The public outcry of SIEA unreliable power supply will continue unless SI government is serious of considering alternative interventional plan from its current setting.
We know that the supply of electricity is significant for the proper development both in Honiara and provinces to meet modern living standards and to facilitate its economic development.
The reliability of power supply is a necessary pre-requisite to industrial and commercial investments growth. Established under electricity Act, 1969, SIEA purpose is to provide reliable, cost effective electricity to the citizen of Solomon Islands.
In its revised statement of corporate objective, SIEA’s prime corporate social responsibility is to provide reliable safe electricity supply systems within its area of operations, while working in partnership with the community to plan, deliver and operate infrastructure in such a manner which seeks to mitigate the social and environmental impacts of SIEA’s activities.
In this article, my discussion will be on the challenges SIEA will continue to face in its core activities in identifying the requirements necessary to ensure that the company is providing high quality reliable power supply with competitive priced infrastructure to Solomon Islands enterprises and maximizing their potential to support the economy development and opportunities for enterprise and innovation.
In Honiara, currently there is sufficient power generation estimate over 20 MW in Honiara to meet the peak load in the city of 14 MW on business days.
However there is no reserve capacity. If one major generator is out of service for any reason, load shedding has to take place. This results in blackouts throughout the city. This is an unacceptable situation which is constraining the business activities and residents of Honiara and triggers negative feedbacks from public.
In order to resolve this unacceptable situation, the company requires N-2 generation capacity. It simply means that when the biggest generator is taken out of service for an overhaul and the next largest generator fails due to mechanical problems, there is still enough capacity to meet the peak load.
To achieve N-2 generation capacity, two major priority areas identified for immediate action are; (a) the cooling system for the existing generators is to be refurbished (b) An additional two 5 MW generators required to meet the N-2 margin and to cater for growth in Honiara.
However, SIEA is unable to fund these new generators, due to its current cash flow is barely sufficient to pay for diesel fuel for the current generators. The major problem with cash flow is the ongoing SOE debt issue, and in particular the SIWA and other SOEs with major business and Provincial Governments.
Further, SIEA also has a number of Outstations: the three major ones are Gizo, Noro, including Munda, and Auki. There are also 5 minor stations at Buala, Kirakira, Lata, Malu’u and Tulagi. Progress is being made to bring all of these stations up to a modern, reliable standard, as finance permits. The problems with these outstations were over the years all these outstations are operating on deficit cash flow position.
Government is introducing Community Obligation Services assistance to SIEA to subsidise these loss however, the first payment of SBD4 million to SIEA is very small compare to the losses SIEA incurred in keeping these Outstations.
Distribution and Network
SIEA’s only extensive electrical network is in Honiara. In general it is in good condition and is being well maintained.
However, some of the main weaknesses and these are being addressed as follows; (a) the Lungga to Ranadi 33 KV underground cable – this cable is too small for the existing load and is prone to failure which can disrupt supply to many areas of the city (b) The 11 KW Switchboards at Honiara Station – this is the main switching point for the city. The existing equipment is obsolete and over loaded resulting in many outages in the central city.
The network re-arrangements under the SISEP Project the engineering firm of SKM has carried out a load study of the network to improve its performance. As a result a number re-arrangements are under way; changing transformers; changing loads on lines; upgrading lines; putting in power factor correction; etc.
To refurbish these distribution and expansion of network it requires funding which currently SIEA cannot afford.
Revenue is recognised from two derivatives; kilowatts bill to customers and money collects from customers.
In regards to kilowatts bill to customer, SIEA currently does not bill about 17.5% of the electricity it generates due to meters not being in our billing system, faulty meters, by-passed meters, illegal connection by customers and etc. Some of the common electricity thefts with kilowatt Bills to customers are discussed as follows;
The first electricity theft is fraudulence. SIEA loses large amounts of money each year due to fraud by electricity consumers. Electricity fraud could be defined as a dishonest or illegal use of electricity equipment or services with the intention of avoiding, billing charge. The customer tries to cheat intentionally SIEA that supplies electricity by adjusting the electric meter in a manner enabling it to show the energy lesser than the used amount.
