FG mulls DisCos’ overhaul amid investment shortfalls

The federal government has disclosed plans to restructure electricity distribution companies (DisCos), citing unwillingness of players to invest in the sector.

Adebayo Adelabu, minister of power, said this in Abuja on Thursday during the public presentation of the National Integrated Electricity Policy, stating that DisCos have continued to perform below expectations financially.

He said the poor fiscal health of DisCos is affecting their ability to attract finance from banks.

“This is why we are going to focus on the DisCos this year and carry out a lot of restructuring. They are not ready to make more investments, and their balance sheets are not healthy to even attract debts from the finance sector,” he said.

The minister said that none of the DisCos has attempted to adopt franchising of some underperforming feeders, even after being advised to do so.

“No one has even attempted it. So, do we need to announce a minimum capital for the DisCos like banks do regularly and give them more timeline within which this capital will be proxied? Can we compel or mandate them to even franchise some underperforming feeders, which we expect them to invest in, which they have not invested?

Adelabu also disclosed plans to regularise the electricity tariffs being paid by customers, stating that the move will address the significant disparity in tariffs between different consumer bands.

He explained that the current tariff structure is unfair, with consumers in Band B paying N63 per kilowatt-hour for 17-18 hours of electricity supply, while those in Band A pay N209 per kilowatt-hour for 20 hours of supply.

Nigeria’s power sector has remained under-funded since the privatisation of late 2013. About 7.3 million electricity customers are metered, according to the Nigerian Electricity Regulatory Commission (NERC). Power cuts and grid collapse characterise the sector.

Adelabu said any adjustments to the tariff structure will not exceed the current Band A rate. Instead, the goal is to regularise the tariffs across different bands, ensuring a more equitable and sustainable system.

“We will look at the tariff again. I am not saying that we are going to increase the tariff (before I am misquoted). We are going to look at the tariffs and see how we can improve upon our modest achievement of last year, not only to ensure that we grow the sector but to also ensure that we are able to invest more in revamping all the dilapidated infrastructures.

Read also: Band A customers decry DisCos extortion amid poor supply

“We thought the migration to Band A would be faster than what we are having now, but we found out that the DisCos have refused to invest in this sector. A lot of investment is required for us to achieve an accelerated migration of lower-band customers into Band-A.

“We will look at the other bands, which are B to E. Let’s pull up the bands to A, B, and C, because the gap between the Band A tariffs and the Band B, B and C, D, and E is just too wide. And B that’s enjoying 17 or 18 hours is paying N63 while the one that’s enjoying just 20 hours, just two hours difference of supply, is paying N209.

“So we believe it’s not fair. It is not just, and we must be able to carry out some level of regularisation. So, this is not a tariff increase. Our tariff will never go beyond what a B and A are paying. But what we want to do is to regularise the tariff,” Adelabu said.

FG’s debt to GenCos, DisCos hits N4trn

Similarly, Adelabu said the federal government currently owes both the electricity generation companies (GenCos) and distribution companies (DisCos) over N4 trillion.

According to him, the government is indebted to GenCos to the tune of over N2 trillion, while there is an outstanding unpaid subsidy for 2024 of N1.97 trillion. Additionally, the government owes DisCos N450 billion for the electricity subsidy of 2024.

“One of the major issues concerning liquidity is the huge debt in the sector. We talk about legacy debt to GenCos of almost over N2 trillion and we have an outstanding unpaid subsidy for 2024 of N1.97 trillion. DisCos are owed N450 billion for 2024 electricity subsidy.

“How do you expect the GenCos to perform optimally? How do you expect them to pay for gas, services, and for the maintenance of their turbines and other infrastructures as well as their staff, if a total of over N4 trillion is being owed to them?

“I do not deceive myself. The government cannot afford to continue to fund the level of subsidy that our consumption pattern is throwing up. We have seen increased consumption of electricity. As consumption increases, the government subsidy also increases.

He further said that the key issues in the power sector are market, liquidity, and sector reforms.

The minister also noted that more than 60 percent of the manufacturing firms have cut off connection from the national grid and now engage in self-generation of electricity. This, he said, impacts the prices of the products being produced by the firms.