‘How to improve DisCos’ poor performance years after privatisation’
The distribution segment of the Nigerian Electricity Supply Industry has again been rated the weakest amidst push by stakeholders to address the lingering challenges bedeviling electricity sector in Nigeria.
Energy consultant, Nextier, Alex Aloko, who said a level of progress has been recorded in the power sector, insisted that the distribution segment of the market failed to meet expectations.
Reviewing the sector, seven years after privatisation, Aloko said the critical roles of the DisCos in the industry must force stakeholders to collaborate and implement solutions in the sub-sector.
Some solutions to improve DisCos’ performance, according to him, included promoting a cash-less policy for transactions, engaging in aggressive cash-drive activities, prioritising service delivery to Maximum Demand (MD) customers, and improving billing and collection efficiencies.
“In addition, the DisCos need to smart meter their transformers to curb vandalism and energy theft, engage in meter monitoring, train their staff to develop human capital, invest in network upgrades/rehabilitation, etc,” he said.
Aloko said the Nigerian power sector has made significant strides and achievements despite being beleaguered with numerous challenges.
To him, there has been significant increases in the generation capacities as some power plants, such as Azura Power and Mabon Hydro, came on board within the last seven years. “Further, in 2016, the Nigerian Bulk Electricity Trading Plc (NBET) initiated Power Purchase Agreements (PPAs) with 14 solar developers for the generation of about 1,000 MW of electricity into the national grid. However, to date, none of the 14 projects has reached a financial close.
“The Transmission Company of Nigeria (TCN) recorded a milestone achievement in March 2021 when there was a 30 per cent increase in the highest peak generation ever wheeled from 4,500 MW in February 2015 to 5,800 MW. To achieve this, the TCN has completed several abandoned projects and upgraded and repaired its vandalised transmission lines and facilities. However, we have experienced frequent national grid collapses, especially in 2021 and 2022,” he said.
Aloko added that unlike the generation sub-sector, DisCos did not perform so well, as not much has changed within the last seven years.
High aggregate technical commercial and collection (ATC&C) losses, inability to meet revenue requirements, high customer apathy, huge Ministries Departments and Agencies (MDA) debts, dilapidated distribution infrastructure, equipment vandalism, and huge metering gaps, according to him, were parts of the issues that faced the DisCos.
He said, while the DisCos made significant progress in the areas of network growth, customer centricity, and health and safety, most of them have not met the set targets in DisCos’ performance agreements with the Bureau of Public Enterprises (BPE) upon privatization.
“Most DisCos have continued to remit below their minimum remittance obligations to the market. A testament to their abysmal performances is the recent takeover of Abuja Electricity Distribution Company (AEDC), Benin Electricity Distribution Company (BEDC), Ibadan Electricity Distribution Company (IBEDC), Kano Electricity Distribution Company (KEDCO), Kaduna Electricity Distribution Company (Kaduna Electric) and Port-Harcourt Electricity Distribution Company (PHEDC) by their lenders.
“As a result, the Federal Government had to approve and disburse a total sum of N1.3 trillion (N701 billion in 2017 and N600 billion in 2019) Payment Assurance Facility (PAF) to shore up the monthly remittances from the DisCos to the GenCos and their gas suppliers. Prior to this time, the monthly remittances from the DisCos to NBET were less than 30 percent,” Aloko said.
On the regulatory side, he disclosed that the regulator of the power sector, within the time scope under review, produced and implemented several orders, regulations, and directives to improve service delivery in the country.
Some of these include the Order on the Capping of Estimated Billing, The Multi-Year Tariff Order (MYTO) and Minimum Remittance Order, Service-Reflective Tariff, Meter Asset Providers (MAP), and National Mass Metering Programme (NMMP) Regulations.
With other regulations such as the mini-Grid regulations, distribution company franchising guidelines, and embedded generation regulations, Aloko said there has been a significant increase in payment discipline in the electricity market as remittances have improved.