The Federal Government is putting in place measures to increase the capacity of electricity distribution companies (DisCos) by 2,000 megawatts (mw), to improve service to consumers.
However, there are indications that the DisCos are not comfortable with the arrangement. The Federal Government intends to make direct investments in the distribution arm of the power supply value chain through independent investors. But DisCos are demanding that the government should channel such investments through them, fearing that the plan will impinge on their operations and negatively impact returns on their investments.
These concerns, among others, are contained in a letter dated September 27, 2017 entitled: “Federal Government of Nigeria’s Initiatives in the Electricity Sector and the Impact on Electricity Distribution Company Activities.” It was jointly signed by the DisCos and addressed to the Nigerian Electricity Regulatory Commission (NERC), with a copy sent to the Minister.
Power, Works and Housing Minister, Babatunde Fashola, who disclosed this at the 20th monthly power sector operators’ meeting in Owerri, Imo State, said the substance of government initiatives, which prompted the letter by the DisCos, could be summarised as: provision of meters to consumers through licensing of meter suppliers; provision of more power to consumers through licensing of eligible customers; and provision of independent dedicated power to universities.
Others include promotion of the use of solar power through mini-grids; and expansion of the distribution network of DisCos so that they can take on additional 2,000mw of power now available for supply
He said:“We are also making promising progress in recovering debts due from international customers and you will be notified of how much has been received when the appropriate accounts confirm that they have received value for the credits we have been notified of.
“It is against this background that I now move to the challenges, which we still have to overcome; the more pressing of which is how the DisCos can quickly increase their capacity to take power and distribute to the consumers.”
Fashola had, at a similar meeting in Lagos, last month, said: “Today, we have more power available to go on the grid over 6000Mw because generation and transmission have improved. The capacities are above what the Discos can carry. So, they have to play catch up.”
He commended the DisCos for the decision to channel their complaints to NERC through a jointly- signed letter. “This is a welcome departure from the previous order and it is to be encouraged,” he said, adding that without doubt, the government’s initiatives are targeted at improving service to the people. “In your letter under reference copied to me, you expressed concerns about the impact of these initiatives on your businesses,”he said.
He continued: “It is not my understanding that you oppose them, which is commendable. It is my understanding that you fear that you will lose some income or some customers if government proceeds; and on the question of meters, you seek to have technical compatibility with what the licencee will operate. In respect of possible investment in distribution equipment you seek that government should route the investment through the DisCos.
“Understandably you are concerned about investment recovery and in your views, the solution is a tariff review. While your concerns about business viability, financial stability and cost recovery are well understood and indeed, supported by the Electric Power Sector Perform Act of 2005 (EPSRA), which government will respect, I must point out that government’s focus is also strong on the issue of service to the people.There must be a balance somewhere in the middle.
“As far as the promotion of solar and other sources of independent power are concerned, please note that not only are they supported by the ESPRA, they are consistent with our Paris Climate Change Agreement Obligations and with emerging global practice. DisCos have nothing to fear about solar. It is a space in which they are entitled to play, but in which they cannot exclude others from playing.
“The ESPRA did not contemplate a monopoly for any licensee unless it is expressly stated in the license. As for channelling investment into distribution assets through the DisCos, government has not yet taken a position on what the best way forward will be.
“However, the government is clear that a solution must be found quickly to the inability of DisCos to take about 2000Mw of power that will imminently increase as we get more incremental power.
“But the point that must be made is for all of us to remember that, government is a 40 per cent shareholder of the DisCos (on behalf of the Federal, State, Local Governments and workers) and therefore, has a self-benefitting interest in the wellbeing and efficiency of the DisCos.”