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Privatisation: How FG, DisCos failed power consumers
#1
Privatisation: How FG, DisCos failed power consumers
February 25, 2020 Adeola Yusuf,
[Image: Power-station.png?fit=655%2C322&ssl=1]

Investors in distribution companies fret and spoil for war over threat by the Federal Government to revoke their licences. Adeola Yusuf, who examines the failure of power privatisation and attempt at buck-passing by the two shareholders, reports that consumers are losers in all the drama

 
The relationship between the Federal Government and investors in electricity  distribution companies (DisCos) reached its ebb at the weekend.

 
 
The two major stakeholders on Friday, November 1, 2013, appended their signatures to the document, which transferred ownership and control of assets of the defunct Power Holding Company of Nigeria (PHCN) into the hands of private investors.
 
 

Though the review of the process, which was due after five years, was shifted from November 1, 2019, the two parties have begun a blame game few months to the legally-binding review period of power privatisation.
 
 
Apprehension, reaction
 
 

Investors in the 11 power distribution companies (Discos) were last Thursday unsettled by Federal Government’s threat to revoke their licences as they engaged in marathon meetings at over four major locations to consider actions including legal suit in case government makes good its threat.
 
 
Investigation by New Telegraph showed that the meetings included conference calls held in locations like Lagos, Abuja, and the United States (U.S.), were made by the investors who considered the Novembet 1, 2013 power privatisation as a legally-binding transaction, “which could not be arbitrarily threatened by any of the parties.”
 

Executive secretary of Association of Nigeria Electricity Distributors (ANED), Sunday Oduntan, could not be reached as at the time of this report for comment. He neither picked his call nor replied a message sent to his phone.
 
 
 
One of the investors, however, told this newspaper after his anonymity and that of his company was guaranteed that government would be sued if it goes ahead to  revoke their licences without following the due process prescribed by the document it signed with investors.
 
 
“We have heard this threat for a number of time but those making the threat are aware that you cannot be arbitrary in dealing with a transaction duly backed by the law. We shall, as a part of Plan A, meet with the government’s representatives. For plan B’ the government, however, run the risk of being sued and it should prepare for this if it goes ahead with its threat.
 

 
“We all know that the privatisation which was concluded with the signing of documents between us and the government on Friday, November 1, 2013, also gave the government some roles and responsibilities to discharge. The question here is that has the government lived up to the dictates of the deals it signed?” He inquired.
 
 
The threat
 
 

The Federal Government had last Wednesday declared that the Discos had failed in supplying adequate electricity to Nigerian consumers.
 
 
Speaking through the Minister of Power, Saleh Mamman, government said it would no longer provide intervention funds as a subsidy to the DisCos and might take drastic actions against the companies which have continued to enjoy subsidy without commensurate result.
 
Vote of no confidence on deregulation
 
 

Government’s concern, according to Mamman, is that the DisCos have consistently failed to efficiently make use of financial intervention.
 
 
“This privatisation as well as everything all parties do therein is legally-binding, and it  could not be arbitrarily threatened by any of the parties,” another staff of one of the Discos said.
 
 

“There will be meetings with the government over this issue. However, the legal team of our company, like those of other Discos, has been fully detailed after marathon of meeting with our investors to prepare for necessary action as plan B,” he declared.
 
 
Buhari received license revocation plan
 
 
Briefing State House correspondents at the end of the Federal Executive Council, FEC, presided over by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja, the minister had said his ministry submitted a memo to the council to decide the fate of electricity distribution companies that have failed to honour their commitments to buy and distribute adequate power generated for them by the generation companies, GenCos.
 
 
Mamman, who was flanked by the Minister of State for Power, Prince Jeddy Agba, said although Nigeria’s current generating capacity was about 13,000 megawatts, about 7,000 megawatts was transmitted.

 
 
He explained that the DisCos do not evacuate all of the 7,000 megawatts generated by the GenCos, but pay only 15 per cent for the 3,000 megawatts they eventually distribute.
 
