DisCos on edge over Tesla’s entry into Nigeria’s power sector

Since BusinessDay broke the story that American electric car maker Tesla is planning entry into Nigeria’s power sector, electricity distribution companies (DisCos) have been in a panic mood over what they perceive as threat to their revenue.

“I understand the story has sent panic into the market since it broke,” Chuks Nwani, an energy lawyer, said by phone on Saturday. “The DisCos are taking the threat really seriously.”

Last week, DisCos held meetings on how the industry will respond to the perceived threat from Tesla. The mood at these conversations has been sombre and serious, according to two people who were present in the meetings.

A key concern is that since DisCos do not have exclusivity over franchise areas, Tesla and any other competitors can easily lure away their choice customers, especially as they seek to focus on industrial customers who pay higher electricity bills.

Babatunde Fashola, minister of Power, Works and Housing, and the Nigerian Electricity Regulatory Commission (NERC) have maintained that DisCos do not have exclusivity over their franchise areas, a situation that creates room for competition in the sector.

This is why projects like the Sura Market Independent Power Project and the Ariaria Market IPP have proceeded despite lawsuits by the DisCos. The Enugu DisCo took Ariaria Independent Energy Distribution Network Limited (AIEDN) to court in June last year, saying it encroached and trespassed on its distribution licensed coverage area by illegally constructing distribution lines without a licence and without the DisCo’s authorisation.

The Nigerian Electricity Regulatory Commission (NERC), the sector regulator, responded by issuing AIEDN a licence the next day.

Also, last year, in Lagos, Eko DisCo bared its fangs against a private company, PIPP LVI Distribution Limited, directing it to remove all the lines it laid on its network and cease soliciting further business from its customers. The directive didn’t stop the company’s work.

Under the Rural Electrification Agency’s Energising Economies programme, markets including Ariaria in Abia State, Sura and Iponri in Lagos and Sabon Gari in Kano have been taken away from the DisCos and handed to private investors who can provide 24-hour power supply at a tariff that is cost-reflective.

Curiously, the same regulator has also prevented the DisCos from pricing electricity sold to the public at market prices.

DisCos are also worried that Tesla’s superior product offering and focus on industrial customers could wipe off a significant chunk of their revenue. The company is said to be mulling providing batteries with a capacity of between 1Kilowatt hour to 1MW, capable of powering an industrial complex or an industrial estate, or between 10,000 to 100,000 homes.

When contacted, Tesla’s Nigerian office referred this paper to the corporation’s US press office. Robert Pierce, an energy communications representative at Tesla, said the company does not have a comment at this time “but we’ll update you if that changes”.

But a source close to Tesla said DisCos have been making enquiries from the company about its plan after the story was published. The company’s Nigerian office has been fielding calls from DisCos, many of the calls borne out of both curiosity and paranoia. This has forced Tesla to reassure them that it was not necessarily coming to deepen their woes but to offer benefits to underserved customers.
Many Nigerians are, however, excited about the prospect of Tesla’s entry into the country’s broken electricity sector.

Many see it as a breath of fresh air as can be deduced from engagements with the story on social media networks. Many also expressed fears about the business environment capable of forcing the company out of Nigeria even as it did Richard Branson.

Analysts say a positive for the power sector is that Tesla’s entry may just provide the right push needed to compel the DisCos to do actual work on improving their distribution systems and get better at collecting electricity bills.

Between October and December last year, Nigeria’s 11 electricity distribution companies collected from consumers only 65 percent of the value of electricity sold but remitted back to other operators only 33 percent of what they collected, according to the third quarter report released by NERC.

In monetary terms, total billing to electricity consumers by the 11 DisCos was N172.9 billion, but only a total collection of N106.7 billion, representing 65.5 percent of billing, was recorded.