06 March 2017, Abuja – Electricity distribution companies have not improved customer services at the pace that the government and the country expects, the Ministry of Power, Works and Housing has said.
It said in a communiqué that the Discos were not paying fully for the electricity they received from the generation companies through the Nigerian Bulk Electricity Trading, to which N702bn had been committed by the Federal Government to enable it meet its payment obligations to Gencos on a more regular basis in order to ensure delivery of electricity across the country.
The ministry, however, said some of the reasons for the failure were not the fault of the Discos alone.
The government-owned NBET was established to buy electricity in bulk from the generating companies licensed to produce electricity and sell to the Discos.
The communiqué read in part, “Regulatory and tariff inconsistencies of the past administration, unexpected changes in the foreign exchange market, and lower than expected generation due largely to pipeline vandalism, 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.”
Explaining the reason for the government intervention, the communiqué stated that as a result of the aforementioned inadequacies, the NBET’s monthly collection from the Discos was not enough to pay for its contractual obligation to the Gencos, resulting in huge government debts.
It said the payment by the Discos to NBET was as low as 17 per cent of the latter’s invoice in recent months.
“In January 2017, it was 24.9 per cent. The Gencos in turn do not pay their gas suppliers, equipment suppliers, banks and other partners what they are contractually bound to pay. The Discos also do not pay the Transmission Company of Nigeria what is contractually due to it for transmitting the energy the Discos sell to consumers,” the ministry said.
It added that these had resulted in payment shortfalls with the accumulated debts increasingly threatening the electricity supply system and undermining the growth of the economy and the electricity sector.
The communiqué further stated, “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 part of its Economic Growth and Recovery Plan, at its Federal Executive Council meeting of March 1, 2017, has taken far-reaching steps to reset the electricity industry.
“These steps, conceived within a sequence of sector reforms, confirm government’s commitment to enforcing decisions taken as a nation to move from a vertically integrated government owned statutory monopoly that did not serve our power needs, to a private sector led industry, with government as guarantor, regulator and policy maker, that achieves the objective of developing a better and sustainable power sector as quickly as possible.”–