Distressed Discos: FG’s Action Plan for Takeover
The Power Sector Recovery Programme (PSRP) recently developed by the federal government and the World Bank to revive Nigeria’s ailing power sector, has come up with an action plan for the sweeping restructuring of the 11 electricity distribution companies (Discos) that would enable government to take over any Disco found to be insolvent.
Details of the action plan, revealed at a workshop organised by the Ministry of Power, Works and Housing to educate the media on the expected workings of the PSRP, indicated that the government is planning to restructure the Discos to meet their responsibilities in the country’s privatised electricity market after a thorough forensic review of their operations.
The workshop was held on Wednesday evening in the ministry in Abuja. It had in attendance the Minister of Power, Works and Housing, Mr. Babatunde Fashola, the two ministers of state – Mr. Mustapha Shehuri and Mr. Suleiman Hassan – as well as heads of parastatals in the ministry, all of whom took time to explain the government’s plan in the PSRP.
The report further made recommendations for the Nigerian Electricity Regulatory Commission (NERC) to engage the Discos on revised business plans, which will be negotiated, finalised and implemented.
It also requires the government to “start the process of restructuring Discos that are found to require new capital injections”.
“This would involve NERC, BPE (Bureau of Public Enterprises), the Discos and other relevant parties. This may also involve the takeover of Discos with degraded financial positions,” said the PRSP report.
It however explained that before the takeover, technical competence reviews including forensic audits of all the Discos and the adequacy of their technical partners, should be undertaken to ensure that they had not failed in their initial agreements with the government after the privatisation exercise.
The document also revealed that there was an ongoing audit of the performance agreements and all direct agreements the government signed with operators in the sector to ensure that it was in compliance with its obligations.
It explained that there should also be measures to address the operational challenges of the Discos, which should include: “Develop case studies to determine the level of load rejections in the network, develop investment plans with clear impact analyses for increase in load across the network and in metering, and ensure regulatory measures are enforced.”
Also at the workshop, the Managing Director of the Nigerian Bulk Electricity Trading Plc (NBET), Dr. Marilyn Amobi, debunked claims by the Discos through their umbrella association, the Association of Nigerian Electricity Distributors (ANED), that the electricity they distribute to Nigerians at an average of N31 per kilowatts hour (kWh) is retailed to them at N68/kWh.
Amobi, in her response to a question on how much the NBET really sells the electricity it procures from the generation companies (Gencos) to the Discos, stated that its retail price per kWh of electricity to the Discos had not exceeded N18/kWh. Meanwhile, NERC has invited car dealers in the country to bid to supply it seven sport utility vehicles (SUV) for its commissioners.
The regulator, in a procurement notice it recently put out, requested bidders to supply the vehicles with specifications that include 4.6-litre engine capacity and V8 type. It equally noted that vehicles should have full options and must be 2018 models.
The commission, however, did not specify the exact make of the vehicles it wants to buy.
During the time of the Dr. Sam Amadi-led board, the commission reportedly bought Ford SUVs for its commissioners who left office in December 2015 when their tenure expired. It was not certain if the retired commissioners left with the SUVs.
In the tender notice, NERC said successful bidders would be given just six weeks from the date of the award of the contract to deliver the vehicles.