Uncertainty clouds DisCos operations as performance review nears

A cloud of uncertainty hangs about the operations of Nigeria’s eleven electricity distribution companies (DisCos) as the November deadline for review of their performance agreement with the Federal Government when privatised national electricity assets were handed over to them, approaches.

 

According to the privatisation rules drawn up in 2005, successful core investors were required to submit a proposal aimed at reducing aggregate technical, commercial and collection (ATC&C)losses over a five year period since it was envisaged that initially demand will trump supply.

 

The level of loss will be incorporated into the Multi Year Tariff Order (MYTO), which will stipulate the annual investment requirement, allowable operational expenditure, approved rate of return on equity and other allowable expenses for each DisCo. Based on this, it was expected that the core investor that will be selected would have the best technical, financial and managerial qualification for reducing ATC&C losses.

 

This did not happen. Analysts say investors who got the assets were unprepared, investments needed to replace dilapidated assets did not materialise and they could only meter about 10 percent of their customers three years into the privatisation exercise.

 

“If we take into consideration that, after five years of privatization, there are still people and businesses who do not have power or enough power, common sense and public interest demands that we must not resist ordinary people, small businesses like shops and markets from seeking alternative sources of energy,” Babatunde Fashola, minister of Power, Works and Housing said in a directive to the Nigerian Electricity Regulatory Commission (NERC) in July, borne out of displeasure at DisCos’ service.

 

The DisCos in response insist that the government has not been forthright in meeting its own obligations in the performance agreement.

 

“The government too has not fulfilled its own obligation in the performance agreement and it has not addressed these challenges which have impacted our operations negatively,” said an official of one of the DisCos who pleaded anonymity not to jeopardise future discussions with government.

 

The DisCos accuse the government of reneging on key areas of the performance agreement including cost reflective tariff regime, debt-free book upon acquiring assets by DisCos and N100billion annual subventions for two years to bridge the gap for inadequate retail cost of electricity.

 

Much to their displeasure, DisCos have not been allowed to raise the retail price of electricity due to a political concern that it may draw the ire of Nigerian’s who are already suffering from poor supply. Government ministries and departments owe billions in electricity debt and DisCos accuse the regulator of being partial and unfair.

 

Two sources in the DisCos confirm that there are moves by the Bureau of Public Enterprise to reset the privatisation programme but they are uncertain about what this will entail.

 

“The BPE has not official communicated to us, what they are planning to do, but we have heard them talk about resetting the whole privatisation arrangement,” said one source.

 

Fashola had assured it is neither his intention nor that of Government to take over the business of the DisCos, he said in July, “On the contrary, it is Government’s desire to see DisCos thrive and flourish in a competitive environment”, adding, “In the period when they are not yet ready, willing, or able, life must go on and we must find solutions and substitutes as we have seen in other sectors,” he said justifying granting licenses to minigrid operators granted licenses to operate in areas allocated to DisCos.

 

Meanwhile NERC says it is embarking on deep reforms including carrying out forensic audit of DisCos to determine their income as well as true costs, and setting up an Information Technology system that will monitor revenue collection in real time and also show how money is spent.

 

The regulator is proposing to tackle debts by government agencies through metering and deducting electricity after appropriation has been disbursed. It also recently enacted a regulation to allow private investors provide meters for customers and receive direction to introduce competition charge to assuage fear of DisCo losses over eligible customer declaration.

 

“This is not a time to trade blames, because there is enough to go round; rather it is a time to reiterate everybody’s responsibility and urge all of us to brace up, to do what we are obliged to do, which is to serve the people” Fashola had said.

 

The DisCos say they want to be carried along.