BusinessDay

Fashola directs NERC to stop DisCos’ monopoly

Babatunde Fashola, Minister of Power, Works and Housing has directed the Nigerian Electricity Regulatory Commission (NERC), the electricity sector regulator to enforce provisions in the Electric Power Sector Reform Act (EPSRA) which bars DisCos from exerting absolute control over a franchise area hence opening up the sector for private investments.

 

In a strongly worded policy statement sent to BusinessDay yesterday, the minister, in exercise of powers conferred on him by the law, directed NERC to ensure DisCos improve on their distribution equipment and capacity to take up the available 2,000MW in order to optimize the use of the electrical resource produced by the Generating Company’s or GENCOs.

 

“Enforce the contract of DISCOs to supply meters and act to ensure the urgent speedy supply and installation of meters with a view to eliminating estimated billing and promote efficient industry and market structures,” Fashola directed.

 

“Stop DisCos from threatening private entrepreneurs from entering the market to supply consumers whom the DISCOs cannot supply and to license such persons subject to terms and conditions in order to promote competition and private sector participation and avoid a private monopoly of power.”

 

Analysts say such a strong regulation has been missing in the sector which has helped to create a monopoly for the DisCos, and hindered private investments the sector.

 

“This is good news for the sector, this is in fact what we have been hoping for,” says Ernest Akale, the managing director of Elec3city, a solar energy firm based in Abuja.

 

The DisCos have argued that by virtue of their license, they own absolute control over franchise areas. Nigeria’s geographical territory is divided among 11 DisCos who have failed to improve investments in the assets they purchased in 2013 to improve distribution in these places.

 

On June 13, NERC granted a 9.5megawatts embedded electricity generation licence to Ariaria Market Independent Power Plant Limited an Independent Electricity Distribution Licence to distribute power within Ariaria Market, in a franchise area allocated to Enugu DisCo citing ‘public interest’.

 

Enugu DisCo went to court seeking judgement to stop the plan. In their reaction, Enugu DisCo through its spokesman Emeka Eze said, “This act is in clear contravention of the regulatory provision that no company can set up a distribution network within a franchise area of a distribution company where there is already an existing and active distribution facility in the area.”

 

Chuks Nwani, an energy lawyer who has worked for one of DisCos argues that what the DisCos purchased when they acquired the license was not just a territory but the electricity supply services that can be rendered to people living in those franchise areas and excising part of that market is a violation of the contract.

 

Last year, Babatunde Fashola declared ‘eligible customer’ a provision in the power sector that allows heavy users of power (2MW) to buy power directly from generation companies. The DisCos kicked against the move saying they could lose up 60 percent of their choice customers, mostly industrial areas and large estates.

 

However, the DisCos have done little to improve distribution. They have failed to make investments in metering to improve collections and are merely content on exacting estimated billings which the regulator NERC has preferred to turn a blind eye to.

 

To handle this challenge, the NERC issued a (MAP) Meter Asset Provider regulation to allow third parties provide meters as DisCos say they cannot afford the cost.

 

Sunday Oduntan, executive secretary of Association of Nigerian Electricity Distributors (ANED) said DisCos could not provide meters because they are forced to sell lower than the cost of producing it.

But Fashola said that “no DISCO is buying power directly from the GENCO for reasons only known to them.”

“They are content to allow the government bulk trader pay the GENCO for the power and receive it under the vesting contract which they are not properly performing because they remit only about 15% to 20% of the power they receive, and have accumulated debts of about N859 Billion (Principal and Interest) owed to NBET.”

The DisCos have on three occasions last year alone threatened a force majeure, a contract clause that removes liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations, over market rules they are not happy with and the regulator has often failed to sanction them.

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