The accusations and counter-accusations between the Minister of Power, Works and Housing, Mr Babatunde Fashola, and electricity distribution firms are stoking up consumers’ disquiet about the state of the power sector, ’FEMI ASU writes
Electricity consumers and other stakeholders have expressed concerns about the nation’s power sector following the disagreement between the Minister of Power, Works and Housing, Mr Babatunde Fashola, and the distribution companies.
They also called for a review of the privatisation process that led to the takeover in November 2013 of the electricity generation and distribution companies created from the defunct Power Holding Company of Nigeria.
Almost five years after the privatisation, power supply continues to hover between 3,000 megawatts and 4,000MW, with many consumers groaning over estimated billing as demand for prepaid meters remains unmet.
On Friday, Fashola lambasted the Association of Nigerian Electricity Distributors and condemned its recent reaction to his directives to the Nigerian Electricity Regulatory Commission, the Bureau of Public Enterprises and the Nigeria Bulk Electricity Trading Company.
He accused the Discos of sabotaging the nation’s economy through their actions.
The minister was responding to a 28-page document released in Abuja on Tuesday by ANED in which the power distributors argued that most of the statements about the power sector that were made by Fashola two weeks ago at a press briefing were false.
Fashola, while briefing journalists on the status of the power sector in Abuja, identified a lot of lapses on the part of the Discos.
But the Discos, in their response, said comments made by the minister on metering, power generation, transmission capacities and stranded electricity, among others, were significantly distorted.
They accused the ministry of consistently promoting policies that had resulted in sector-wide confusion; infringing on the responsibilities of the various sector players; imposing its agenda on the regulator; compromising its independence; creating a lack of respect for contracts; as well as distorting and redefining the law of privatisation.
Displeased with ANED’s reaction to his briefing, the minister said in a statement on Friday, “Electricity consumers (which include Fashola) want better service; the NBET wants its money – about N800bn – so she can pay the Gencos; if the Discos can prove that the Federal Government owes more than what we admit, they should deduct N72bn from the N800bn and pay the remaining N728bn, which they owe the NBET.
“The Discos should respond to the query from the Ministry of Power, Works and Housing as to why 408 feeders, which have a capacity to deliver 5,756MW of power to consumers, only carry 444MW because of faulty lines, bad equipment and load shedding.”
The President, Electricity Consumers Association of Nigeria, Mr Chijioke James, in a telephone interview with our correspondent, advised the two parties to adhere strictly to the laws governing their relationship.
He said a lot of politics, greed and personal interest overriding the public interest in the sector had left the consumers worse off, adding, “From 2005 till now, there is nothing for consumers to cheer about; consumers are even crying for the basics from the distribution companies.
“The regulator is not alive to its responsibilities, and unfortunately, the consumer advocacy groups do not have the requisite capacity to hold both the distribution companies and the regulator to account.”
James stated that the dispute between the minister and the Discos would worsen the state of the power sector.
He said, “The government cannot be encouraged to run this as if we are in a military government where you rule by decrees. We run a constitutional democracy and we want foreign and local investments in the sector. So, the government and the regulator must be guided by the rules.
“Rules are meant to be obeyed. Rules are meant to be applied strictly. Then, if anyone is in breach, there should be penalty for that. That is the way to go to bring sanity into the sector.”
According to James, the position of consumers is that the government has the power to review the privatisation process for as long as it doesn’t breach the existing contracts it has with the firms.
The Director General, Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, stated, “What it (the dispute) points to is that we have not achieved the desired outcome from the power sector reform, particularly the privatisation. The privatisation is not an end in itself; it is a means to an end, and that end is the delivery of electricity to the people.
“So, the minister is talking from the point of achieving the purpose of the reform; the operators are looking more at the investments that they have made; and of course, the bigger emphasis is on the commercial objective because they are investors; they have put in money and want to recoup their money.”
Yusuf is of the view that the country didn’t quite get the idea of the power sector reform right, adding that there were legal, process and transparency issues with the privatisation.
“Questions have been raised about the capacity of the Discos to deliver, and many of the Discos have owned up that they didn’t quite have a good knowledge of what actually was on the ground as of the time they were investing,” he said.
He noted that some of the investors borrowed money from the banks to buy the assets, saying, “It is not a good investment model. First, the cost of funding in our banking system is too high. Secondly, these projects are long-term projects.”
The LCCI DG noted that the disagreement between the minister and the Discos would further affect investment.
Yusuf stated, “What is causing the controversy are some of the clauses in their agreements. The minister’s perspective of the agreements is different from that of the Discos. I know that one or two of them have gone to court to challenge some investors that were trying to do mini grids and take advantage of what looks like a decentralisation of the process.
“We need to sort out all the legal issues. If we need to review the agreements, government can sit them down and review their agreements. If we need to overhaul the whole process, let us do that so that the citizens can have access to electricity.”
According to an energy analyst at Ecobank Nigeria, Mr Kareem Jubril, there is a significant misalignment between the interests of the Discos and what is being done right now in the sector.
He explained, “It is a big issue in the sense that if you look at it from the tariff to everything happening in the industry, it seems like the Discos are not performing; but the truth is that what they have now as tariff is insufficient for them to actually meet all their obligations, and I think that is why there have been a disagreement.
“Reviewing the privatisation might actually bring some solutions, but it is not really the way to go right now. Because if you review it and you are still not doing the right thing, everything is going to remain the same.”
“What is more important is constructive planning alongside the Discos and the Gencos in the way we have it now. If we are trying to start over some form of restructuring, we are just deceiving ourselves,” he said, adding that this might lead to some litigation for the next 10 years.