Between Discos and FG

NIGERIA’s electricity sector breeds anger. The citizens are frustrated that despite the sale of national assets to private businesses, electricity supply in the country seems to be going from the ridiculous to the horrible and, to make it worse, they are billed for electricity that is not supplied. The government is livid with the electricity distribution companies for their inability to live up to the agreement of improving energy distribution, while the electricity distribution companies (Discos) are enraged that after investing billions of naira to buy the outfits, they are neither able to do as much as they would want nor able to generate as much as they should on their investments.

Indeed, so awful is the electricity distribution situation in the country that the government once called on the Disco operators to quit if they could not deliver. A prompt response from the Disco owners spoke of their readiness to ship out, provided the government would pay them 90 per cent of the money paid for the entities.  But at the root of this quandary is the inability of the parties to keep to the terms of their agreement.

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According to the agreement entered into with the electricity distribution companies by the Federal Government in 2013, the government agreed to ensure a cost-reflective tariff as well as the payment of N100 billion subsidy to the Discos so as to make them debt-free with a view to positioning them to deliver adequate and sustainable power to consumers. But after almost five years, neither of these has happened. The old Power Holding Company of Nigeria (PHCN) gas debt is still hanging on the Discos. Similarly, cost-reflective tariff is still a mirage. On their own part, the Discos promised to deliver 1.7 million pre-paid meters to consumers, ensure an improvement of service delivery, extend the distribution network and scale down power interruptions. But none of these has happened six years later.

However, the Discos are quick to heap the blame for their failure on the government. They always insist that if the government takes care of its own end, it would be easy for them to fulfill their own part of the bargain. As a result of the failure of the two parties, power supply in Nigeria has become not only irregular but alarmingly irascible. Inflation has been on the increase as a consequence of poor electricity supply. Unemployment has gone up as many companies continue to ease out workers to bring down the cost of production occasioned by high cost of generating power. Poverty has also been escalated.

We are of the opinion that as bad as the situation appears to be currently, it could be salvaged if the parties involved are willing to keep to the terms of their agreement. First, the government should pay the subsidy to relieve the Discos of the burden of the inherited debt. The government should also work towards emplacing a cost-reflective tariff. It should come to the understanding that electricity distribution is no longer a social service. The businesses have to generate enough revenue to guarantee sustainability. On their part, the Discos should also resolve to invest in their networks to improve service delivery. Many of the inherited lines are weak and cannot support electricity transmission. This is one of the reasons downtime is high. Changing these will greatly improve electricity distribution.

Then on the issue of meters, it is apparent that the Discos lack the capacity to produce or procure meters. Counting  on Discos for meter provision is akin to waiting for Godot; it is going to be a long wait. Therefore, it is our considered opinion that the government should review this aspect of the agreement, take away meter provision from Discos and give this to those with the capacity to deliver same. This will enable Discos the opportunity to concentrate on their core business of electricity distribution. Finally, the Nigerian Electricity Regulatory Commission (NERC) should be alive to its responsibility and keep the Discos as well as other operators in the industry on their toes. NERC should monitor Discos’ performance and apply sanctions when they fail to deliver on agreed terms.

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