27 July 2016, Lagos – The nullification of the electricity tariff structure has raised concerns that some Distribution Companies, DISCOs, may be forced to close shops and abandon their projects.
The concerns came on the heels of a Federal High Court ruling on July 13, 2016, in Lagos, which proscribed the tariff structure used by the eleven DISCOs to bill their consumers.
The Chief Executive Officer, Charity Aid and Development Foundation for Africa, CADFA, Mr. Patrick Tolani, told Vanguard that if the impasse is not resolved very quickly and the tariff is not increased in the next one year, many Discos may be forced to close shops and abandon their projects.
He also said that this development portend serious danger to the financial institutions that made funds available to them to buy the companies at the onset.
“That is a serious risk to the national economy. It is difficult to predict what the Federal Government might want to do to prevent such a time-bomb from exploding,” he said.
Tolani also noted that the immediate consequence to consumers is that electricity supply will become less efficient and hours of outage will increase.
In the short to medium term, he said that, embedded energy generation and distribution will increase and more IPPs servicing residential and industrial estates will mushroom.
“This is where various interventions by institutional development agencies will provide the immediate solution for entities that are willing to sign agreements to pay appropriate pricing.
“The evidence of their efficiency and effectiveness will be useful to convince the consumers that without the assurance of a tariff structure that can guarantee that investment could be recouped, it would be impossible to attract investment into the sector.
“When that consciousness has gained prevalence across the country, it is also possible that the legal logjam would have been resolved and it might provide the motivation for the parties to set aside their misconceptions and be willing to listen more attentively to the views of others.For now, with the ongoing grandstanding, the possibility for logic to prevail at the negotiation table is very remote.”
Tolani also traced the genesis of the current crisis in the power sector to the way the legacy Power Holdings Company of Nigeria, PHCN, was unbundled and sold by the previous government.
“Those who bought the assets and liabilities of the unbundled entity were primarily not fully prepared to get the licenses they got with the intention to improve delivery of power supply to consumers in the country”.