Revised Introduction and Table of Contents

Table of contents

1.     Introduction

1.1.Background

1.2.Aims/Objectives

1.3.Methodology Adopted

2.     Literature Review

2.1.Electricity Reform

2.1.1.              Competition

2.1.2.              Regulation

2.1.3.              Government

2.2.Economic Outcome

2.3.Social Outcome

3.     The Nigerian Electricity Sector

3.1.The History of the Power Sector

3.2.The Structure of the Power Sector

3.3.The previous reform done in the Power Sector

3.4.The current state of the Power sector

4.     Electricity Reforms in Other Countries

5.     Possible Solutions to the Power Sector in Nigeria

Conclusion

References and Biblography

Introduction

1.1.     Background

The Country in question is Nigeria, accordingly to the CIA World Factbook, 2011; Nigeria that is a developing country gained its independence in 1960. It is the most populous country in Africa with the population being 155,215,573 (July 2011 est.) with Lagos being the most populous city in Nigeria and Abuja being the Capital. In terms of their government structure, Nigeria is a democratic nation, the constitution used today was adopted on 5^th of May 1999 and it became effective on the 29^th May 1999. Nigeria has been suffering from corruption since the military rule where the mode of transmission of power has been through coup d’état and this has affected so many sectors in Nigeria notably the power sector. The power section in Nigeria has been in a very bad state that has resulted to lack of constant electricity throughout the country. Since the first power outage that occurred in the 1960s, Nigeria has been in the situation of lack of constant electricity. This problem has hindered growth in the country with businesses, offices, industries and even the regular residential consumers resorting to buying fuel-run generator sets that cost a lot to operate. Because of this situation, whatever that is to be made as profit, most of it has gone into the acquisition of electricity through these means and because of this, some industries have not been able to cope and has packed up. The people most affected by this is the people living in rural areas, they how have a mind-set that they have been neglected, they hardly see electricity in their households and most of them are poor and cannot afford generator sets to aid their electricity problems. This is a serious problem in Nigeria and there are so many negativities this problem has brought, as well as the economic loss and social discomfort, there is also the environmental problem. With an average of a generation per house, the carbon emissions from these generators are high with big companies and industries emit more carbon to the atmosphere which in turn cause global warming and with the way the world is today, everybody is worried about the environment as well as trying to promote sustainable development.

There has been a call for electricity reform in Nigeria and in 2005; a kind of reform came about. The then government owned electricity company NEPA was unbundled into 11 generation and 6 distribution companies collectively known as PHCN. This was to enable IPPs in the country and attract investors to the Nigeria Power sector as well as resolve the power problems in the country. This helped a little but, there was little bit more power produced but the problem with PHCN was, it was another monopoly run by the government. After a while, the power situation went back to being the same and in some parts of Nigeria, people there would say, it became worse. With the transition of new governments and the corruption in the country, the population is worried that the power sector will never be reformed, although in recent years and the present administration, there have been signs that the peoples worries can be reduced. There has been a plan for the privatization of PHCN and so far, there have been bids from 331 companies worldwide to come and invest in the electricity sector with the hope of providing an extra 6000 megawatts by 2014 and a total of 40,000 megawatts in 2020 for the vision 2020 dream to compete with world markets.

The intent is highly welcome by the people of Nigeria but the worry still remains, would they achieve their goal of vision 2020? Would they finally finish a project that has been started with the rate of corruption in the country? Even if there is progress, Nigeria has a history of bad maintenance, so, would they change their habits and invest in maintaining equipment? All these questions go on in every Nigerian’s head but still hopes for a better tomorrow. This paper will talk on the electricity reform, relate it to the reforms done in several places in the world, it would discuss the factors involved to achieve this reform and also how to maintain this reform, it would discuss the economic issues on this reform, the parties involved in the reform. The paper would then discuss the present condition in Nigeria and several solutions to this problem.

1.2.     Aims/Objectives

The aim of this paper is to show what electricity reform is, how is can be achieved, the different types of reforms that are in place and the best one that will correct the electricity crisis in Nigeria. Use various countries as examples in how this reform can be achieved. Indicate the benefits of a successful electricity reform and also, outline several solutions to this electric sector in Nigeria

There are several objectives for this paper and they are:

·      Finding different ways to achieve a successful electricity reform

·      Using various countries are baseline in knowing what they went through in their electricity reform

·      Knowing the entire present state of the power section in Nigeria

·      Knowing the people of interest in Nigeria to achieve a successful electricity reform

·      Deciphering the effects of the reform in an economic perspective

·      Researching other ways in which the country can go to achieve the vision 2020 of 40,000 megawatts

1.3.     Methodology to be adopted

This is a research paper; it would not require lab work, just consultation from specified sources as well as extensive research on the topic. For this paper, books would be looked at, journals will be read, research done by others will also be looked at with the date of the research indicated to show the timeline the electric reform has gone over the years. Blogs would be looked at as well as newspapers to see recent developments in the electricity sector. A situation where a person is to be met in order to get more information, an appointment would be booked and there would be a meeting between both parties. Website would be checked and if more information is needed, contact the organization to whom the website belongs to by phone or e-mail. All these are to ensure that the paper is authentic and carries present information and data.

