• Sunday, June 23, 2024
businessday logo


Gencos, Discos ownership structure harms power supply


The current problems bedevilling the power sector, resulting in epileptic electricity supply could be traced to the ownership structure in which the three loops of the chain- generation, distribution and transmission, are held in separate hands, causing poor co-ordination and synergies, industry stakeholders say.

The stakeholders consequently argue that the current  ownership structure of the assets, as well as poor funding and week institutional controls, are the cause of the nightmare of intermittent power supply and disruption which Nigerians are subjected to.

They reason that the present situation where the different companies as presently constituted, are working at cross-purposes, does not augur well for the economy and further contend that much could be achieved when resources are pooled to achieve a common objective.

Besides, they say the harmonisation of the management of the companies would enhance full utilisation of the human and material resources for maximum output..

  The proponents further say they want government to allow for an integrated structure  for the power sector  so that  the same company  can be  in charge of generation and distribution.  This, they say, would engender efficiency and prompt attendance to issues affecting generation and distribution as well as transmission.

A managing director of one of the electricity distributing companies  who  spoke to BusinessDay on condition of anonymity, said that the recommendation, if approved by government would be the most efficient way of ensuring that the power generated and distributed is properly managed.

“How do you explain a situation where one  company is in charge  of generation, another in charge of distribution and yet another, responsible  for  transmission, and  if there are issues with any of these, how do you address it?  he asked.

He said if  the Genco has a challenge, the Disco which depends on it for supply may be forced  to stop  operation abruptly because it was not informed  about the challenge before, but if  the Genco and Disco are owned by one company, the situation could be promptly  managed.

Regarding institutional weakness, he said the regulatory agency needs to be strengthened as well as up and doing, to ensure the industry functions the way it effectively.

He further stated  that reflective tariff is the only way to attract serious funding to the industry.

John Ayodele ,deputy managing  director  of Ibadan  Electricity Distribution Company, however said  it ideal for different companies to own the assets but  observed that there should be binding contracts to ensure that they function well. “There is no contract signed between anybody parties, there is no contract that has been signed to deliver 1,000 megawatts in the industry at the moment”.

He said the only contract ever signed was a gas contract for Egbin Power Plant which was  to generate 220 megawatts of electricity.

He however observed  that Gencos and Discos may not necessarily be owned by one company but  that the companies involved can operate interdependently through agreements  because the various sectors have different  assignments.

He stated that because there are credibility challenges in the power sector, banks are not ready to issue loans. “A Disco cannot go to the banks and ask for loans. No way, their balance sheet is not sufficient to earn that opportunity. If you go to any bank and present the balance sheet of my company, the clerk  to the manager  would send me out”. The situation is that bad,” he said.

A former managing director of  one of the Discos has however kicked against such an arrangement which he says would create conflicting interests.  He says Nigerians are yet to be told  what  the power  needs  of the country are, adding  that the  country currently produces 10,000 megawatts  if all  that are  being  generated  by national  integrated  power plants and the  old  power plants  are  put together.

“Even if we get 7,000 megawatts today, the country would be relatively stable in terms of power supply.”

Concerning funding, he said the privatisation exercise was carried out because it was believed that it would attract funding from technical partners to the  sectors.

He adds that unfortunately, the technical partners, rather than bringing money, are now being paid by the buyers of the electricity companies and that this is a problem.

He also observes that the Discos are not equipped for efficient revenue collection and that as such, they are  only getting about 60 percent of what is due them.

Olusola Bello