Discos: Why we’re against N72bn distribution network

The electricity distribution companies (Discos) have explained why they are against the federal government’s decision to invest N72 billion in the power sector to upgrade their distribution networks.
They contended that they may not be able to recover it from the current tariff they charge for distributing power to consumers.
DisCos in a statement issued on its behalf by the Association of Nigerian Electricity Distributors (ANED), warned that the investment if not evaluated and appropriated by the Nigerian Electricity Regulatory Commission (NERC), as part of the laws governing investments in their networks, would become a pitfall to their operations.
They also identified the heavy illiquidity crisis in the sector as another reason for their cold shoulders to the investment.
The statement read: “Ordinarily, any attempt to improve any aspect of the Nigerian Electricity Supply Industry (NESI) value chain – a value chain that was mostly neglected and inefficiently operated for the 62 years prior to the November 1, 2013 handover to private investors – would be praise worthy.
“Particularly laudable is when such investment is coming from the government, as is the case now, establishing its determination to have “skin-in-the-game” and explicit acknowledgement of the urgency of turning around a sector that is a vital contributor to the national economy.
“Unfortunately, in this instance, the N72 billion initiative is one that, potentially, holds pitfalls that will undermine any expected positive outcomes that were the genesis of the government’s planning for it’’.
Giving reasons for their decision, they stated, “Government funds, albeit, based on a stranded 2,000MW capacity that is constrained largely by factors other than distribution limitations should not be invested in a sub-sector that has been privatised.
“It is the obligation and business of the investor to access debt financing for any such investments, freeing government funds for other more urgently needed social investments.” “Given the heavily regulated nature of the distribution sub-sector and that this planned expenditure falls outside of the legal/regulatory requirement that capital investment must be recovered through the tariff (based on Disco cost submissions to the regulator, Nigerian Electricity Regulatory Commission (NERC) and after mandatory public consultations), failure to adhere to this requirement will cause a problem of lack of recovery of the N72 billion,” they explained.