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Can Fashola’s strange advice on direct purchase from Gencos boost or kill Discos?

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The recent advice from the Minister of Power, Works and Housing, Mr. Babatunde Fashola, to eligible power consumers to purchase electricity directly from power generation companies has generated serious confusion in the industry.

The Minister last week empowered the consumer to buy electricity directly from licensees other than the power distribution companies, a development that the Discos recently opposed, saying it will knock out efforts they had been making.

Business Hilights recalls that the minister had recently averred that government is not willing to review power privatization but will review some of the issues that had been frustrating the growth of the sector.

It was not yet clear if the power to buy power direct from Gencos could be one of the side reforms.

Analysts say the idea will not work because electricity consumers do not have the infrastructure to move power from Gencos’ power stations to their point of needs and if ever they want to use poles and cables of Discos, they have to pay heavily.

Accordingly, they concluded that it will not work; rather it will create more confusion than resolving any.

However, power firms are fully aware that the minister, under Section 27 of the EPSR Act, 2005, had the authority to determine end-user customers, who then constitute eligible customers.

However, the Act insisted in Section 28 that the Discos must be compensated for any reduction in their ability to “earn permitted rates of return on their assets,” or any inadequacy in their revenues as a result of such determination.

Currently, Gencos are regularly generating enough powers to serve the country but the problem had been moving the powers to points of need which is the core function of Discos.

Business Hilights gathered that the Nigerian Electricity Regulatory Commission on Friday stated that Fashola declared four categories of eligible customers in the Nigerian electricity supply industry on May 15, 2017, describing the declaration as a major policy directive in the industry.

In a statement issued in Abuja, NERC said, “The declaration, which permits electricity customers to buy power directly from the generation companies, is in line with the provisions of Section 27 of the Electric Power Sector Reform Act, 2005, whereby eligible customers are permitted to buy power from a licensee other than the electricity distribution companies”.

“In exercising the power conferred on him by the said Act, the minister directed the commission to permit four categories of customers to buy power directly from licensees other than electricity distribution companies.”

“The first category of eligible customers comprised of a group of end-users registered with the commission whose consumption was not less than two megawatts-hour/hour and connected to a metered 11kV or 33kV delivery point on the distribution network.

However, these customers, according to NERC, must be subject to a distribution use of system agreement for the delivery of electrical energy.

The commission added, “The next category of eligible customers are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy.

“Other category of customers under the declaration consists of those with consumption in excess of 2MWhr/h on monthly basis and connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement.

“Eligible customers in this category must have entered into a bilateral agreement with the distribution licensee licensed to operate in the location for the construction, installation and operation of a distribution system for connection to the 33kV delivery point.”

“The last category are eligible customers whose minimum consumption is more than 2MWhr/h over a period of one month and directly connected to the metering facility of a generation company, and have entered into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location,” the commission added.

But reacting weekend, the President of Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, argued that eligible customers “can be declared by the minister only when a competitive market exists in the Nigerian electricity supply industry.”

According to ANED, “Such a competitive market, driven by efficiency, presence and utilisation of industry contracts, did not exist at the moment”, stressing that “What this means is that consumers will have to suffer an increase in their electricity tariff to accommodate this premature declaration of eligible customers”.


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