BusinessDay

Amid poor power supply, FG vows to sanction Discos

As many homes and businesses continue to groan under poor power supply and lack of prepaid meters, the Nigerian government has vowed to sanction “underperforming” distribution companies.

This comes more than eight years after the country’s power sector was privatised, leading to the transfer of the distribution and generation companies carved out of the defunct Power Holding Company of Nigeria to core investors on November 1, 2013.

The total power generation in the country fell to 4,117 megawatts as of 6am on Thursday from 4,470.1MW on Tuesday, according to the Nigerian electricity system operator.

In recent weeks, major cities across the country have witnessed worse-than-usual levels of power cuts.

The Minister of Power, Abubakar Aliyu, at a press briefing in Abuja, said the performance management of the distribution companies (Discos) had been fully transferred to the Nigerian Electricity Regulatory Commission (NERC) from the Bureau for Public Enterprise (BPE) as of January 2022.

“We have a robust team led by the Boston Consulting Group performing a diagnostic of the performance of Discos from post privatisation to December 2021 and the results will be concluded soon,” he said.

“Based on the results, actions will be taken against underperforming Discos under the guidelines of our contractual agreements,” he added.

According to him, the enforcement of contractual agreements and regulatory clarity is the best way to bring underperforming Discos into compliance and improve the market.

On what it described as “evolutions in the ownership of Discos,” the minister noted that Abuja and Ibadan Discos “have commercial transitions ongoing through UBA and AMCON respectively.”

The Asset Management Corporation of Nigeria (AMCON) had on January 20 this year took over the control of IBEDC over the inability of the Disco to clear its acquisition loan obtained from the then Skye Bank, now Polaris Bank.

A court ruling empowered AMCON to take over the asset and IBEDC immediately came under receivership.

Abuja Disco also had issues with the United Bank for Africa Plc (UBA) over acquisition loans.

NERC and BPE disclosed in a joint statement in December that there was a dispute with UBA over the inability of AEDC’s core investor, KANN Utility Company Limited, to service its debt to the bank.

BPE agreed with the lender’s request to exercise its powers as receiver/manager over KANN by exercising its power over the 60 per cent equity in AEDC as a means of recovering the acquisition granted by the bank.

Analysts at CSL Stockbrokers had noted in a recent report that since the conclusion of the privatisation, the Discos had remained the weakest link in the electricity value chain “as they have been grappling with enormous operational challenges.”

They said the most obvious challenge had been the absence of cost-reflective tariffs that limited their ability to fulfil their financial obligations to the Nigeria Bulk Electricity Trading Plc (NBET), leading NBET to default in its contractual obligation to the generation companies.

Read also: Ikeja Electric, Eko DisCo, explain reason for constant power outage

The analysts had said, “The overall impact is that the power sector has continually suffered a cash crunch, forcing the government to inject funds to avert a total collapse. Despite a series of government interventions, the problems in the power sector prevail.

“Although we acknowledge that the challenges in the nation’s power sector run across the entire value chain, we believe the distribution companies are the most troubled.”

The power minister also said plans were in top gear to kick off the second phase of the country’s mass metering programme, adding that contracts would be awarded by the end of the first quarter of 2022.

“We are working assiduously to ensure that all locations in the country are metered through the National Mass Metering Program. DISCOs that fail to perform will be sanctioned,” he added.

Data obtained from the latest report by electricity regulator, NERC, showed that only 4,529,497 (about 40.95 per cent) had meters, out of a total 11,058,939 registered energy customers as of June 30, 2021.

“We aim to provide meters for all households and eliminate the metering gap,” Aliyu said.

He said the ongoing maintenance work on some power plants around the country contributed to outages at a time where low water levels were witnessed in dams.

The minister said, “We are having maintenance work in the Eastern Axis around Odukpani leading to reduced power supply from the usually reliable NDPHC Calabar Power Plant and we are having challenges at Okoloma Gas Station linked to Afam VI power plant.

“We are working on NNPC and gas suppliers also to improve the pressure on the Western Axis that is precluding units from reaching optimum supply.”

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