Between Gencos, TCN and Discos

The blame game over the electricity shortage across the country continued last week when government accused Electricity Distribution Companies (Discos) of low investment in their networks. Minister of State for Power, Works and Housing Mustapha Shehuri made the accusation in Uyo, when he voiced out his dissatisfaction over the inability of Discos to distribute available power to consumers.

Shehuri said, “Generation capacity has improved; transmission has improved; but the distribution companies are not taking power from the transmission company.” The minister lamented that the attitude of Discos was frustrating the essence of power privatisation because Discos did not procure transformers and other facilities to strengthen the network. Shehuri added, “They [Discos] are expected to enumerate and metre all their consumers.

Government is still intervening in the distribution system and that is why we initiated the Eligible Customers Policy to allow consumers take power directly from TCN.”

To amplify the minister’s position, another power sector agency, Transmission Company of Nigeria (TCN), through its Managing Director Usman Mohammed, accused Discos of not investing in their networks, thereby making the billions of naira government invested in power transmission assets across the country to be of no effect. He said government had invested $1.63bn in the sector under the Transmission Expansion Rehabilitation Programme, making it possible for TCN to evacuate as much as 8,100mw of power generated by Gencos.

This latest confusion and blame games in the sector buttress the widely held belief, which we share, that the power sector privatisation, though inevitable, was not well thought out before it was implemented. There is no doubt that those who bought the distribution companies lacked the capital and technical capacity needed to invest in and run them profitably.

While the Federal Government has been investing in transmission infrastructure, it has become clear that Discos have not been able to raise enough funds to provide transformers and metres across their areas of jurisdiction. Their desperate measure of giving consumers ‘estimated bills’ has led to a loud outcry from one part of the country to another, such that the estimated billing strategy of generating undeserved revenue is no longer sustainable.

The privatisation model being implemented was taken from New Delhi, in India, but experts have lamented that the model is failing because other components of the approach have not been applied. For instance, in New Delhi when the sector was privatised and handed over to distribution companies, electricity tariff was jerked up astronomically. But government subsidized it to a certain percentage in order to give consumers a breathing space while Discos reinvested what they generated from consumers and government subsidy in their networks.

In Nigeria too, government did roll out a three-year plan for the gradual withdrawal of subsidy in electricity tariffs but it is far from clear whether this system has worked.

As things stand, Discos are the weak link in Nigeria’s power supply chain. While TCN’s investment problems have been substantially ameliorated and the Gencos have also succeeded in improving their game, the Discos are far from addressing theirs. These include everything from low investment in transformers and meters to under recovery from customers. The later problem is aggravated by the Nigerian phenomenon of many customers not paying their bills. As a result, Discos often refuse to evacuate the power generated by Gencos on the grounds that they cannot sell it and recover their money.

Unless the problem of the Discos is addressed, improvement in power generation and transmission will never trickle down to the consumer and result in improved power supply to homes, offices, shops and factories. The crux of the matter is that Discos do not have the capital to invest in transformers and metres so they definitely need help. While Minister Shehuri’s indignation was understandable, the problem cannot be solved through indignation and threats. We urge government to bring together experts in the sector to take a holistic look at power sector privatisation. It had too many weak spots.

Source: Daily Trust