 
He said the implication was technical and economic losses as the GenCos don’t get value for the electricity they generate, adding that the end consumers also do not get adequate electricity, despite the output of the GenCos.
 
 
Although he declined to give details of his recommendations to FEC, Hassan stressed that in view of the situation, the DisCos might have to quit and give way to more capable operators if they were not able to fulfil their obligations as agreed with the government.
 

 
Note of warning
 
 
The minister said the companies must show they have the capacity to give power to Nigerians or leave so that those who could do it can be engaged.
 
 
He said:  “We presented achievements right from the day we took an oath of office to date.  We want to tell Nigerians what we achieved in the value chains. Nigeria can generate up to 13,000 megawatts of electricity but we cannot transmit all.
 
 
“So today we presented to the council the solution to the problem of our generation. It is mainly distribution. We can transmit, we can generate 13,000 megawatts, we transmit 7,000 megawatts but can only distribute 3,000.
 
 
“There is a lot of work to be done in transmission companies and the government is now willing to take up the matter immediately.”
 
 
On what government has resolved to do, he said:  “What I want to say is that most of the problems we are facing in this country that we cannot get electricity supplied adequately and efficiently is because we have a problem in distribution.
 
 
“Generation is no more a problem. We can generate up to 13,000 megawatts but the transmission.  Those who are taking the electricity supply can only take 7,000 megawatts, even at that, they are not taking the whole 7,000 megawatts but only 4,500 megawatts and then send to distribution.
 
 
“The distribution, in turn, receives only 3,000 megawatts. Because of technical and commercial reasons, they cannot contain the whole power that has been generated.
 
 
Consumers at loss
 
 
While the bickering continues, electricity distribution companies (DisCos), on February 1, 2020, began implementation of 2.5 per cent hike in Value Added Tax (VAT) on meters and tariff altering electricity bill payment dynamics for millions of customers.
 
 
The consumers in Nigeria, who are still battling with estimated billing and insufficient supply, have begun to  pay more tariff and cost on meters beginning from February 1.
 
 
Discos, according to checks by New Telegraph, earlier slated February 1 to begin the implementation of 2.5 per cent increase, which had jerked Value Added Tax (VAT) on meters to 7.5 per cent.
 
 
VAT on tariffs has also been adjusted to accommodate the new 7.5 per cent rate, and service charges on installment meter payments through Meter Assets Provider (MAP) will be reviewed to accommodate the new VAT charge.
 
 
Blaming FG’s VAT
 
 
The Eko Electricity Distribution Company, one of the two major power utility firms in Lagos, commercial hub of Nigeria, confirmed this to this newspaper, noting that from February 1, the prices of meters sold to customers under the Meter Asset Provider (MAP) scheme had been reviewed to reflect the increase in Value Added Tax recently implemented by the Federal Government.
 
 
This, the EKEDC Corporate Communications General Manager, Godwin Idemudia, said in a statement, was in compliance with the 2019 Federal Government directive, which would see an increase in value added taxes from five per cent to 7.5 per cent from the first day of February 2020.
 
 
Idemudia further stated that customers should now expect  to pay “39,765.86 (VAT inclusive) for a single-phase meter and 72,085.68 (VAT inclusive) for a three-phase meter.”
 
 
How it affects tariff
 
 
The statement also disclosed that VAT on tariffs have been adjusted to accommodate the new 7.5 per cent rate, and service charges on installment meter payments through MAP will be reviewed to accommodate the new VAT charge.

 
Idemudia used the opportunity to appreciate customers for what he described as their “unwavering support” and urged them to always pay bills on time, as these are the major source of funding for several projects underway to improve service delivery in their operational network.
 
 
Last line
 
 
Instead of stiring confusion over revocation of licences, government should go ahead and do the statutory review of the power privatisation programme through a third party.
 
 
This independent party should do a damning expose of all shareholders and how they failed to keep to their promises to make the privatisation work.
 
 
It should go ahead and make recommendations, which should include sanctions, for any party, who failed to fix the problem.
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