Discos Kick Over Alleged FG Expropriation of Power Distribution Assets

*Condemn ‘Thuggish’ Arrest of BEDC CEO

*Declare Record N777bn Q1 Revenues

wwww.2n-network.com/Benin City

August 25, 2022

Association of Nigerian Electricity Distributors, ANED, has accused the federal government of illegally taking five distribution companies, Discos. The action, according to the group, has worsened the power supply situation in the country.

In a statement issued on Wednesday by the association’s Director of Research and Advocacy, Mr. Sunday Oduntan, the group also accused the federal government of using it 40% stake it acquired through the Bureau of Public Enterprise, BPE, to complicate the sector’s limited performance.

The statement warned that any attempt to resell the seized Discos would amount to an exercise in futility.

“Expropriation or Disregard for the Rule of Law is Not the Answer to NESI’s Challenges,” the Discos’ body noted regrettably that recent events happening in the sector had continued to undermine an already fragile and moribund Nigerian Electricity Supply Industry (NESI).

Director General of BPE, Mr. Alex Okoh, recently announced that the government had successfully concluded the takeover of struggling Discos, including Kaduna, Kano, Ibadan and Port Harcourt Discos, adding that the challenge in the takeover of Benin Disco was being addressed.

Okoh’s announcement is sequel to an announcement by the federal government in July, explaining that the takeover by some banks became imperative following the Discos’ inability to meet up with debt obligations repayment. The move, government said, is part of on-going restructuring process.

But ANED insists that rather than the reason adduced by the federal government, the real issue is the long history of policy and regulatory inconsistency, which contributed significantly to the poor performance of sectoral operators, worsened by a resort to violations of the rule of law as witnessed through the expropriation of Discos outside the framework of the agreements reached under the privatisation of the assets.

ANED cited as example, the alleged illegal abduction of BEDC Chief Executive Officer, CEO, which it describes as the “Thuggish arrest or abduction of the Chief Executive Officer of the Benin Electricity Distribution Company, BEDC, by purportedly rogue elements of the law enforcement apparatus, in enforcement of this expropriation, on Monday, August 15th, 2022.”

Speaking via Oduntan, ANED noted that the disregard of the restraining or Ex Parte order issued by a Federal High Court on the expropriation, in favour of BEDC, which has expired, is another evidence of the Federal government’s mismanagement of issues surrounding Discos.

According to him, the action is an evident lack of respect for the rule of law and lack of policy and regulatory consistency, both of which are part of what was envisioned under the National Electricity Power Policy, NEPP, 2001, the foundation of the Electric Power Sector Reform Act, 2005, EPSRA, the statutory basis for the privatization.

“Disco performance cannot be divorced from the presence of an enabling environment or, particularly, a partnership with the federal government. Indeed, the shining moments in the evolution of the privatisation have come out of collaboration between the DisCos and the agencies of government,” Oduntan said.

Oduntan pointed out that the Central Bank of Nigeria’s, CBN, loan initiative to the Discos in collaboration with the Ministry of Finance, BPE, the Nigerian Electricity Regulatory Commission, NERC, and the Ministry of Power, established a successful template for handling evolving issues of the Discos’ lack of access to capital and addressing the metering gap, insisting that NERC, in tandem with CBN also worked commendably with the Discos to address and reverse some of the historical regulatory challenges that impacted adversely on Discos’ performance.

According to Oduntan, another major challenge faced by Discos is that government shortcomings were also made to look like those of the distribution companies. He listed the deficiencies as, “a misalignment or misallocation of risk (government-owned risk of gas pipeline vandalisation, limited gas pipeline network and commercial framework, limited or constrained government-owned transmission network, government policy/regulatory inconsistencies have all been wrongly passed on to the Discos-undermining a core predicate of the electricity business that risk should be borne by the party that can best bear it.

“Non-payment of electricity liabilities by the Ministries, Departments and Agency (MDA), inconsistent and unsustainable electricity tariff modelling and implementation, electricity theft, etc.”

According to him, the federal government’s acknowledgement of its role in the non-performance of the Discos resulted in the determination or declaration of the two years of mutual non-performance by the government and the Discos, 2017 and 2018, under the Multi- Year Tariff Order, MYTO-2015, adding that BPE’s Performance Assessment of nine Discos Comprehensive Report of December 2021, had further stated that several commitments and investments had not been executed timely by government, leading to continuous structural issues impacting Discos.

Oduntan insisted that the same report further highlighted specific areas of government failure to meet its obligations and commitments, which include misallocation of liabilities on the books of Discos as market shortfall and inadequate electricity supply.

Others are insufficient investment to address 30 years of historical underinvestment in the sector, misalignment between assets, meters, number of customers, communicated to the Discos pre-privatisation and clarification of roles between BPE and NERC not done at the time of privatization and among others, the persistent security breaches’ impact on Discos’ collection capacity.

“Significantly, these challenges were similarly identified in the final report issued by the National Economic Council’s (NEC) Ad Hoc Committee on the Review of the Ownership Structure of the Partially-Privatised Electricity Distribution Companies, (March 2020.)

“It is important to also highlight that the Director General, BPE, as a board member who represents the federal government’s 40 percent minority share in each of the Discos, is an integral participant in the board decisions that guide the operations of the Discos.

“How then is the ‘restructuring’ or expropriation of the five Discos justified, given the government’s contribution to the challenges that have bedeviled Disco operations?

The Discos cannot reasonably be exempted from the issue of non-performance, admittedly.

“The Discos take and own responsibility for falling short of their performance objectives, thereby depriving their valued electricity customers a key contributor to improved quality of life. However, Disco investors and operators remain totally committed to improving service delivery to their customers.”

Oduntan pointed out that evidence abound of the progress made by Discos in revenue collection which yielded N777bn in the first quarter, Q1, of 2022, and the reduction of average Aggregate Technical, Commercial and Collection Losses, ATC&C, estimated in excess of 56% pre-privatisation but now 46.3%.

Other areas to include increase in the number of registered customers from less than two million pre-privatisation era to 10.2 million, and the establishment of 1,035 customer centers. That is in addition to the creation of 32,573 jobs as against 23,515 at the time the sector was privatized, increased metering from 2.3 million in 2013 to 4.7 million, representing a 100% increase, and the installation of 129,352 distribution transformers as of 2020 against 75,041 in 2013, representing a 72% increase.

Oduntan disclosed further that the Discos increased electricity distribution capacity from 15 gigawatts to 30GW post privatisation, pointing out however, that the distribution companies still have a long way to go to meet the service delivery requirements that will ensure consistent and stable electricity to their customers.

Leave a Reply

Your email address will not be published.