NEC: Discos owe market N230bn, deprives power sector N164bn

NEC: Discos owe market N230bn, deprives power sector N164bn

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The National Economic Council (NEC) says the electricity distribution companies (Discos) is owing N230 billion and have deprived the power sector the sum of N164 billion.

The Council on Thursday in Abuja, which puts the figure at 67 per cent between 2015 and 2018, said the Discos’ actions were in breach of their Performance Agreement Target.

The disclosures were parts of the findings of the NEC Committee on Ownership Review and Analysis of Discos and Electricity Sector Reform, which submitted its report to the council yesterday.

Briefing newsmen after the meeting presided over by Vice President Yemi Osinbajo at the Presidential Villa, Nasarawa State Governor, Mr. Abdullahi Sule, said the Committee upon the review of National Council on Privatisation (NCP) and National Electricity Regulatory Commission (NERC) documentation, found that states’ average shareholding in Discos is 27.3 per cent based on the level of a state government’s investment prior to privatisation.

He also highlighted the misdemeanours of Discos and why they have been inefficient since the privatisation of the power sector.

“Between 2015-2018 Discos under invested relative to their Performance Agreement Target by N164 billion (67 per cent) and benefitted from investments by NDPHC/REA in their networks to the tune of N147 billion.

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“Board composition across Discos are disproportionately skewed towards private investors, while states and local government areas have no representation

“While on reform revitalisation, the presentation stated that the EPSRA established a good framework for driving the reform, through a multi-stage competitive approach, the establishment of an independent regulator, and mechanism to protect the poor.

“The sector has underperformed due to critical challenges which include non-implementation of cost relative tariffs, misalignment between the investors and Bureau of Public Enterprises (BPE) on required investment in Discos, underinvestment in infrastructure and poor implementation of rules/ contracts.

“Urgent measures needed to turn the sector around include: recapitalisation of Discos, firm implementation of industry rules/contracts and the insistence on sound governance principles that improve performance”, he said.

Sule also said the committee’s report showed that Discos were indebted to the tune of N230 billion because of inefficient collection and under remittance to the market.

According to him, Discos’ N230 billion indebtedness to the electricity market includes 48 billion of ministries, departments and agencies (MDAs) indebtedness to Discos, adding that Discos’ indebtedness was driven by collection shortfall and low remittance.

He also said the Committee recommended the return to orderly evolution under market rules that make the contract effective between Gencos/IPPS, TCN, Discos and gas suppliers, backed by payment and performance guarantees.

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He added that the committee recommended the recapitalisation of Discos by shareholders – states, the federal government and core investors – and encouraging generating companies (Gencos) to bring in capital and management expertise.

“Another recommendation was to Implement and expand existing infrastructure finance support programmes to augment distribution, transmission infrastructure and rural/ off-grid programmes (TCN- $1.6bn; Siemens-TBD; World Bank DISREP-$1bn; REA/ NEP-$550m).”

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