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Discos not paying fully for the power they received from Gencos—Minister

Another can of worms has been opened by the Minister of Power, Works and Housing, Mr. Babatunde Fashola has said that the Discos were not paying fully for the electricity they received from the generation companies through the Nigerian Bulk Electricity Trading (NBET).

A communiqué issued by the ministry said electricity distribution companies have not improved customer services at the pace that the government and the consumers expects, revealing that N702bn had been committed by the Federal Government to enable it meet its payment obligations to Gencos.

Government also claimed that some of the reasons for the failure were not the fault of the Discos alone.

Business Hilights recalls that 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 ministry’s communiqué read in parts: “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.”

On why government intervened, the communiqué argued that it was due to observable inadequacies as 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.

According to government, 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.

Continuing, the communiqué added that “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.