The second common electricity theft is illegal electricity uses. It is made by installing a line from the power sources to necessary point for purpose of by-passing the electric meter. In a wider scale, companies may give a bribe to the power administration personnel to install a direct line to their own buildings or offices and in order the consumed energy not to pass their electric meter.
The third common type of electricity theft is billing irregularities. Invoicing irregularities may result from various sources. In few scenarios, power system establishments may not be effective in measuring of the used electric energy amount and determine lower or higher usage fee unintentionally.
SIEA has bad records in its debt management. A number of organisations do not pay their bills. Currently SIEA is owed over SBD120m, 70% of which is owed by Government SOEs, or government related organisations such as schools, medical centres, provincial Governments, etc. The worst debtor is SIWA, one of our biggest customers. It constantly increasing every month and if this is not arrested, SIWA will bring down SIEA.
The issues of unpaid bills can be regarded as electricity theft as well. Some customers either individuals or organization do not pay their electricity debts. The individual or commercial customers may move from the area or town or an entrepreneur may bankrupt.
Some customers who are politically very powerful and rich know that their electricity will never cut regardless of they pay or not. I can still recalled when various calls from political appointees, pass few SIEA board members calling us during the odd hours to reconnect without pay a single cent.
Daily Cash Flow
SIEA has a constant struggle to obtain cash to meet its commitments and, as a consequence, it has insufficient money to purchase much of the equipment the company needs, or to expand the network.
Currently, fuel consumed 80% of its total cost. The credit facility signed in the contract with Shell Company is only 14 days which does not match with SIEA average collection period of 30 days to 60 days for normal customers and over 120 days for customers in arrears.
The fuel charged including GST & Duty costing SIEA about $40 million per year. The concern of freight charges to fuel drums to SIEA outstations in provincial centre keeping increasing.
In regards to local suppliers, 99% of local suppliers on prepayment and cash basis and 1% of local suppliers on credit facility. The reason is due to lack of business confidence with SIEA cash flow, suppliers may not willingly to sign credit facilities with the company.
In regards to overseas suppliers, about 95% of overseas suppliers on prepayment arrangement and 5% of overseas suppliers on credit facilities. From these suppliers, about 90% of suppliers are third party basis (middleman); the company is losing about AUD$100,000 per year for percentage mark up. And due to third party suppliers, SIEA is losing millions of dollars in wrong parts Suppliers cannot be easily identified of due to generators installed at power houses are different brand.
These generators are donated by Aid donors thus SIEA has no option to choose. Overhauls and maintenance cost of these donated generators are very expensive. To maintain these donated generators is almost double the cost of purchasing them.
SIEA is serving approximately 11,000 customers in Honiara and urban Centres in the Solomon Islands. Being recognized by an industry who serves customers in providing electricity, SIEA has a strong commitment in ensuring its customers to have a positive customer services experience whenever they interact with the company.
The company faces the daily challenges in its daily operations. One of the challenges is geographical location, scattered of seven main islands in the country on how best to maintain and achieve providing reliable and effective supply chain in terms of engine spare parts, billing reports, metering equipment, customer’s invoices, cash power dockets, payments of bills via ATM from customers to SIEA Head Office and its Outstations.
Another challenge is to maximize revenue while providing good customers services which will result in customer satisfaction specifically in meter testing efficiency, revenue average collection days, invoice delivery and creditors average payment period.
In terms of quality, SIEA still yet to make its best to achieve best results especially in specifies areas such as accuracy of customer records, accurate disconnection reports, accurate meter readings and daily monitoring of arrears accumulations.
The challenge of transforming SIEA to online billing system to enhance effective communication on online for customer access to all billing issues including applying for new power disconnection notices, and meter reading schedules to ensure that the application use can support functional activities in an effective manner. The issues of cost will be another factor in implementing this.
Information Technology and Support
In regards to its billing system, SIEA has effective system of inputting of bills which processed by computerized system to produce reports on timely especially the disconnection reports, age debtor listing, top customers’ category report. Billing Department has qualified staff with vast experience in the billing system in reviewing the reports for management decision.
However, lots of weaknesses associated with the billing reports that accuracy of the reports is around 50%, which will give incorrect figures. The system does not provide relevant reports according to the management needs.
