Discos: We Have Received No Subsidies Since 2013 Privatisation

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Director of Research and Advocacy for ANED, Mr. Sunday Oduntan

Chineme Okafor in Abuja

The electricity distribution companies (Discos) in Nigeria’s power sector have denied receiving financial subsidies from the federal government since 2013 when the sector was reformed, and privatisation exercise concluded.

The Discos through their trade association – the Association of Nigerian Electricity Distributors (ANED), condemned a recent claim by the federal government that it has given the sector N1.7 trillion subsidies over the last seven years.

They explained that contrary to the government’s claims, they are being owed billions of naira by the government for unpaid electricity supply to its ministries, departments and agencies (MDAs).

The Director of Research and Advocacy for ANED, Mr. Sunday Oduntan, explained wednesday that the statement was a direct response to the claims by the Minister of Power, Mr. Saleh Mamman.

Oduntan noted that the Discos recognised their existing operational challenges and power consumers’ dissatisfaction with their services but disagreed with the government’s claims of huge financial supports to them.

“To date, the Discos have not received any subsidy from the federal government. References to the N1.7 trillion in subsidies paid by the government are associated with payments that have been made to the generating and gas supply companies, under the Payment Assurance Guarantees (PAG) initiative and the Nigerian Electricity Market Stabilisation Fund (NEMSF),” he said.

According to him: “PAG is, principally, a result of government regulatory and policy interventionist initiatives that have resulted in the inability of the NESI value chain to recover the cost of doing business based, primarily, on tariffs that are non-cost reflective – an unmet critical commitment of the privatisation of the electricity distribution companies.”

He explained that: “As a matter of fact, NERC’s December 2019 Minor Review Order specifies federal government debt to the Discos (correspondingly, the rest of the NESI value chain), due to tariff shortfalls, of N1.728 trillion. Disco’s liability to NESI, due to market shortfalls, is N81 billion.
“Significantly, government ministries, departments and agencies (MDA) owe the Discos in excess of N100 billion, for energy consumed but not paid for – a federal government commitment, yet again, unmet under the privatisation agreement and MYTO-2015.”

Oduntan equally stated that under the N210 billion NEMSF initiative, N189.1 billion has been disbursed by the CBN with the Discos getting N49.89 billion or 26.3 per cent of the disbursed portion of the fund.

“Importantly, this is money owed to the Discos by the consumers, due to the non-cost reflective tariff of MYTO 2.0 and the government’s failure to inject the associated N100 billion in subsidies, a commitment under the privatisation agreements.

“Interestingly, the rest of the NEMSF disbursement of N139.21 or 73.7 per cent is comprised of the Power Holding Company of Nigeria (PHCN)’s legacy gas and energy supply liabilities that should have resided with the Nigerian Electricity Liability Management Company (NELMCO),” he claimed.
He also stated that the liabilities have become an encumbrance on the Discos’ financial books, limiting or precluding their ability to access the finance for capital investment in their networks.

Oduntan, indicated that the Discos were equally unhappy with news of government’s alleged negotiation with German firm – Siemens – to handover the distribution networks to Siemens.

He said the proposal would be dishonest and not a solution to the problems of the country’s power sector.
“The Disco investors have executed agreements with the Bureau for Public Enterprises (BPE), the federal government’s representative agency under the privatisation.

“These agreements specify the terms and conditions under which both parties shall accomplish the objectives of the privatisation, as well as a framework of commitments necessary for the Discos to achieve their performance targets. Unfortunately, the commitments of the government remain unmet.
“The solutions to the problems of NESI are found in a collaborative and partnering framework and environment. Pronouncements that are misleading or misrepresentative of the complicated challenges of the power sector will not lead to increased power supply,” he explained.