ELECTRICITY: No subsidy from FG since privatisation – DISCOs

*Say N1.7trn subsidy for generating, gas companies

ELECTRICITY: No subsidy from FG since privatisation - DISCOs

Electricity Distribution Companies, DISCOs, yesterday, declared that they have not received any subsidy from the Federal Government since the power sector was privatised in November 2013.

The 11 Distribution Companies, operating under the aegis of Association Nigerian Electricity Distributors, ANED, insisted through a statement by its Executive Director, Research and Advocacy, Mr. Sunday Oduntan, that none of the companies ever received subsidy from the government.

Apparently reacting to the remarks credited to the Minister of Power, Engr. Saleh Mamman, that the Federal Government would not continue to subsidise the power sector, ANED said government only made payments to generating and gas supply companies.

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Oduntan said:   “Last week, via various news media, we were, once again, presented with another situation in which our electricity distribution, DISCOs, sub-sector was put up for public vilification and denouncement on information that is, largely, not reflective of the reality or complexity of the Nigerian Electricity Supply Industry, NESI, value chain.

“The statements or comments behind this recent media exercise were attributed to Mr. Saleh Mamman, the Minister of Power, speaking to journalists after the Federal Executive Council, FEC, meeting.

“As the face of the NESI market, responsible for direct interface with the public and collecting of all monies due to the different players in the sector, we readily acknowledge both the inefficiencies that our sub-sector continues to experience and the pervasive dissatisfaction of our customers with same.

“We will continue to strive to do better.  However, it is also important that our customers, specifically, and Nigerian citizens, in general, be accurately and well informed as to the challenges, facts and constraints of the NESI value chain, as necessary for us to, collectively, devise strategies and solution that will get us to the envisioned improved supply of, and service delivery of electricity.

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“The following information is provided for clarification of some of the statements or comments that have been attributed to the Minister of Power via various national newspapers on February 20th, 2020.

“That is what we are saying.  Government cannot continue to subsidise because what they are doing is that they collect 3,000 megawatts and pay for only 1,000 megawatts. That is 15 percent of what they are collecting. So, government is the one completing the payment.”

“To date, the DISCOs have not received any subsidy from the federal government.  References to the N1.7 trillion in subsidies paid by the government are associated with payments that have been made to the generating and gas supply companies, under the Payment Assurance Guarantees, PAG, initiative and the Nigerian Electricity Market Stabilization Fund, NEMSF.

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“PAG is, principally, a result of government regulatory and policy interventionist initiatives that have resulted in the inability of the NESI value chain to recover the cost of doing business based, primarily, on tariffs that are non-cost reflective – an unmet critical commitment of the privatisation of the electricity distribution companies.

“As a matter of fact, NERC’s December 2019 Minor Review Order specifies federal government debt to the DISCOs, correspondingly, the rest of the NESI value chain), due to tariff shortfalls, of N1.728 trillion. DISCO’s liability to NESI, due to market shortfalls, is N81 billion.

“Significantly, government Ministries, Departments and Agencies (MDA) owe the DISCOs in excess of N100 billion, for energy consumed but not paid for – a federal government commitment, yet again, unmet under the privatisation agreement and MYTO-2015.

“Under the NEMSF N210 billion initiatives, of the N189.1 billion that has been disbursed, the DISCOs have only received N49.89 billion or 26.3%.  Importantly, this is money owed to the DISCOs by the consumers, due to the non-cost reflective tariff of MYTO 2.0 and the government’s failure to inject the associated N100 billion in subsidies, a commitment under the privatisation agreements.

“Interestingly, the rest of the NEMSF disbursement of N139.21 or 73.7% is comprised of the Power Holding Company of Nigeria, PHCN’s legacy gas and energy supply liabilities that should have resided with the Nigerian Electricity Liability Management Company, NELMCO.

Unfortunately, these liabilities now constitute an encumbrance on the DISCOs’ financial books, limiting or precluding their ability to access the financing that is critical for capital investment and injection of efficiency in the distribution of electricity – another violation of a privatisation commitment which required that the DISCOs have debt-free financial books that would enable them access debt funding for their operations.

“A review of DISCO performance would indicate that the DISCOs have improved their collection efficiency, from 2017, 57.89%, to a high of 74.5% , Quarter 4, 2019, in spite of the issues of lack of access to financing and the related limited capital investment, as well the artificially suppressed electricity tariff.”

“However, a discussion about DISCOs remittances and collection efficiency would be incomplete without reference to regulatory and government policy inconsistencies and interventions that have distorted the ability of NESI to evolve organically.”


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