Probe of Discos: Nigeria Risks Major Disruption in Power Sector
*Ex-Minister Wants Decentralization of Power Grid
As the National Economic Council moves to probe ownership of electricity distribution companies in Nigeria,the country may be in for major disruption of the power sector.
The NEC decision to appoint Kaduna State Governor ,Mallam Nasir El-Rufai to review ownership of the Discos is the third level of probe and review targeting the Discos to the exclusion of the generation and transmission sub-sector of the electricity value chain.
The economic regulator,the Nigerian Electricity Regulatory Commission had already queried seven Discos with a December 7 deadline for them to respond following which threats to withdrew operating licence may be invoked.
The Senate has also last week mandated its committee on power to probe the Discos and Gencos.The House of Representatives has instituted similar probe,leading to insinuations that the government may be plotting a take over of the sector.
Checks however showed that the plots to shake up the power sector may backfire if not handle with care. The assumption of government that the Discos are the problem of power supply in the country was faulted by the sector operators who cited failure to allow free market in the pricing of electricity supplied to consumers.
“The Discos sell power to the consumers below the price the power was purchased and supplied by both the Gencos and the transmission firm.This was because high tariffs carry political risks and the government is not willing to allow market pricing.So we have issues paying for power supplied.The infrastructure question is also capital intensive.Because we are hardly breaking even,the capacity to rapidly upgrade the distribution infrastructure was limited”,an official of one of the Discos told Sahel standard.
Beyond the above,the major fear of some stakeholders in case of forceful take over of the Discos is the likely legal challenge.Checks showed that the power sector reform act prescribes stringent conditions for violations of mutually endorsed agreements that underpinned the sale of the power utilities.
“Nigeria risks plunging itself into legal crisis and sanctions which may in turn negatively affect her standing among foreign investors and create likely gridlock within the power sector. This will distract from government agreement with Siemens which is billed to work with gencos and Discos to correct loopholes in the power sector”,another official of generation company said.
An official of a Discos in southern Nigeria expressed fears about politicisation of the review exercise,noting that “Problems of power sector include inadequate has supply,limited transmission capacity,weak distribution capacity,lack of market pricing among others.
“If we politicise the problem of the power sector,we may end up further destabilising the power situation in the country”,he said.
Other stakeholders are however hopeful that Mallam El-Rufai who chairs the NEC probe committee has a deeper understanding of the power sale dynamics ,having served as the head of Bureau of Public Enterprises in the past.
“Mallam El-Rufai has a deep insight. He knows the legal implications. He is aware of the likely consequences of striking investors unfairly by fiat. What may happen is that government may demand more say especially as the government still owns 40 percent equity share in the Gencos and the Discos. Government may inject her views and thinking leveraging on the equity holding”,an industry expert within the sector noted.
Meanwhile ,a former Minister of Power, Prof. Bart Nnaji, has called on the Federal Government to decentralise the national grid in order to address the frequent collapse of the national grid and improve electricity supply in Nigeria.
Nnaji, who is the Chairman of Geometric Power Limited, stated this on Thursday, during the Second Distinguish Guest Lecture of Dominican University, Ibadan.
The News Agency of Nigeria (NAN) reports that the lecture was entitled “Let there be Light: Solving Nigeria’s Electricity Puzzle for Sustainability’.
The former minister said that the national grid should be made into smaller chops for regional supply of electricity.
“Each one must be autonomous for better control and invested in by different groups and not one national grid, although there will still be national control that aggregates power and gets power supply from one end of the country to another.
“With this, each grid will be able to control itself and there will not be system collapse as we always have it now,” he said.
Nnaji said that operating the national grid from the centre could limit the ability of the country to address the problem of power supply.
According to him, gas supply and transmission infrastructure challenges are also hindering adequate supply of electricity in Nigeria.
The former minister said that government was doing its best, but needed to do more in order to have adequate supply of electricity in the country.