The challenges of IT support is to address are lots of complaints regarding billing issues come from customers in the provinces and urban areas outside Honiara. The inconsistent of providing good customer services is due to the geography locations inadequate infrastructure in the country and poor mailing services, poor airlines services, often there are delays in meter reading data, receipts from branches to be input at the head offices, delay of cash power dockets, delay in delivery of disconnection reports from head office to branches and the list goes on.
Organisation and Staffing
For the company to implement its strategies to achieve its objectives it requires identifying right people for the right job. In other words, identifying the relevant skills, knowledge and qualified personnel which have the capabilities to perform the jobs well.
The restructuring exercise has been approved and will be implement to give greater customer focus; to remove a number of ‘layers’; to ‘flatten’ the organisation; and to bring greater accountability. Engagement of a Human resources review by outside consultants to ensure that all of the correct policies are in place and the organisation is efficient.
Training is being provided for our technical staff; for all staff in customer service and ‘change management’. Only recruiting well trained staff, this was not a policy in the past and SIEA is still suffering from the consequences.
In other supportive areas, there are still significant problems resulting from SIEA difficult financial situation, in particular repaired SIEA owned 100 houses for staff, many are in very poor condition.
It is estimated that it would cost over $40m to bring them up to an acceptable standard. Further vehicles are an essential tool for our staff.
However SIEA does not have enough and several of the ones we have are in very poor condition. Progressively the company will replace vehicles case by case basis.
Achievement by SISEP Project
The World Bank funding a strategy of board-level focus on commercial objectives plus greater management capability through the appointment of an International Director and two key senior management staff under the SISEP Project.
I understand that SIEA has progressively and addressing most of the challenges mentioned above over the period under the project.
I also understand that achievements of some of the above challenges have been made whilst other challenges still on progress of implementation or require government further assistance.
The question always creeping in the minds of the public is, how SIEA can get out of its system of media coverage of continuous power outrages, load shedding, waiting for spare parts, engineers are working on it, ordering wrongs parts and etc.
With the current situation, I do think SIEA has capability of addressing its generator capacity issues, technical and commercial loss issues, aged infrastructure, and to expand its networks which the causes of unreliable power services.
Further, the challenges should not be concern for management and staff, but for the Government National policy makers, strategic planners and development budget formulator to seriously review, assess and address the areas of priorities.
Based on my past experiences and observation over the years I have been with SIEA, some of the key areas I suggest for the government to address includes but not limited to;
- Revised Electricity Act 128, to allow competition. For example, Provinces including Honiara should have their own electricity whether owned by Province as their investment Authority or operated by private companies. Currently SIEA will not continue to sustain its operation in a long run subsidizing the outstations with Honiara revenue in meeting their operational cost especially fuels and generators overhauls.
- Government should seriously build strong relationships Aid Donors such as ADB, World Bank, NZaid, AusAid to ensure that adequate and timely support is available to help SIEA meet its operational and expansion needs especially of replacement of all donor funded Generators with new standardized generators.
- Government in its annual development budget under Ministry of Mines and Energy, immediate funding to address significant capital investment which is need for SIEA to replace its aging generators, transmissions, and standby generators for Lungga power station.
- Privatisation of SIEA – If privatization is to improve the quality of SIEA power services and the performance of the company over the longer term, it needs to be complemented by policies that promote competition and effective regulation of the industry in question. Although it is essential not to sell natural monopoly assets like electricity when conditions in financial markets are favourable.
- Get Government immediate support in funding the expansion of the distribution and networking to increase commercial and industrial based customers. This increase revenue collection will subsidize the revenue loss incurred by the domestic customers.
In conclusion, it is sad to note that SIEA will continue to struggle to achieve its corporate social responsibility of providing reliable electricity to its customers unless government is seriously addressing the key priority areas which beyond the company resources and capabilities.
About the writer: Benjie was a former employee of SIEA. The above view is his own analysis and observation from his work experiences with SIEA from 2004-2010 in response to the current issues of power outrage in Honiara.
SIEA – beyond power outrage
By Benjie Oatasia Aitoroi
West Kola’a Ridge