FG: Discos Don’t Have Exclusivity Over Distribution Areas

• Says it can invoke its rights as shareholder, blacklists ANED

Chineme Okafor in Abuja

The federal government on Monday said that it did not grant exclusive operational rights to the 11 electricity distribution companies (Discos) in their areas of operation when it privatised the distribution assets in 2013.

It also said that none of the Discos could claim such exclusive rights on any of the distribution areas, except they can guarantee their ability to consistently provide electricity services to the areas.

Following from this, the government, which also accused the Discos of frequently instigating industrial disharmony in the country’s electricity sector, stated that their opposition to “eligible customers” clause declaration was unlawful and unfair.

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, stated this at the 15th edition of the monthly power sector operators’ meeting in Jos, capital of Plateau State.
Fashola also claimed that some of the operational actions of the Discos have largely contributed to the existing problems in the power sector.

Alleging that the Discos have often blackmailed other operators in the sector with false information from their trade association – the Association of Nigerian Electricity Distributors (ANED) – Fashola said ANED does not enjoy the recognition of government.

He added in his opening remarks at the meeting that the Discos have largely been dishonest with the industry and consumers, noting that through ANED, they have frequently complained about developments in the sector without stating the true positions of things.

“As head of the ministry, I regret that I will not deal with an association because the Bureau of Public Enterprises (BPE), acting for the National Council on Privatisation (NCP), did not contract the asset sales and performance agreements with an association and neither did the Nigerian Electricity Regulatory Commission (NERC) grant you licences as an association,” he said.

According to him, the government will only relate with the Discos individually, not through ANED.
“I am certain that NBET and NERC, your regulator, will communicate a similar position to you,” he added.
Speaking on other issues affecting the sector, Fashola claimed that the Discos have largely misrepresented the situation, explaining that the decision to centralise and escrow their revenues, as well as regulate their procurements was taken to protect the finances of the market and guarantee the Discos’ low interest borrowings from the Central Bank of Nigeria (CBN).

He stated: “What you failed to say was that the escrow condition was agreed by you with the central bank as a condition for offering you stabilisation funds by way of loans to fund the business you invested in because commercial banks were reluctant to do so.
“What you also failed to state was that the loan was at 10 per cent interest rate which is well below commercial rates.

“What you also failed to state was that you also agreed under that arrangement to establish letters of credit to guarantee future payments to NBET and the TCN Market Operations, and that the agreed commercial terms of the letters of credit authorises NBET and TCN Market Operations to draw on the letters of credit for any default in payment to them, and that such defaults have occurred and continue to occur.”

The minister cautioned the Discos that since the government still holds a 40 per cent stake in their assets across board, it has the right to ensure that they are competitively run and their operations not mismanaged.

On the eligible customer clause which he said the Discos were opposed to, Fashola said: “Your statement claims that this provision, which allows certain classes of consumers to deal with the generation companies directly is premature and could result in extra cost to consumers.
“But your statement is silent about the inability of some of your members to invest in feeders and distribution equipment to get power to consumers.

“As you rightly acknowledged, the power to declare eligible customers is provided by law, and what it does is to entitle certain types of customers to deal directly with their power provider or Gencos once they can bear the cost of constructing the distribution facility in cases that we currently have, where their Discos cannot or will not invest the money to do so.

“Your statement does not address the illogic of standing in the way of a consumer seeking to get for himself what the service provider, Disco, has failed or is unable to give them.
“What is important is that the law is followed, consultations are held, and decisions are taken. No Disco has exclusive rights over any area and its ability to retain an area must be consistent with its ability to provide service to the area.”

Fashola also said the government had to provide the N701 billion intervention fund to the electricity generation companies (Gencos) and gas suppliers to make sure they remained operational because the Discos were not paying for electricity supplied to them.

On claims by the Discos that their performances had been impeded by the aging and inefficient distribution infrastructure they bought from the government, the minister said: “Rather than complaining about old infrastructure, I wish to remind you that nobody forced you to buy those assets and you knew what you were buying.”