Why Nigeria needs multiple electricity markets (III)

There are 12 licensed electricity distribution companies (Discos) in Nigeria. Nine cover groups of states. Two are set up in Lagos State. The 12th, and probably the least-known, is Aba Disco, which unlike the other 11, is focused on a single city, Aba, in Abia State, and its environs.

These latter three Discos belie the dubious conventional wisdom driven over the past 50 years by successive central/federal governments and accepted meekly by the states until very recently that individual states cannot be served by single, speak less of multiple distribution entities.

This peculiar shape of Nigeria’s electricity distribution sector has a history. In 2006, following the enactment of the Electric Power Sector Reform Act 2005 and the unbundling of the defunct National Electric Power Authority (NEPA) as mandated by the Act, it was thought expedient and minimally disruptive to create corporate entities based on the boundaries of the NEPA’s distribution and marketing zones.

So, NEPA’s 10 distribution zones became 11 Discos, with the exception of Lagos Zone that became two Discos in Lagos State. The 12th Disco, Aba Electricity Distribution Company, was incorporated in anticipation of the possibility that Geometric Aba Power, which had taken a lease of the assets of the Aba/Osisioma Districts under Enugu Zone, would exercise its contractual right of first refusal to buy the two districts whenever electricity privatisation occured.

This is the simple expediency that led us to having 12 Discos today. There is no commercial or technical/engineering justification for continuing to run Nigeria’s electricity distribution on this central control conventional wisdom inherited from the monolithic NEPA era.

In the 17 years since the unbundling of NEPA into 18 successor companies, followed by their corporatisation and acclaimed privatisation, Nigeria’s distribution sector has continued to operate pretty much like NEPA 2.0 – with largely the same staff at mid- and lower-level, the same sub-optimal business practices and lack of innovation, the same assets with barely-beyond-nominal technological evolution or volumetric growth and the same mindset that customers are more a nuisance than anything else.

Read also: Why Nigeria needs multiple electricity markets (II)

Following privatisation in November 2013, there was significant growth from an average 2,500MW/60GWh traded daily to an average 3,500MW/84GWh daily delivered by the grid to the 11 Discos by May 2015. For the next five to six years, for various reasons that should be examined elsewhere, growth was more or less flat.

Then from the second quarter of 2021, we witnessed incremental but steady growth to the average 4.4GW/110 GWh seen today. This incremental upward trend, however, looking at daily performance reports, is actually negative if we consider that energy supplied by the grid per capita has not kept pace with population growth, as ought to be the case.

Given what is known about the correlation between energy supply and socio-economic development, Nigeria cannot expect the consistent Asia-style GDP growth and uptick in our human development index if we continue to allow reliable energy supply and universal access to be elusive.

Electricity distribution is commercially and technically about serving the customer at retail level, meaning that by definition, it cannot be efficiently operated or regulated centrally or even regionally.

It is therefore an aberration that we continue to operate Discos that cover multiple states in a unitary, centrally-controlled manner that is ponderous, unresponsive, almost completely impervious to customer needs and therefore incapable of delivering any form of reliable, universal access across the country.

This became very clear to me while I served as commissioner for market competition and rates at the Nigerian Electricity Regulatory Commission (NERC) from December 2010 to March 2015 and was driven home very directly when I went on to serve as NERC’s commissioner for consumer affairs in April–May 2015, leading a team of just 11 people to deal with the consumer issues and analyse the behaviour of over 10 million electricity customers across the country.

A thankless and foolhardy task indeed because the ability to enforce any regulations made as a result of observed behaviour will be almost impossible to enforce. It is still pretty much the same with NERC today.

Ekpo is the CEO of Excredite Consulting Limited; former commissioner, Nigerian Electricity Regulatory Commission; past head, Power Sector Reform Team, Bureau of Public Enterprises; and past attorney-general/commissioner for justice, Cross River State

This is the third instalment of a four-part commentary