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‘Why Discos Want Cost-Reflective Electricity Tariffs’

31 October 2015   |   6:49 am
Every investor that invests in a business will want to do it well so that they can make profit. The more electricity we distribute, the more profit we shall make.


There is the impression out there that the new utility owners are not doing enough to improve service. What challenges do Discos so face?

Every investor that invests in a business will want to do it well so that they can make profit. The more electricity we distribute, the more profit we shall make. It is in our interest to have more light. We want to distribute more so we can recoup our investment over time. But the power sector is not like any other quick money business. It is a long-term thing. The investors that paid for these utilities invested money right from take over and have been spending billions of naira on the utilities. There are so many things that we are doing and people don’t see it.

For instance, we spend much to improve Information and Communication Technology (ICT) within to improve the billing system. What we inherited from the PHCN was a very ugly billing method which was creating occasions for duplication of bills. Some bills were drawn fictitiously in connivance with some staff. They will go to the computer room to create new billing address and leave the old one which they owe much debt with and the address do not exist. The old bill which they owe money on will still be running and the people cannot be traced again.

So we invested to clear those mess and we invested in equipment like transformers and many other things. There was so much rot. The decay in the sector spans 50 years so it cannot be cleaned up in a year or two. It is an ongoing investment programme to us Discos.

We need to highlight the many challenges we are facing, especially that of energy supply. The inadequate energy given to us has lowered our revenue base. The other thing is the very uncertain tariff regime. We are working closely with our regulator, the Nigerian Electricity Regulatory Commission (NERC). But they should wake up to their role by nurturing the industry. As a regulator, they need to know that this is an infant industry that should not be compared with the banking sector which has been there for years. The Central Bank of Nigeria (CBN) can afford to wield the big stick on them.

Discos met a lot of challenges. We did not know many of these until we took over properly. We are not complaining, but we are saying that there should be cost reflective tariff that shows clearly the cost of delivering electricity to the doorsteps of consumers. In the days of PHCN, there was subsidy which helped a lot but since we took over, there is nothing like that. However, we thank the government for the recent CBN intervention fund which was a loan they gave to us at 10 percent interest rate for a 10-year period. But we are saying they need to do more to solve this problem.

We also have a lot of losses especially due to non-payment of bills. So many customers are not paying and we are appealing to the federal government to prevail on departments and agencies which owe us huge debts. The SSS and military formations owe us, and a lot of other agencies. For instance, the Ministries, Departments and Agencies (MDAs) owe Abuja Disco N7billion.  If Abuja Disco has that today, don’t you think they will invest more in this system?

What is the estimated electricity debt owed other Discos?

To tell you the fact, we are compiling the list of what the MDAs owe the 11 Discos. State governments are fond of owing electricity bills also. These are the same officials that buy N40 million bullet-proof cars. They move in a convoy of 14 to 15 cars, yet they can pay their electricity bills. For how long should we continue that? This is no more NEPA! They accuse us of not investing in the networks but they don’t pay their bills. So let them start paying their bills. A federal agency in Abuja owes Abuja Disco N90million. The utility disconnected them. They paid N20million. They were taken to court. We told them to pay N10milion and then sign a monthly payment plan to offset the N70million debt but they refused and so they remain disconnected.

They reported to NERC and instead of NERC supporting the Disco’s effort of getting their money, our regulator that should be a neutral arbitrator shockingly sent a letter to the Disco that the agency must be reconnected despite the huge debt, that the corporation is worth billions of naira and must not remain in darkness.

We hope the regulator is not telling us to condone debt, while it wants us to invest hugely in the sector. If they are helping the sector, they wouldn’t be condoning debtors but will condemn them. There are many examples of that like the military men in Keffi barracks beating up our officers over bill payment.

Now, we have a change and what President Muhammadu Buhari promised voters in this country is that there will be a change. So we need change in the power sector, in the regulator and the federal government. He needs to talk to his people from the State House to the state governments to pay their bills. There are provisions for utilities in the budget of agencies. Since they are not paying the bills, what then happened to the money?

The Armed Forces should also speak to their people that they need to pay their bills. We will be going public to name and shame the bodies owing us debts. For individual consumers, we keep saying that it is cheaper to take electricity from the grid than to use generators, as you pay three times more coupled with the pollution.

There is improvement in generation in recent weeks with over 4,000megawatts and I can assure you that it will still go up but we need the assistance of consumers to regularly pay up their debts.

Our other challenge is energy theft. In every street and town, there is an energy thief, big men, welders, battery chargers do it a lot and these people consume a lot of energy. In developed countries, neighbours report crime so I will like to plead with our people to support us, including our customers and security agents, to apprehend electricity thieves. Until we begin to have a situation where people begin to go to jail for stealing electricity, these losses will continue. That is what is affecting people under the estimated billing.

The imminent liquidity crisis in the sector is said to arise from Discos’ inability to pay 100 percent of their power costs. What would you say about this?

We were at NERC the other day and we talked about energy allocation and the issue of imbalanced penalty which we have been able to resolve. NERC was helpful on this. What happened in the past is that Discos are punished for taking more power for distribution than what they are originally allocated to. As for the claims by the Nigerian Bulk Electricity Trading Plc (NBET) that we haven’t paid our invoices by 100 percent in the past three months, negotiations are still ongoing. We are saying let us be realistic. For example, if a Disco collects N3.2billion a month, and the Market Operator (MO’s) bill alone is N3.1billion, how do we pay salaries and execute Capital Expenditure (CAPEX) like transformers?

In some cases, the bill is more than the collection and that is why we are harping on the many losses including collection, technical and commercial losses. As long as we have this big gap, the problem will continue. There is no way we can pay 100 percent MO bill. We are not smiling to the bank now.

I will break it down. When the customers pay their bills monthly, it is only about 20 to 25 percent that comes to Discos. Four percent goes to the Regulator, Bulk Trader and MO.  11 percent goes to TCN and the Gencos have 60 percent as they also have to pay gas suppliers. It is a cycle but we pray it doesn’t become a vicious one. We are the money collectors but it is not easy to collect money in Nigeria unlike in advanced societies where bill payment is a seamless culture.

Electricity consumers do say if we give them more electricity, they are ready to pay. But we want them to give us money and we will give them electricity because we also need money to buy electricity. The Discos are distributors and without money there is nothing that we can do. That is the issue with the NBET and we are trying to iron issues out so that the whole system does not collapse.