Port Harcourt Loss Reduction Strategy

PHED provides electricity service to an area of 39.2 km2 covering four states in the South East of the country: Rivers, Cross Rivers, Akwa-ibom and Bayelsa. PHED serves approximately 530,000 customers out of the total approximate population of 14 million people. The company has incurred consistent operating losses due to the lack of cost-reflective tariffs and poor commercial performance. Table 1 clearly demonstrates the severity of the company's financial situation, with accumulated operating losses of $300.9M USD over the five-year period since privatization. The company's auditors, Ernst & Young, have expressed concerns about the company's ability to continue as a going concern due to structural inadequacies in the pricing model of the Multi-Year Tariff Model (MYTO) issued by the regulator for the Nigeria Electricity Service industry. PHED's financial situation is further exacerbated by its inability to collect payments from customers. The company only pays 24% of its total Nigeria Bulk Electricity Trading (NBET)/Market Operator (MO) invoices and has little funding available to undertake routine maintenance of the distribution network or invest in the necessary systems and staff development/training required to achieve the performance improvements expected by the various stakeholders. The lack of cost-reflective tariffs is a major contributing factor to PHED's current financial situation. Globally, the best practice is to bill customers for the energy used and collect the amounts billed, which provides the major source of income for all electricity utilities. However, PHED is neither billing all of its customers nor collecting the amounts billed. The company is not metering all of its customers, with only 60% of registered customers being metered. This has resulted in 30% of households using electricity without being billed, contributing to the DISCO's overall losses. PHED has implemented various initiatives to address these issues, including the enumeration exercise to identify and register all of its customers and the implementation of the Meter Asset Provider (MAP) Regulations 2018 aimed at ensuring 100% metering of registered customers. However, the company still faces significant challenges in collecting payments from customers and reducing its operating losses. The Power Africa Nigeria Power Sector Program (PA-NPSP) has been working with PHED to develop a loss reduction strategy. The strategy aims to reduce PHED's operating losses by improving the company's commercial performance and increasing its revenue collection. The strategy includes various initiatives such as improving the accuracy of meter readings, increasing the number of customers being metered, and improving the company's billing and collection processes. The PA-NPSP has also identified several key performance indicators (KPIs) to measure the success of the loss reduction strategy. These KPIs include the percentage of customers being metered, the accuracy of meter readings, the percentage of customers paying their bills on time, and the reduction in operating losses. The PA-NPSP will work closely with PHED to monitor and evaluate the progress of the loss reduction strategy and make adjustments as necessary to ensure its success. The implementation of the loss reduction strategy is expected to have a significant impact on PHED's financial situation and the overall performance of the company. The strategy aims to reduce PHED's operating losses by 20% within the next two years, which will enable the company to invest in the necessary systems and staff development/training required to achieve the performance improvements expected by the various stakeholders.