Worried by worsening power supply situation and rising consumer complaints, Fashola urged power vendors to compete or quit for more serious investors.
Mr Babatunde Raji Fashola, Nigeria’s Power, Works and Housing Minister, is certainly not the happiest folk in President Muhammadu Buhari’s cabinet.
This is because his dream of delivering uninterrupted power supply to the electorate and probably use it as key campaign strategy in the February general elections to enhance the chances of his principal is gradually slipping off his grip.
The minister had shortly before taken his huge portfolios that have also enjoyed the lion share of the nation’s capital vote over the last three years, assured he would deliver in record time.
But recent turn of events in Nigeria’s electricity supply industry shows that the blame game between the Federal Government and Distribution Companies has now triggered a rat race among stakeholders in the industry, with barely six months to the next general election.
Today, however, his recurring war of words with the core investors who took over the assets of the defunct power holding company and the latter’s threat to return the power generation and distribution assets to the Federal Government even at discounted rate, has revealed the extent Nigeria’s power supply situation has degenerated.
According to energy investment experts, only a miracle can rescue the nation’s power consumers from the mess they find themselves at the moment. The developments have since left the business community whose bottom line has already taken a hit over the past three years due to erratic power supply by the Discos leaking their wounds.
Worried by the worsening power supply situation and rising consumer complaints and agitations across the country, Fashola at a recent interactive forum, took the power vendors to the cleaners, urging them to compete or quit the scene for more serious investors.
The Minister lamented that even small businesses, which are also the largest employers of labour in the country cannot get the little energy they need because the Discos cannot take the power to them, adding that the investment of GenCos is threatened because they cannot utilise the capacity they have installed.
But, in order to improve service to small businesses, Fashola said the Federal Government, acting through the Rural Electrification Agency (REA) is linking small power entrepreneurs with markets including Ariaria in Aba, Sabon Gari in Kano, and Sura Market in Lagos.
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The markets according to him contain approximately 37,000, 13,000, and 1,047 shops respectively, now being metered by small entrepreneurs who have offered to replace their generators with more efficient power supply and meters.
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‘‘There are 15 (fifteen) markets in all which if successfully implemented would provide power to 85,485 shops, empower 205,000 SMEs and create 2,000 jobs during the installation, operation and maintenances.
He also decried the Discos agitation against captive suppliers the Law did not anticipate exclusivity for any Disco.
Clearly, unless the Discos have a license that is endorsed as ‘EXCLUSIVE’, it is clear that no Disco has exclusivity over its franchise area,’’.
The Minister’s outburst was indeed bolstered by recent feedbacks from industry stakeholders, including members of the Organised Private Sector who recounted their frustrations about the state of the power sector at the interactive.
For instance, Managing Director of Seplat Petroleum Development Company, Mr. Austin Avuru, recently lamented that the Nigerian economy loses over N534 billion yearly to inefficiency of the power sector.
He argued that year-on-year, the OPS remained the worst hit as a result of poor electricity supply to majority of its member companies, leading to the closure of several manufacturing companies with its attendant effect on the economy.
According to Financial Quest, quoting a draft document on the Power Sector Recovery Programme (PSRP), Nigeria’s economy is currently losing $29.3 billion yearly due to inadequate power supply, a development that has also constricted capacity utilisation in various industries.
The OPS reports that its members spend about 40 per cent of their production cost generating their own electricity.
This was as the Manufacturers Association of Nigeria (MAN), raised the alarm that about 272 manufacturing firms shut operations in 2016 with the situation hurting small business owners most of whom cannot afford to buy diesel or petrol to power their generating sets.
However, not please with Fashola’s ‘compete to deliver to deliver of quit order’, the Discos represented by the Association of Electricity Distributors (ANED) recently fired back at him, threatening to quit the sector and resell the power assets at discounted rates to government or other willing buyers.
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‘‘Government must act, and will do so. The Discos bought these assets with their eyes opened, and they must compete to deliver or exit,’’ Fashola warned.
They have therefore, called on the minister to urgently convene a meeting with investors if he truly wants the sector to make progress, adding that they were willing to resell the power assets to the Federal Government or any interested buyer.
