The Ad-hoc Committee on Ownership Review and Analysis of Discos and Electricity Sector Reform set up by the National Economic Council (NEC) has determined that power Distribution Companies (DisCos) made an underinvestment of N164 billion (67%) between 2015 and 2018 contrary to their Performance Agreement Target. The companies are also indebted to the market to the tune of N230 billion.
These findings formed part of the report submitted by the Kaduna State Governor, Nasir el-Rufai-led ad-hoc Committee, which presented its report to NEC presided over by Vice President Yemi Osinbajo at the presidential villa, Abuja on Thursday.
Briefing State House correspondents on the outcome of the meeting, Nasarawa State Governor, Abdulahi Sule, said the presentation also noted that upon review of National Council on Privatization (NCP) and National Electricity Regulatory Commission (NERC) documentation, it has been determined that the states’ average share holding in the Discos is 27.3% based on levels of state government’s investment prior to privatization.
The governor stated: “Between 2015-2018, Discos under invested relative to their Performance Agreement Target by 164bn (67%) and benefitted from investments by NDPHC/REA in their networks to the tune 147bn.
“Board composition across Discos is disproportionately skewed towards private investors while states and LGAs have no representation.
“While on Reform Revitalization the presentation stated that: The EPSRA established a good framework for driving the reform, through a multi stage competitive approach, the establishment of an independent regulator, and mechanism to protect the poor.
“The sector has underperformed due to critical challenges which includes non-implementation of cost relative tariffs, misalignment between the investors and BPE on required investment in Discos, underinvestment in infrastructure and poor implementation of rules/ contracts
“Urgent measures needed to turn the sector around includes: recapitalization of Discos, firm implementation of industry rules/ contracts and the insistence on sound governance principles that improves performance.”
He said the report posited that Discos are indebted because of inefficient collection and under remittance to the market.
Governor Sule further stated: “Excluding tariff shortfall (responsibility of Federal Government), Discos’ indebtedness to the electricity market amounts to 230bn.
“This includes 48bn of MDAs indebtedness to Discos. Discos indebtedness is driven by collection short fall and low remittance
The committee recommended the return to orderly evolution under market rules that make contract effective between Gencos/IPPS, TCN, Discos and gas suppliers, backed by payment and performance guarantees.
It also recommended the recapitalization of Discos by shareholders (States/FG, core investors), encourage Gencos to bring in capital and management expertise.
Another recommendation was to Implement and expand existing infrastructure finance support programmes to augment distribution, transmission infrastructure and rural/ off-grid programmes (TCN- $1.6bn; Siemens-TBD; World Bank DISREP-$1bn; REA/ NEP-$550m).”
According to the governor, the presentation suggested next steps as “Conclude Forensic Audits (Contracts in place), present findings and recommendations to NEC, and BPE to ensure share allotments recognising states government’s equity in Discos.”
