private company has generated and distributed electricity (through separate licenses) efficiently for many years in Jos to the satisfaction of its customers; this is a case in point to support private sector investment. However, there is need to establish a structure for private-public partnership to prevent what we may elegantly describe as turf wars. There are examples in Jos where both PHCN and NESCO are laying parallel distribution facilities in the same neighbourhood. Aside from health and safety issues, what this means is that consumers will be compelled to pay for the cost of multiple infrastructure; whereas one set of infrastructure would have served the populace at a far-reduced cost.
The second issue raised by the unions is that “since 2005, through the power sector reform, the monopoly of NEPA/PHCN was supposed to have been broken with the unbundling of NEPA into 18 companies to work alongside PHCN, yet none of those companies founded by private investors has generated a single megawatt of electricity.”
The EPSR Act does not provide for the 18 successor companies to work alongside PHCN. When the companies are privatised, PHCN, which was established as a holding company, will cease to exist.
Original date published: 28 November 2010
Source: http://allafrica.com/stories/201011291432.html?viewall=1