Speaking at a press conference in Abuja last Tuesday, the investor in Jos Electricity Distribution Company Plc, Tukur Modibbo, stated that the power firms were doing their best to improve on the situation, but added they would be willing to resell the companies at discounts to whosoever was interested in them.
On metering, the Minister said in order to bridge the metering gap, government has settled an inherited court case and is able to make available N37 billion to Meter Asset Providers (MAP) under regulations made by NERC to license meter entrepreneurs to help supply meters that the Discos are under contract to supply but are as still unable to fully discharge.
“In order to accelerate supply to industries and heavy consumers, Federal Government, through my office, pursuant to powers conferred by Section 27 of the EPSRA declared eligible customer, which was to enable people who consumed 2MW and above, who were not getting power because of lack of distribution equipment, invest in the provision of the equipment and take power directly from GENCOs who had the power.
The Discos, Fashola said initially resisted and are currently giving reluctant cooperation to a policy meant to supply power to people they cannot supply.
“In the face of this picture, where we have power to sell, with more to come, the number of complaints coming to Government for meters, which the DISCOs should supply, and for estimated billings, and mass disconnections when not everybody is owing cannot continue,”
He said Gencos and gas suppliers who produce the power were being underpaid by Nigerian Bulk Electricity Trader(NBET) because Discos were under collecting or under remitting, such that Gencos were getting only about 20 percent of their invoices for power they generated.
Government, he said, created a N701 billion Payment Assurance Guarantee (PAG) for NBET to ensure that payments to Gencos improved and this has now increased to 80 percent payment on invoices, up from 20 percent, in the hope that with improved power production, Discos will collect and remit more;
However, all these allegations seem not to have gone down well with ANED as the association submitted that Fashola should be held liable for power sector woes.
Reacting to some of the claims by the Minister at a World Press Conference held in Lagos recently, ANED’s Executive Director, Research and Advocacy, Mr.Sunday Oduntan, said none of the promises made by the Federal Government prior to the takeover of the assets by the power investors have been met.
He noted that, these commitments or preconditions were fundamental to the Discos ability to meet the obligations of their Performance Agreement with the Bureau of Public Procurement (BPE) which requires them to improve customer service delivery, meter 1.7 mill customers, expand the distribution network and minimize power interruptions.
On Discos franchise area exclusivity, Oduntan said the issue of non-exclusivity of Discos franchise areas is a reminder of our nation’s inability to optimize its prospects as a preferred investment destination of choice, based on a constant reoccurring deficiency – lack of sanctity of contract.
This issue, he said is even more worrisome when put in the context of the $1.4 billion that the Disco investors paid into the coffers of the Federal Government.
He further queried the use of REA ‘Energizing Economies’ initiative to cannibalize and infringe upon Disco franchise areas as being a wrong model.
Oduntan equally explained that the indebtedness of the Discos to NBET will remain a reoccurring decimal as long as a cost reflective tariff was not put in place, adding that the current electricity tariff does not cover the cost of the supply of energy to consumers, a development which he said is a product of ministerial directives and the regulator’s lack of independence.
The ANED ED lamented that the minister’s relationship with stakeholders is headmaster/pupils rapport, which gives no room for the much-needed “sincere collaboration.”
“Under the watch of Mr. Fashola as the minister, the Nigerian Electricity Regulatory Commission (NERC) has conducted no minor review of the Multi-Year Tariff in violation of the law. This has worsened the under recovery in the entire value chain far above N1.1 trillion,” he said.
Reacting to the developments, some power stakeholders who spoke to Daily Sun, frowned at face-off, saying it was capable of derailing the nation’s power sector roadmap if not quickly resolved.
A don and expert in Energy Law at the Faculty of Law, University of Lagos, Dr. Yemi Oke, said it remained worrisome that Fashola who ought to be the conscience of the power sector is the one overheating up the sector needlessly.
“I think the Minister is being unfair to the Discos because the way to go about it is not by harassment. This is not good for the country because no serious investor will want to come because those who are on ground are threatening to pull out due to the way they are been treated,” he said.
Oke stated that the Minister’s approach to the issues on ground is counterproductive, warning that should the threat by the Discos to pull out is carried out, Nigerian Banks who provided financial backing to the investors will go under.
For his part, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, said both parties are not being honest but are all at fault, adding that both parties upon takeover of the assets by the power investors made promises that haven’t being kept.