The Gantt Chart for the dissertation

Summary of "The Power of Choice: Governance and Outcomes in Electricity Sector Reforms" by Navroz K. Dubash

This paper is on Electricity reforms, it stated how electricity has been previously considered as natural monopoly where in developing countries, the electricity sector has either been owned or strictly regulated by the government. Then, at astonishing speed, a revolution in thinking, swept through the sector according to the report and several countries undertook major reforms. The reforms ranged from opening their electricity markets to independent power generators to broad-based reforms remaking the entire sector around the objective. Debates went on about the viability, applicability and feasibility of these market-led electricity reforms but after a while, it was realized that the electricity reform will shape patterns of development, including social environmental outcomes for decades to come. The question then arose, "How are developing countries managing the complex, often contentious process of electricity sector reform? and how various interest groups participate in shaping the electricity sector as it depend of the governance structure under which the reforms are carried out. Using 6 countries: Argentina, Bulgaria, Ghana, India, Indonesia and South Africa as case studies, an examination of the process and politics sheds light on how the process of reform can support or hider sustainable development outcomes.
Using the case studies, the paper talked on how these countries achieved their reforms, Argentina for example, in the late 1980s, there was a backdrop of economic crisis, so a small group of politically powerful bereaucrats supported by international agencies such as the World Bank designed reforms with little outside debate or input, although these reforms did lead to improved quality of service in urban areas they undermined incentives to increase the efficiency of electrical appliances and equipment, limited expansion of electricity service to isolated rural areas, and placed a disproportionate burden of electricity price increases on low income consumers.
The pattern and Trends across the six case studies, there were several bullet points that were stated, the first one was;

Summary of "Competitive Markets for Electricity Generation" by John Moorhouse

This paper discusses how market competition in electric power generation can replace regulation or state ownership. It showed how competitive markets could improve the generation capability of a country using the US and parts of Europe as an example. The US practiced deregulation while some parts of Europe went through the path of partial reform. The paper indicated that, the British and American reforms arose in part because of two fundamental ideas which have been successfully challenged during the last two decades. The first idea was that the electricity is a natural monopoly and the second one was, independent but complementary, idea, particularly influential in Europe, is that generation, transmission, and distribution of electricity raise purely technical problems to be solved by engineers. Under both the natural monopoly and technological efficiency, it proved how wrong they both were and with both of them not having to rely on a single medium but several other factors. The paper then discussed Competitive Generation in full, starting from the elements of reform which were (i) private ownership of electricity industry facilities (ii) open access for generators to transmission facilities (iii) a minimum of three independently owned generating stations that could potentially compete for consumers with each regional electricity market or service area and (iv) separation of generation from transmission and distribution. This was discussed in relation to several countries like the US etc. The next that was talked about was the Advantages of Competitive Generation, this stated how large industrial customers would be satisfied as well as the residential customers, it explained the peak periods, the off-peak periods to the daily to seasonal periods as well. The 1st major advantage it indicated was "cost saving", then the second advantage was that "a spot market market will develop". The third advantage was "the market would provide an array of service standards that more closely match the mosaic of consumer preferences and the fourth advantage was "innovation". All these advantages were fully explained. The next chapter discussed was Competitive pricing of Electricity. This was explained with sub-chapters like the industrial customers, residential customers, distribution companies and transmission services. Before the conclusion, the market response to risk was talked about with relation to competitive generation as oppose to state ownership. Case of who carried the risk in electricity generation, how the risk was taken care of and why the risk had to be taken care of were all discussed.

