Power Sector Stakeholders Say Changing Ownership of Discos Won’t Solve Nigeria’s Erratic Electricity Problem

*Urge NERC to implement cost-reflective tariff structure 

*Oppose FG on naira-denominated gas sales

Emmanuel Addeh in Abuja

Power sector players in the country yesterday told the federal government that changing the ownership of the electricity Distribution Companies (Discos) will not resolve Nigeria’s power supply problems.
Minister of Power, Mr Adebayo Adelabu, had last week advocated the sale of gas-to-power in naira to eliminate the volatility occasioned by the transactions being done in dollars.

But stakeholders at the maiden edition of the Nigerian Electricity Supply Industry (NESI) Market Participants and Stakeholders Roundtable in Abuja, attended by over 300 professionals, said implementing a cost-reflective tariff regime was necessary.

Participants at the seminar included academics, industry practitioners, policy makers, and regulators.
In a communiqué after the event, signed by Chairman, Central Planning Committee, and Secretary of the conference, Professor Stephen Ogaji and Mr Bode Fadipe, respectively, the participants identified insufficient power generation capacity, poor utilisation of power generated, and stranded generation capacity as key issues in the sector.

The communiqué stated that current generation constraints included gas volume and pressure, transmission, collection/financing, and risk mismatch or misalignment.
According to the attendees, pricing gas in naira will diminish incentive to continue domestic gas production. It would further increase gas prices until any parity issues are recovered, they said, adding that producers will not accept or absorb the currency exchange risk.
The communique stressed that lack of effective contracts and debt arising from power off-takers will be a major issue.
On the distribution side, it identified the significant Aggregate Technical, Commercial, and Collection (ATC&C) losses, impacting the overall efficiency and financial viability of the sector as another problem.

The participants argued that assets were sold in FX, which were not ploughed back into the business, but used to settle staff liabilities, while the absence of widespread metering contributed to issues, such as electricity theft, inaccurate billing, and revenue losses for power distribution companies.
The communique stressed, “In Nigeria, there are approximately seven million unmetered customers and three million customers with outdated meters. Currently, there is no transparency/accountability of intervention monies pumped into privatised distribution companies or even for meter procurement.”
As for power transmission and grid stability, participants said the network code, despite all that it promised, still had issues with implementation that needed to be closed out as soon as possible. They fingered lack of effective metering at entry and exit points as well as the absence of SCADA and unregulated entry and exit conditions for all suppliers as key issues.

It stated, “Much of the transmission network in Nigeria is outdated and lacks the necessary infrastructure to efficiently wheel electricity across the country.”
Participants said non-investment in the super grid to allow bulk power movement and export, non-availability of minimal 10 per cent reserve margins as required by the grid code, lack of effective spinning reserve implementation regime, as well as electric power sector financing, liquidity, and recapitalisation, remained major challenges.

The communique said, “Changing ownership of Discos will not solve any problems and only the injection of funds tied to specific deliverables will move this sector forward.
“There has never been liquidity in the NESI, since funding never came into the market, except for Central Bank of Nigeria (CBN) interventions.
“Acquisition payments received from investors to acquire the Discos were channelled towards settling Power Holding Company of Nigeria (PHCN) workers and not to improve the network.

“Big customers are exiting grid power not just because of cost but primarily due to the unreliability of supply.”
The communique added that the Nigerian power sector needed to transition to cleaner and more sustainable sources of energy, reducing reliance on fossil fuels, and minimising the environmental impact of power generation.

It stated that regulatory failures, limited monitoring and penalties, skipped tariff reviews, and political interventions had kept the market growth stunted.
It said, “The power sector in Nigeria requires stronger institutions and more effective and independent regulations to address issues such as market competition, contract enforcement, and investor confidence.”

It recommended that full contractual market with capacity payment should be encouraged to enable the replacement of aging capacities, support the retention of existing capacities, and full payment as and when due for services rendered.
To attract more upstream gas players in the industry, the group stated that Nigeria must begin to award gas blocks with some incentives.

The communique stated, “The Nigerian Electricity Regulatory Commission (NERC) should implement a fair and cost-reflective tariff structure that encourages investment, ensures revenue sufficiency, and incentivises efficient energy consumption.
“Cost reflective tariff should be treated as an output, not an input. Discos should introduce energy efficiency programmes and initiatives to encourage customers to adopt energy-saving practices and technologies.
“Discos should expand the deployment of smart meters to improve billing accuracy, and revenue collection, and reduce electricity theft.”