Will DISCOs heed to Fashola’s service improvement call amid financial hiccups?

The call by Babatunde Raji Fashola, Minister of Power, Works and Housing to Power distribution companies (DisCos) on the need to improve on their service delivery, collection of revenues without extortion through estimated bills is good only to the extent that such calls are heeded to.

Fashola at the 26th monthly power sector operators meeting held at the Ohiya transmission substation, Umuahia, Abia state stated that in order to improve service, Discos must accept their respective responsibilities and this is important for the purpose of identifying our respective roles and tasks.

As forthright as this admonition is, operators in the industry continue to see things differently.

Those who know in the power industry observe that the entire electricity sector is faced with huge revenue shortfalls. The implementation of cost reflective tariffs, access to long-term debt capital and equity injection, will still not address the revenue shortfall to the system in the short term.

They insist that underpinning any debt or equity capital raise is a sustainable and cost reflective electricity tariff and a long-term tariff path. Without cost reflective electricity tariffs, the electricity sector is not likely to attract and sustain the much needed investments.

Ayodele Oni, a lawyer with special interest in Energy sector in a recent article explains that MYTO’s methodology fundamentally relies on the power value chain.

According to him, electricity which “powers” the value chain can only generate revenue for the entire sector from the consumer end of the chain, where the distribution companies operate.

Oni opines that these retail tariffs determine the overall profitability of the power sector. “Without consumers paying their bills, the Discos are unable to pay NBET. In the absence of further capitalisation of NBET, this will eventually lead to NBET’s inability to pay the generating companies (which means they are unable to pay sums owed to gas suppliers). Essentially, failure of consumers to pay retail tariffs will lead to the entire value chain starving for lack of funds”.

Explaining further on the retail tariffs which he noted are not entirely cost reflective, the energy expert observed that it is difficult for the distribution companies to generate the necessary revenue to make their activities profitable as well as making the necessary investment.

“The base tariff structure is one which seeks to have the sector (particularly Discos) run at a loss for a number of years before being ultra-profitable much later in time; a structure referred to as sculpting”. He said.

A large percentage of the over 180 million citizens in Nigeria have never had it so bad when it comes to the issue of electricity supply in recent times.

Minister of Power, Works and Housing promised to do his best to keep track of developments and challenge NBET to improve on the timelines it takes to process payment to the DisCos.

According to him, “The truth is that if NBET cannot pay her bills to the GenCos, the DisCos will have no business because the bulk of their power comes from NBET. Therefore, the DisCos must, in their own very best interest see NBET as the goose that lays their golden egg, which must not die”.

KELECHI EWUZIE