Project Proposal

1.1 Introduction

The Country that is looked at in this paper is Nigeria, this is a country that is located in the Western part of Africa, with more than 160 million people is known to be the most populous country in Africa. Nigeria is a developing country, only just started democratic rule in 1999 which has seen the country want to compete with world markets now. There has been a major hindrance in that plight as the electricity sector of the country has been in shambles. For a very long time, the country has been plagued with power outages and with this going on, the country has been slow to move forward. Over the last 10 or more years, there has not been constant electricity with industries and also normal consumers resorting to buying petrol or diesel run generator sets. This cost a lot of money to live on and also maintain as well as the environmental damage it causes on a regular basis, with the high cost of using a generator, the market has been slow to grow, foreign investments not coming as they should and also, local businesses not going to new heights. There has been a cry for electricity reform in the country to ensure constant electricity supply for both business and personal use. The initial electricity company, Nigerian Electricity Power Authority (NEPA) was first the sole company in charge of every aspect of electricity supply chain, it controlled the generation, distribution, transmission and supply sectors and after a hint of electricity reform, it changed to Power Holdings Company of Nigeria (PHCN), which is still in operation today. The Government started the reform in 2000 but till date, there has not been any headway in achieving the goal of power outages, there are still places that hardly see electricity, especially the rural areas of the country which could seem have been neglected. Although, in recent times, there has been an improvement in the electric sector but the improvement is at a minimum. It is difficult to have electricity for more than 24 hours at a stretch, there are always breaks in power supply. The calculated amount of electricity generated in the country is said to be about 3000 megawatts and this is to supply the whole country that has over 160 million people living in it electricity. Taking Scotland which is a part of the United Kingdom as an example, it has a population of about 5.2 million people, the electricity generated is more than 7000 megawatts to supply consumers with many sources of electricity in place.

1.2 Aims/Objectives
The aim of this paper is to show what electricity reform is, how is can be achieved, the different types of reforms that are in place and the best one that will fulfill the electricity crisis in Nigeria. Use various countries as examples in how this reform can be achieved. Indicate the benefits of a successful electricity reform.
The objectives of this paper is to find out different ways to achieve a successful reform, ranging from the introduction of a competitive electrical environment to the regulations that would be associated with these reforms to the way the government of Nigeria should act towards the reforms. Find out how the reform would affect the stock market.

1.3 Methodology to be adopted
This is a research paper, it would not require lab work, just consultation from specified sources as well as extensive research on the topic. For this paper, books would be looked at, journals will be read, research done by others will also be looked at with the date of the research indicated to show the timeline the electric reform has gone over the years. Blogs would be looked at as well as newspapers to see recent developments in the electricity sector. A situation where a person is to be met in order to get more information, an appointment would be booked and there would be a meeting between both parties. Website would be checked and if more information is needed, contact the organization to whom the website belongs to. All these is to make the paper as authentic as possible.

1.4 Principal outcomes

1.5 Structure of the Report
The paper would be structured as follows
a. Introduction
b. Electricity reforms
c. Competition
d. Government involvement
e. Electric Market
f. Benefits of the Reform
g. Conclusion
All with sub-topics in between. The structure of the report is subject to change as time goes on

Electic Market Restructuring in Nigeria (Overview)

Nigeria is a third world country, the most populous country in africa with about 160 million people. The type of government being practised is democracy.
Electricity has been a major problem in Nigeria with lack of constant electric supply which has made people in Nigeria resort to using diesel or petrol run generators. This has had a an adverse effect on the economy, hindering the progress of the economy. With this being in mind, there has been talk of electricity reforms in the nation to solve the unending problem of lack of power. In electic reform, there are various factors that should be looked into and they include:
1. Privatisation
2. Regulation
3. Government
4. Available Technologies etc

With all these and a few more, the electric market can be restructured but it is no easy task, a lot of countries has gone through this with most opting for the privatisation option rather than government runned. The pivatisation option looks more viable to achieve the electricity reform goal because, there will be division of labour and with the electricity being in 4 parts which are the Generation; Transmission, Distribution; and supply; other companies can take part in at least one of them, ensuring more activity and also, making the electricity sector not dependent on government. The problem with privatisation is the lack of competition. If the electric sector is privaticized and only a company or a handful of companies takes over, then, they run it the way they want, put tariffs at whatever amount that suites them and could want to pay less attention to maintenance. With this, it would be worse than when it was government runned but when they is a lot of competition, this creates a situation where only the best company is used for electricity, so others would sit up and want to be the best.
The second factor which is the regulation is also of utmost importance, this is because, without a strong regulation body to ensure that all parties involved with electric sector are abiding to the set rules and regulations, there is no need for the reform because, it would eventually go back to being what is was or even worse. With this in mind, there should be a strong regulation body with rules that are put in law.
The third factor which is the Government is also important, the government ae the ones doing the reform and in a corrupt government, the people in power would do this to seek personal gain and might not let this get to completion because of the money they may be seeing when the reform is underway, bribes that may be passed around etc. For this to go smoothly, the government should be firm and go about the reform diligently.
The factor of available technologies talks about the different modes of which the electricity would be generated, transmitted and distributed. With the world having lots of modes of electicity generation and looking at the available resources to know the kind of electricity generation to be used, thereby, increasing the amount of electricity that is being produced to satisfy the amount of users.
If the reform is done correctly, there would be a boost in the economy with industries operating on power from the grid other than, spending so much on diesel or petrol to power there generations to be able to work and also, small business can even run smoothly without the fear of the electicity being cut.