Critical Reforms Needed in Power Sector

A new plan by the Federal Government to unbundle the electricity distribution companies along state lines is a tacit acknowledgement of one of the perennial weaknesses the power sector has been fraught with. Therefore, the government should not merely unbundle the DisCos, it should also ensure that they are further privatised to tackle the energy challenges citizens and industry are confronted with.

During his interaction with members of the Senate Committee on Power recently, the Minister of Power, Adebayo Adelabu, said, “Some of the DisCos are too big for efficiency. They are too big for effectiveness. Ibadan DisCo covers seven states. It is practically impossible for them to be efficient.”

This is a good point. In this case, size offers no advantage.

Adelabu added, “So, we are rearranging and restructuring the DisCos along state lines so that each state government will know the responsible DisCo for their states.” The minister said that the federal and state governments would start exercising their rights in the operation and management of the DisCos “because we still own 40 per cent of the firms.” This percentage is sizeable and should be restructured.

Also, President Bola Tinubu recently signed the Electricity Act 2023 into law, marking an important development in the country’s electricity sector. This Act aims to break the monopoly in electricity generation, transmission, and distribution at the national level. There are 11 DisCos in Nigeria, which were created in November 2013 as part of the power sector reforms, but their performance has been short of the mark in power distribution.

Experts and industry players have described the generation of between 3,000 and 4,000 megawatts of grid electricity to cater to over 220 million citizens as abysmally poor. Since the beginning of 2024, blackouts have persisted across the country. Figures from the daily load summary of DisCos show that the firms failed to distribute about 1,769MW of electricity between February 1 and 14 this year. Nigeria’s continental peers – Egypt and South Africa – generate far higher electricity.

This year alone, the national grid has collapsed thrice. Last month, the Federal Government said that the number of citizens who lack access to electricity from the national grid has increased to about 92 million. A proper restructuring of the power companies will solve this niggle.

Another shortfall that the unbundling of DisCos will tackle is their inability to supply consumers with meters. Data from the third quarter report of the Nigerian Electricity Regulatory Commission indicated that the number of power consumers without meters across the country was over seven million in late 2023. An ESI Africa report noted that DisCos were caught overcharging unmetered consumers by around $70 million over nine months in 2023. This metering crisis needs to be urgently tackled.

However, the way forward is to further privatise the DisCos, not for the Federal Government to have an increased share nor retain the 40 per cent it currently owns. Also, handing them over to state governments might not solve the problem.

Instead, more technically competent, and financially buoyant companies need to take over. This will ensure liquidity in the sector and the government can put in place regulations that will ensure accountability and transparency. In this regard, the focus should be on attracting targeted international investors primarily because the 2013 privatisation failed as the bidders depended on domestic banks to fund their bids.

The United States has three major regional power grids. Other countries with efficient electricity supply such as Singapore, Hong Kong, and Luxembourg have decentralised power grids. Nigeria should do the same. The country’s sole national grid needs to be decentralised.

The government needs to work with stakeholders to bridge the energy access gap. It should start with the unbundling of the DisCos and the diversification into alternative means of energy generation.

SOURCE: PUNCH