Fashola’s riot act signals intention to confront DisCos inefficiency

The Minister of Power, Works and Housing, Mr. Babatunde Fashola SAN, Monday directed the Nigerian Electricity Regulatory Commission (NERC) to immediately step in to ensure that Electricity Distribution Companies (DisCos) improve on their distribution equipment and increase capacity to enable them optimize the use of electrical resources by the Generation Companies (GenCos).

Fashola, who spoke at a Press Briefing on the “Power Sector State of Play, Next Steps and Policy Directives”, also directed NERC to 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.

The Minister, who said the improvement in their distribution equipment and increase in capacity would enable the DisCos take up the available 2,000MW difference between the generation capacity of the GenCos and the distribution capacity of the DisCos, also directed the Regulatory Commission to stop DisCos from threatening private entrepreneurs from entering the market to supply consumers whom they are unable to supply.

But these directives to NERC, who is the power sector regulator seem to suggest two things: the Federal Government is no longer willing to tolerate the excesses of the DisCos who like over pampered children has failed to accept responsibility, commit to improving their network and waylay Nigerians with fraudulent estimated billings; it also gives credence to the notion that the sector regulator is not independent and empowered to perform its role.

The privatisation of Nigeria’s electricity assets in 2013 was meant to create a value chain. A value chain according to Investopedia is a high-level model developed by Michael Porter used to describe the process by which businesses receive raw materials, add value to the raw materials through various processes to create a finished product, and then sell the finished product to customers.

In Nigeria’s power sector, the biggest problem is the selling which seems pretty straight forward. However the DisCos have manifested such incompetence at improving collections that they seem to deserve a medal.

The argument that the tariffs are not cost reflective while valid, does little to assuage for about 30% collection of energy sold. It makes economic sense that revenue will improve if more energy users are brought into the net. It is unacceptable that in a country of over 50million people with connection to the national grid, the DisCos has less than 10,000 customers on their database.

When they acquired the assets, the DisCos conducted due diligence on the assets, the liabilities on the assets were warehoused in another company hence the assets were bought without encumbrance. They were meant to ramp up investments to improve the networks. Five years later, the assets are worse than when they acquired them and they are now given the dilapidated state of the assets as excuse for their ineptitude.

DisCos often argue that the preponderance of energy theft militates against collection but that too validates failure. If they were serious, they would have been championing the call for metering of their customers but they are championing estimated billings and running to court on account of every slight, whether real or imagined.

The reason the minister has to direct NERC to perform its role is because the regulator is seen as weak and ineffectual. Failure to enforce sanctions where applicable and enforce regulatory provisions for infractions by operators exposes the weakness of the regulator.

The Transmission Company of Nigeria (TCN) , electricity generation companies and electricity distribution companies have perpetuated flagrant abuses ranging from declaration of false information to the regulator, abusing intervention funds and operating without due regard to the provisions of Electric Power Sector Reform Act (EPSRA) 2005. Sometimes the Bureau of Public Enterprise has to fill a vacuum created by vacuous regulation.

NERC often resorts to pedestrian actions like begging Nigerians to be patient, issuing threats where sanctions would suffice, publishing hallow circulars where discipline is required for operators who violate market rules and always bending to the whims of unserious operators – especially DisCos.

The Transmission Company of Nigeria (TCN) has severally failed to submit performance report every bi-annually to allow regulators evaluate performance, the DisCos have totally abused the provision of estimated billings such that customers are being harassed with fraudulent, if not extortive billings but the regulator has always kept mute – only acting when a push has come to shove.

Often the DisCos first impulse is to rush to court whenever their comfort zone seems to be threatened. However, they forget that these judges also live in this environment with their glaring failure and complain about poor electricity supply, about noise and fumes from generators and the general breakdown of the system. Soon, the chicken will come home to roost and they will find their sanctuary has been breached.

However, in the mean time, the riot act notwithstanding, not much will change unless rules are enforced without fear or favour.