Published On: Tue, May 16th, 2017

GenCos and DisCos: Time to wield the stick

Two weeks ago, the minister of power, works and housing, Mr. Babatunde Fashola held the monthly ministerial meeting with operators of the power sector in Jos, Plateau State. Developments at the meeting paint a frightening picture of the future of power supply in Nigeria. The operators treated the meeting with deplorable contempt. Attendance at the meeting was derisively low. Fashola responded to the contemptuous attitude of the operators with seeming impotent rage.

Apparently frustrated by the horrendous attendance at the meeting, the minister called on the operators to determine through a vote whether the monthly meeting should be stopped for lack of relevance. To the operators of the power generation and distribution companies (GenCos and DisCos), the monthly meeting with the minister had become something of a boring and putrefying exercise at endless blame-shifting.  Fashola on the other hand sees it as a forum for exchange of ideas and finding solutions to intricate problem of the seemingly invincible darkness permeating the land.  The 15th version of the meeting in Jos sent resounding warnings that operators were sick and tired of the incessant haggling at the meeting.

The buck-passing game within the industry has continued unabated as darkness envelops the land.  Last month the Association of Power Generating Companies (APGC), the umbrella body of the GenCos reeled out statistics suggesting that the Transmission Company of Nigeria (TCN) and the DisCos were responsible for the darkness in the land.  APGC argued that the GenCos could wheel 8,000megawatts (mw) of electricity into the national grid at any given time, but that the facilities of TCN and the DisCos could only handle 4, 500mw.  They blame TCN and the DisCos for the debilitating indebtedness to GenCos which inhibits their gas purchasing capabilities.
Despite the impressive statistics churned out by the APGC, power generation and distribution at the best of times in the last few months have hovered below 4, 000mw.
The DisCos responded to APGC’s accusations by shifting the blame to government.

They blame government ministries, departments and agencies (MDAs) for massive power bill debts which make it impossible for the DisCos to pay for the power they purchase from the Nigerian Bulk Electricity Trading Plc (NBET).
Fashola sees the antics of the DisCos as blackmail.  At the poorly attended meeting in Jos, the minister painted the picture of the DisCos as corrupt and bad managers of lean resources.  He accused the DisCos of awarding over-inflated contracts for equipment purchase to their relatives.  That probably explains why the DisCos cannot fix snapped cables, broken poles or incapacitated transformers promptly.

It took three agonizing weeks for a service cable used to connect power to some houses in Josiah Aina Street, Alakuko, Lagos to be replaced after it snapped.  At a certain point, technicians with Ikeja Electric Distribution Company demanded N3, 000 from tenants of the house as cost for replacing the menacing cable.
The darkness in Nigeria would remain invincible if Fashola does not move beyond the impotent rage he displayed at the meeting with operators of the industry in Jos two weeks ago.  It is obvious that the problems of the DisCos are beyond power theft and under-collection of bills. The debt contagion in the power industry is compounded by endemic corruption.

Figures from the National Bureau of Statistics (NBS) suggest that the DisCos indebtedness to NBET is a clear case of bad management of lean resources.  In 2016, the GenCos wheeled electricity valued at N331 billion into the national grid.  The DisCos distributed everything but only managed to pay N89 billion or 27 per cent of the value of what they purchased from NBET.
At the meeting in Jos with operators of the industry, Fashola seemingly intimidated the DisCos by announcing the debt profile of electricity companies in Benin and Niger republics.  Nigeria supplies power to its two impoverished neighbours.
Statistics from the Ministry of Power, Works and Housing show that NBET supplied power valued at $252,089,102.81 to Benin and Niger republics in 2016.  The two countries paid $159,773,116.61 or 60 per cent of the debt.  They owe $92,315,986.20.

At current official exchange rate of N305.7 to the dollar, the two countries paid N48.84 billion (60 per cent) from a total of N77.06 billion they owed NBET.  Their counterparts in Nigeria grudgingly paid 27 per cent of what they purchased.
The federal government has been treating the GenCos and DisCos with kid gloves.  It is time to wield the big stick. The DisCos in particular have to be compelled to pay their debts and raise money to upgrade their facilities.

The GenCos have raised their capacities to 8,000mw.  The DisCos must match that feat. The essence of privatizing the power sector was to reduce government financial burden in the industry, halt epileptic power supply and expand the Nigerian capital market as the power firms list their shares in the Nigerian Stock Exchange (NSE).
At the moment, none of these objectives has been achieved. The power firms have refused to dilute their holdings in the cash-strapped firms.  Government can reduce the debt contagion in the power sector by compelling the DisCos to clean their books, list their shares in the NSE and raise cheap capital to improve power supply.

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MAIGIDA



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