As FG, Discos Trade Blames

Neither of the federal government nor electricity distribution companies (Discos) in Nigeria’s power sector can win in the new fight over who’s to blame for the poor showings of the country’s electricity industry, writes Chineme Okafor

Pundits who have keenly observed the way Nigeria’s power sector had functioned in the last three years or thereabout, weren’t startled by the recent crossfire between the federal government through the Minister of Power, Works and Housing, Mr. Babatunde Fashola, and the power distribution companies (Discos).

They, as a matter of fact suggested to THISDAY that the exchanges came later than they had expected, noting that both parties had built up palpable tensions in the sector over the last couple of months on decisions and actions they had taken.

The relationship between the government and the Discos have not really being a healthy one as the parties involved have consistently suspected each other.

And as the months rolled by, feelings that a disagreement was in the horizon became profound and the first to fire the salvo but in a discreet manner was Fashola, who told the Discos at a meeting in Kaduna, that the rains were now upon the country and they should become a lot more efficient in their operations.

Fashola, equally made comments about the proposed legislation on estimated billing by Hon. Femi Gbajabiamila, a member of the Federal House of Representatives, stating that the practice had become a source of controversy in the sector and that government would work to end it.

“On the legislative side of government, there is a clear intention to intervene by legislation. The executive and legislative response show that government is committed to addressing this issue of meters. It would take some doing but we are committed.

“Let me be clear that every Disco is affected, no Disco is exempted, we all have meter under-supply and therefore every Disco needs to respond by providing meters quickly and seeking to end estimated billing, which is subjective, discretionary, and often times prone to abuse, and that is why it causes disaffection between the Discos and consumers,” he said.

Though the Discos did not react publicly to this, they quietly expressed their views, which was that the government appeared bent on hanging the unsavoury aspects of estimated billing on their shoulders.

They viewed this in bad taste, and inferred the government was yet to accept both parties were together in efforts to bring stable electricity to Nigerians.

Open confrontation

Almost a month after the Kaduna meeting, Fashola, addressed a press conference, where he specifically asked the Nigerian Electricity Regulatory Commission (NERC) to improve its regulation of the sector and bring the Discos to account for efficient service delivery.

Suggesting the Discos have failed to live up to expectations in the industry, the government said it would not sit back and allow them hold Nigeria hostage with their alleged poor performances.

Fashola, thus asked them to buckle up or get out and leave the business of power distribution for people who were willing to compete and uphold their obligations in the sector.

He wanted NERC to begin to enforce the contracts of service of the Discos with regards to supply of meters, upgrade of their distribution networks and promotion of market efficiency.

He, in summary, substantially blamed the Discos for the failings of the sectors, and even went as far as insisting the government didn’t grant exclusive rights to them over their distribution areas, and in which case, the NERC could further split their networks, especially in areas still underserved by the Discos.

“It must be obvious to the ordinary person that the supply of power is now a private business in the hands of private operators and in the final end, in the hands of the Discos.

“But because of the critical and sensitive nature of power supply, government has not left the supply solely,” said Fashola.

He however stated: “It is the Discos who are service providers that you should turn to when you have questions about transformer collapse and metering,” adding, “As it is now obvious, from 2016 when the Discos complained about lack of power to distribute, the problem today is that the Discos cannot distribute all of the power that is available, leaving the sector with an unused capacity of 2000 megawatts approximately.”

“In the face of this picture, where we have power to sell, with more to come, the number of complaints coming to government for meters, which the Discos should supply, and for estimated billings, and mass disconnections when not everybody is owing cannot continue.

“Government must act and will do so. The Discos bought these assets with their eyes opened, and they must compete to deliver or exit,” Fashola insisted.

The Discos Fired Back

Not wanting to concede to the blames leveled against them by Fashola, the Discos through their association – the Association of Nigerian Electricity Distributors (ANED) – firmly reacted to him and claimed he was quite economical with some of his claims, notably the level of power generation.

They promptly indicated the government was fighting a battle none of the parties would be comfortable with and allegation that the government was misrepresenting facts.

The Discos even linked the new disagreement to the upcoming 2019 elections, claiming they were been demonised for political mileages.

“It is with much regret that we feel compelled to respond to the significantly distorted picture that has been painted of the Disco by the Honourable Minister of Power, Works and Housing in his press briefing of Monday, July 9th, 2018.

“In good faith and with recognition that the challenges of the Nigerian Electricity Industry (NESI) cannot be turned around based on a culture of misrepresentation, we have declined to rebut previous inaccurate assertions by the minister and other government functionaries.

“In this instance, it is clear that the objective of that briefing was to demonise the Discos, who by the structure of NESI, are the faces of a difficult sector. We are also left wondering whether such demonisation of the Discos is camouflage for the absence of the effective policy leadership that is desired for implementing the enabling environment that is necessary for the viability and sustainability of NESI?,” they said through ANED’s Director of Research and Documentation, Mr. Sunday Oduntan.

