21 December 2016, Sweetcrude, Lagos – The Association of Nigerian Electricity Distributors, ANED, which represents the 11 electricity distribution companies or Discos operating in the country, has outlined major challenges currently confronting the companies.
Executive Director of ANED, Mr. Sunday Oduntan, who disclosed this in Abuja, said the challenges needed to be addressed for the nation to attain improved power supply.
Lamenting the situation whereby gas is being sold to power generating companies in dollars, he said the problem of the power sector was being compounded by foreign exchange fluctuation and ineffective tariff.
According to him, selling gas for local consumption in local currency, providing security against Forex fluctuation, re-engineering the Discos’ balance sheet and making it bankable, effective tariff mechanism, among others, are the solutions to saving the country from being plunged into total darkness.
He said each of the 11 Discos has been running at a loss of not less than N10/kW of energy.
He reiterated that much needed to be done in terms of regulation and unfavourable policies, noting that the industry lost N12.8 billion to the one-month delay in the take-off of the current tariff regime which left out January to become effective in February 2016 after being conceived in December 2015.
He revealed that the shortfall in revenue in the electricity sector has reached N809.8 billion, saying the shortfall being recorded in the distribution sub-sector alone was capable or crippling the sector.
He said the foremost cause of the crisis is the persistent increase in exchange rate after the December 2015 agreed rate of N197 to $1.
According to him, the Gencos who are made to buy gas from the suppliers in US dollars tender their invoice to the Discos to pay at the prevailing value of Forex and charge their tariffs based on the fixed exchange rate, thus leading to the shortfall.
“By June 2015, the exchange rate had gone up to N293 to $1, and now to about N360 at official rate, meaning the Forex value has doubled such that the same quantum of energy bought from the Gencos at N10.50 now goes for like N18, while the Discos cannot reflect this in the tariff for the end users to pay.
“So if we pay at the fixed rate of N197 to $1, we are still having a shortfall. Who is to take care of that?. And with all that, how can the Discos cope and still provide meters adequately as directed by the regulatory body?,” he said.
Oduntan blamed the crisis in the electricity supply system on inconsistency and ineptitude on the part of the Nigeria Electricity Regulatory Commission, NERC, even as he called on the government to intervene and help out by finding a lasting solution to the problem of the shortfall in the sector.