Forex scarcity, N300bn revenue shortfall hit power firms

18 May 2016, Lagos – As many parts of the nation continue to experience blackout, electricity distribution companies have said their inability to obtain foreign exchange to import equipment and a revenue shortfall of N300bn are some of the factors hampering their operations.

Power transmission station

Power transmission station

The firms said the low electricity generation occasioned by gas supply shortages as a result of pipeline vandalism meant that power distribution by them would be low.

“There is no forex. So, every time we have to secure funds to buy meters, we have to do that at the black market, which is hugely expensive. We should be a priority industry to grow jobs and to grow this economy,” the Managing Director, Ibadan Electricity Distribution Company, Mr. John Donnachie, said at a press conference in Lagos on Tuesday.

Similarly, the Executive Director, Association of Nigerian Electricity Distribution Companies, Mr. Sunday Oduntan, said the ability of the industry to meet its service delivery obligations was severely being constrained by the lack of access to foreign exchange.

He said historically, tariffs did not cover full costs and payment obligations, creating significant revenue shortfalls in the sector.

Oduntan stated, “The revenue shortfall is adversely impacting the ability of the Discos to make capital investments in metering, network expansion, equipment rehabilitation and replacement that are critical to service delivery improvement.

“The industry shortfall is massive and growing, now about N300bn. This is a cash liquidity crisis that threatens to completely undermine the electricity value chain and its ability to continue to serve its customers.”

According to him, the metering gap has dropped to 2.8 million customers, with about 3.3 million customers now metered.

He said the Discos had achieved improved meter rollout strategies at the customer level and the interface/trading points, adding, “We are getting better at accounting for the energy we receive, which will lead to more reasonable estimated bills.”

He added that the power firms had introduced a new billing system, with the ongoing customer and asset enumeration exercises, using the Global Positioning System technology.

Oduntan said, “Gas pipeline vandalism leads to shortage of gas to power stations and shortage of gas leads to low generation. Low generation and poor transmission facilities lead to low distribution. Therefore, the Discos are not to blame for poor power supply. We cannot give what we don’t have.

“Limited power generation robs customers of the needed power supply and prevents the Discos from collecting sufficient revenues to maintain and improve the network.”

According to the ANED executive director, the Discos collect revenue for all stakeholders in the value chain, with only 25 per cent of the collection being their share.

He explained, “When customers don’t pay, the whole sector is affected. Customers bypass their meters and connect themselves illegally. The industry cannot survive with this level of theft.

“The debts owed the power firms by government Ministries, Departments and Agencies plus interests now stand at N93bn. The industry cannot survive with this high level of debt.”

On the way forward, Oduntan said, “We need to generate more electricity. Government should honour the terms of the privatisation. Consistency in regulation-making is fundamental to the commercial viability of the sector. Government should allow the Discos easy access to foreign exchange.

“There is a need for partnership among all the key stakeholders in the sector to resolve all issues. Electricity is a commodity with a price and customers must pay for their consumption of this commodity.

“Failure of customers to pay for electricity means that the Discos cannot make the needed investments that will result in improved power supply, and theft of electricity by meter bypass/tempering or illegal connections increase the cost of electricity for other legitimate consumers. This has to stop.”

 

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