Oduntan further stated, “We recognise that we are on the crux of a political season, in which all manner of advantage is being sought by political contenders, we however do not want to be used as the whipping dog to advance other people’s agenda.”

According to him, “Our members, the Discos, are not politicians, even though they distribute a product that is of great importance to politicians, in view of the needs of their constituents.

“Our constituency which consists of customers, employees, bankers, vendors and investors have a greater interest in improved service delivery than the adoption of cheap theatrics and propaganda for political advantage.

“We take our service delivery obligations to our customers seriously, with total commitment to improving the quality of the electricity distribution experience to them, as well as meeting the performance obligations of the agreement that we have with the Bureau for Public Enterprises (BPE). “This is more so as the commercial success of our investments is intrinsically tied to the quality of our service delivery.”

Oduntan denied the entire allegations heaped on the Discos by the minister, noting that the government at the privatisation exercise acknowledged the sector was moribund and famous for its inefficiencies, and needed to have a tariff structure that covers the cost of all stakeholders along the value chain, but has so far failed to live by this.

This, he added has also contributed to the failure of the market to move into its planned contract-based regime. He inferred the problems of the sector were self-inflicted and could be solved with honest commitments from all stakeholders.

“Unfortunately, the evolution into TEM (Transition Electricity Market) was truncated by politically-induced regulatory restrictions and actions - (removal of collection losses, freezing of the tariff for R-2 residential class for 18 months, non-payment of N100 billion subsidy for 2013 and 2014, under-recovery of required revenue, non-implementation of minor and major tariff reviews, all manner of politically induced regulatory orders.) - that have resulted in the inability of the Discos to recover the cost of the energy that they supply, preventing their ability to enter into contracts to directly purchase energy from Gencos,” he explained.

Oduntan, equally stated that the current 4.1 million meter gap in the sector was as a result of the government’s failure to invest in metering in over 62 years of running the sector, adding that no other party can be as interested in universal metering of consumers than the Discos because according to him, “metering alone reduces collection losses very significantly and improves customers willingness to pay.”

Regarding power generation profile which Fashola said has improved overtime, Oduntan said in disagreement, “We do not understand the constant references to the increase of generation capacity to 7,000MW, from 4,000MW, for the period of 2015 to 2018 that has been used as the basis of defining the Discos as incapable of taking on more power.

“A review of NERC’s “Daily Energy Watch” for January 28th, 2015 would indicate a generation availability of 6,421MW - divided into peak of 4,230MW and constrained energy of 2,191 MW. In other words, it is misleading to state that available generation has grown from 4,000MW in 2015, as a measure of progress, given that a volume of generation slightly under 7,000 MW already or previously existed, prior to the beginning of this administration.”

He said the government could not claim to have an idle 2000MW capacity when gas supply to generation plants have not been consistent.

As regards the government financial support for the sector, Oduntan, explained that the Discos only got N58.45 billion or 27.75 per cent of the N213 billion the Central Bank of Nigeria (CBN) previously provided for the country’s energy sector, adding that it should not be misread that it got so much and yet doing very little.

Experts’ Opinion

Considering the anxiety the development has thrown up, experts who volunteered their opinions to THISDAY, chose to have their names not mentioned in the report.

They, however explained that the development was not in the interest of the country’s power sector.

For instance, they stated that the government appeared to have become exceedingly political with the operations of the sector, adding that the regulatory jobs of the NERC had largely been taken away from it, or at best, orders handed down to it to implement.

Some of them even suggested the government had been largely responsible for the failings of the sector and cited the time it took to constitute the sector’s regulator after the term of its former commissioners expired in December 2015, as well as its alleged refusal to allow the regulator some independence in dealing with the Discos.

According to them, that Fashola and the Discos now exchange words over service delivery, meant that the NERC was either failing in its regulatory tasks or has been relegated and not taking up its jobs.

“You’ll see a veiled politicisation of the issues, and that is very unfortunate because the sector does not need that now or anytime. This is a sector that has not attracted any form of new investments since it was privatised and I think that should worry the government and operators more. “We should not get to the point of scaring investors. We should not give the impression that this is a difficult sector to invest in because it is not if the government allowed the regulator to do its job. How often do we hear the ministry of finance quarrel with the banks? It never does because it has no business with them when there is a CBN to do all the regulatory and supervisory works,” said an expert who spoke unanimously.

The expert further stated that while the Discos are also guilty of poor performance at some of their tasks, they however have valid claims against the government as regards its interference with the workings of the sector, notably tariff. He said, the NERC and not the power ministry was enough to deal decisively and with regulatory measures with the Discos and their failures.