Electricity: DisCos have failed but the fault not theirs alone, says FG

The federal government has said that the electricity distribution companies have not met its expectation of improving customer services across the country.

In a statement released on Friday by the ministry of power, works and housing, the government unveiled the steps it hopes will improve the electricity industry.

“In recognition of the critical role that energy and access to electricity plays in economic growth and poverty reduction, the federal government of Nigeria as at its federal executive council meeting of March 1, 2017 has taken far-reaching steps to reset the electricity industry.

“The first step was marked by the recent inauguration of commissioners for the Nigerian Electricity Regulatory Commission. The reconstituted commission provides the requisite legal and regulatory framework to implement a credible recovery program.

“The second critical element of the recovery plan is to provide payment assurance to electricity generation companies, improve financial liquidity in the power and banking sector and ensure households and businesses are provided with electricity, which is critical for economic growth, job creation and wealth creation.

“Accordingly, the FGN is committing up to N702 billion to the Nigerian Bulk Electricity Trading (NBET) to guarantee the payment of its obligations for electricity delivered to our homes, businesses, industries and government establishments.

“As required by the Electric Power sector reform act passed by the national assembly in 2005, the commission licensed 11 distribution companies (DisCos) to distribute and sell electricity. The companies are 60% owned by private investors with government retaining a 40% shareholding. Government also established NBET, 100% owned by government, to buy electricity in bulk from electricity generating companies (GenCos) licensed to produce electricity.

“The intention was that while the DisCos take the time necessary to improve and expand their networks of substations and lines, enumerate and meter their customers, buy additional power directly from GenCos and provide better customer services, the existing and new GenCos could confidently make investments to expand generation with assurance that the bulk buyer would pay them for the electricity they deliver.

“The DisCos have not improved customer services at the pace government and the country expect. The DisCos also do not pay fully for the electricity they receive from the GenCos through NBET.

“Some of the reasons for this failure are not the fault of the DisCos alone – regulatory and tariff inconsistencies of the past Administration, unexpected changes in the foreign exchange market, and lower than expected generation due largely to pipeline vandalization for example, have challenged the DisCos’ ability to perform. But much of the failure relates to their inadequate financial and technical capacity and some sharp practices of the DisCos in their administration of collections from customers.”

According to the statement, DisCos only paid 24.9% of their financial obligations to NBET which resulted in owing GenCos, who in turn now owe gas and equipment suppliers, banks and other partners.

“The N702 billion payment guarantee support to NBET will be effective from January 2017. From that date the support will enable NBET to pay its obligations to GenCos and through them to their gas suppliers, equipment suppliers, banks and other partners, while working with the DisCos, Government and the Commission, to improve the DisCos’ payment performance from its current 24.9% level with 100% payment as the target.”