Why Nigerian power Distribution Companies should recapitalise

* DisCos fail to implement cost-relative tariffs -NEC

Isola Moses | ConsumerConnect

The recapitalisation of electricity Distribution Companies (DisCos) and firm implementation of industry rules are some of the measures that will turn the power sector around, a report submitted to Nigeria’s National Economic Council (NEC) has recommended.

Agency report indicates that Malam Nasir El-Rufai-led ad-hoc Committee on the Review of the Ownership Structure of the Electricity Power Distribution Companies, submitted its report to the NEC Thursday, March 19.

Nasarawa State Governor Abdullahi Sule; Edo State Governor Godwin Obaseki; Group Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari; and  Director-General, Nigeria Centre for Disease Control (NCDC), and Chikwe Ihekweazu jointly briefed reporters after the NEC meeting at the Presidential Villa, in Abuja, FCT.

Governor Sule said the report noted that the DisCos had underperformed as a result of some challenges, including failure to implement cost-relative tariffs.

According to him, the report further observed that the companies acquired debts because of inefficient bill collection.

It recommended that the companies should get their acts together to return to healthy financial records.

The Nasarawa governor said: “The sector has underperformed due to critical challenges which include non-implementation of cost-relative tariffs, misalignment between the investors and BPE on required investment in DisCos, underinvestment in infrastructure and poor implementation of rules/ contracts.

“The report posited that DisCos are indebted because of inefficient collection and under remittance to the market.

Excluding tariffs shortfall (responsibility of FGN) DisCos’ indebtedness to the electricity market amounts to N230billion.

This includes N48billion of MDAs indebtedness to DisCos. DisCos indebtedness is driven by collection short fall and low remittance.

“Urgent measures needed to turn the sector around include: recapitalisation of DisCos, firm implementation of industry rules/contracts and the insistence on sound governance principles that improve performance.

“The committee recommended that: Return to orderly evolution under market rules that make contract effective between GenCos/IPPS, TCN, DisCos and gas suppliers, backed by payment and performance guarantees.”

The Nasarawa Governor also said the Minister for Finance, Budget and National Planning presented an update on the balances of the Excess Crude Account (ECA) as of March 17, 2020, which stood at $72, 220,756.74; Stabilisation Account, N35, 806,389,699.67; and Natural Resources Development Fund Account, N109, 360,903,475.60.

Dr. Ihekweazu said the states had agreed to collaborate with the Federal Government to fight the COVID-19.

“I briefed governors on the risk that we face as a country and the need to pull together to respond to this. We agree that there was still a window of opportunity to respond aggressively, carry out certain measures and prevent; if we don’t succeed, at least slow down the spread of this epidemic across our country.

“We also agreed that this was a collective responsibility for all cadres of government and their Excellencies agreed to fund a series of urgently needed interventions, both short term interventions that are required for immediate response and medium to long-term interventions that are needed to provide for the control of this and future outbreaks”, he said.

He listed the immediate interventions to include, the expansion of the laboratories network in Nigeria to more states and the expansion of treatment centres to at least one in each state among others.