Discos Slumber As Power Sector Crisis Raises Fresh Questions Over Electricity Privatization

Power generation


The crisis rocking Nigeria’s power sector seems to be expanding annually despite efforts by the Federal Government and the private sector in managing it.

From power generation to transmission down to distribution, there have been diverse concerns, as well as in other arms of the business such as in the regulation of the industry.

These concerns have made stakeholders express doubt over the viability of the privatisation of the distribution and generation arms of the industry over eight years ago, which has yet to impact considerably on Nigerians.

They stated that the recent takeover or re-acquisition of some power distribution companies by a Deposit Money Bank, the Asset Management Corporation of Nigeria and another investor, for instance, showed that all was not well with the Discos.

“The situation is more complex than the ordinary person sees. The entire experiment may not be yielding the desired results; that is the frank truth,” stated Chris Akamnonu, who served as managing director in three Discos in the South-East and South-West for about 13 years.

He added, “Yes the government’s intention to put up the Discos and Gencos for privatisation is a good intention. But whether the intention and expectations have been met is another thing altogether.”

Also, another expert with decades of experience in the power sector, who currently sits as the Chief Executive Officer, Sage Consulting, Bode Fadipe, said the privatisation  had not achieved its goals.

“One thing that is very clear to even the blind today is that eight years down the road, privatisation has not achieved any four of the cardinal goals,” he stated.

To buttress his point, Fadipe said, “The government has not stopped funding the power sector. Nigerians have yet to have more electricity compared to what they had in the days of NEPA (National Electric Power Authority) and PHCN (Power Holding Company of Nigeria).

“There is no doubt that they (Nigerians) long for the days of NEPA and the PHCN. The current power sector has not catalysed economic prosperity. I’m not aware that the government has started benefiting from the sector.”

Expectations unmet eight years after privatisation

In November 2013, the Federal Government through the Bureau of Public Enterprises officially privatised the six successor power generation companies and 11 distribution firms that were unbundled from the defunct Power Holding Company of Nigeria.

According to the BPE, a total of $1.26bn was paid by investors as 60 per cent stake in the distribution companies, while the government retained 40 per cent.

For the six generation companies, the BPE garnered $1.27bn for the power plants, which brought the total privatisation proceeds for the Discos and Gencos to $2.53bn.

The value of both transactions at the time was about N404bn based on the exchange rate of the United States dollar then.

The Federal Government still manages the transmission arm of the business through the Transmission Company of Nigeria. However, there have been calls for the unbundling of TCN. Discos and Gencos had often described transmission as a weak link in the value chain.

But for more than eight years after the takeover of the privatised assets by investors, the sector has continued to grapple with daunting challenges that have stunted its growth.

Power generation, for instance, has persistently hovered around an average of 4,000 megawatts for a population of about 200 million, as there have been repeated cases of national electricity grid collapse.

Also, power distribution companies have not been able to meter a sizable portion of their customers.

Their failure in metering made the government initiate both the Meter Asset Provider Scheme and the National Mass Metering Programme. Both initiatives, however, have not been able to close the over eight million metering gap.

“It is high time we carried out a comprehensive review of all the models that were adopted in the 2012/2013 privatisation exercise,” the National Secretary, Network of Electricity Consumers Advocacy of Nigeria, Uket Obonga, stated.

He added “It doesn’t speak well of us that eight years after the unbundling of the PHCN, the nation has not registered significant milestones in the power sector.”

Obonga argued that the current performance of Discos had dropped when compared to their output before the firms were handed over to private investors.

He said, “It is on record and those who have the information know that pre-privatisation distribution capacity was between 7,500 to 8,000MW. The capacity was developed as a strategic plan to position in-coming Discos to deliver power to Nigerians.

“According to those who were involved then, the distribution capacity was ramped up to leverage the installed generation capacity of the Gencos which was above 10,000MW.

“But no one seems to interrogate what really happened, that the Discos are not able to deliver power to Nigerians despite the available distribution capacity.”

He stated that generation companies had been shouting continuously over load rejection by the Discos, as well as stranded energy produced by Gencos.

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