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Govs to break Discos monopoly

Governors of the 36 states of the federation have agreed to work together to tackle epileptic power supply by breaking the monopoly of Discos in power distribution across the states in the country.

 

This was made known in a tweet by the presidential media spokesperson, Tolu Ogunlesi.

“President #MBuhari has signed 16 constitution amendment bills into law. By this signing, State Houses of Assembly and judiciaries now have constitutionally guaranteed financial independence, while railways have moved from the exclusive legislative list to the concurrent list.

“Another landmark change. By virtue of the presidential assent, Nigerian states can now generate, transmit, and distribute electricity in areas covered by the national grid. (This) wasn’t allowed pre-amendment. This is genuine, realistic restructuring — through the constitution,” he wrote.

With the Fifth Alteration Bill No. 33, Devolution of Powers (National Grid System), Nigeria’s 36 states can now generate their own electricity.

Recall, in March 2023, then-President Muhammadu Buhari signed into law the constitutional amendment allowing states in the country to licence, generate, transmit, and distribute electricity.

President Bola Tinubu recently signed the Electricity Act of 2023 into law, marking an important development in the country’s electricity sector.

This Act aims to break the monopoly in electricity generation, transmission, and distribution at the national level.

The Act grants the power to generate, transmit, and distribute electricity to states, companies, and individuals.

Based on the amendment, Nigerians can now participate in the electricity supply business, which was previously the exclusive preserve of the FG, as administered by the stage regulator, the Nigerian Electricity Regulatory Commission.

States are required to create their laws and the state governors must sign those laws.

With the constitution amended, and the National Assembly having passed a law for the electricity sector in line with the amendment, the states will now proceed to establish their laws based on the constitutional amendment.

The 2023 Electricity Act, by virtue, allows anyone to construct, own, or operate an undertaking for generating electricity exceeding one megawatt in aggregate at a site.

Also, organised labour, comprising the Nigerian Labour Congress and Trade Union Congress, had asked the 36 states and the Federal Capital Territory to work out modalities to break the monopoly of the power distribution companies (also known as Discos) in the country.

According to the labour unions, the discos, as currently constituted, are enjoying a monopoly in power distribution, making them ‘behave in ways that are untoward’ towards their customers.

The Deputy President of the TUC, Dr Tommy Etim, said the issue of estimated billing was killing the populace, stressing the need for all homes in the country to be metered.

He also noted that the new Electricity Act had made things easier for the country, as states could now own and run their own discos.

He said, “Labour also takes the position that every household should be metered. So that whatever anyone is paying will be known rather than estimated billing. Organised Labour frowns at the increase in tariff.

“Again, the continuous refusal to meter homes, even for those who have already paid for it for more than a year or more is unfair. We are not happy about it.

“We call on the Federal Government to ensure that those things are put in place, and states should begin to invest in power infrastructure in line with the new law signed by the former president, Muhammadu Buhari.”

The Director General of the Nigeria Governors’ Forum, Asishana Okauru, said governors were determined to tackle the problem of poor power supply in Nigeria by taking advantage of the power they now had with the Electricity Act (2023).

He said, “States are taking advantage of the new law on power.”

He noted that the NGF had taken a ‘leading and coordinating role’ in seeing to the implementation of the Electricity Act at the sub-national level.

“We have assisted the states as they grapple with the reality of establishing their electricity markets.

“To achieve this, we have set up a dedicated power desk at the NGF Secretariat, engaged consultants, facilitated the constitution of a Forum of Commissioners of Power in the 36 states, and engaged with stakeholders, local and international.

“Additionally, we have enlisted the support of donors who have shown a remarkable interest in working with the states through the NGF secretariat. There is still a lot of work to be done. However, we are on the right track.”

Last Monday, the Federal Government said it had commenced the restructuring of the 11 DisCos in the country.

The Minister of Power, Adebayo Adelabu, disclosed this while speaking during a visit of the Senate Committee on Power to the Ministry of Power and the Transmission Company of Nigeria in Abuja on Monday.

The government also ordered the sale of DisCos that had been taken over by banks and the Assets Management Corporation.

Five distribution companies are currently under the management of banks and AMCON due to their inability to repay their loans to financial institutions.

Five distribution companies are currently under the management of banks and AMCON due to their inability to repay their loans to financial institutions.

The Abuja DisCo is under the management of the United Bank of Africa, while Fidelity Bank manages the Benin DisCo, Kaduna DisCo and Kano DisCo.

Addressing the Senate Committee on Power on Monday, Adelabu said, “We are unbundling the DisCos along state lines.

“Some of the DisCos are too big for efficiency. They are too big for effectiveness. Ibadan DisCo covers seven states. It is practically impossible for them to be efficient.

“So, we are rearranging and restructuring the DisCos along state lines, so that each state government will know the responsible DisCo for their states. Also, the federal and state governments should start exercising their rights in the operation and management of the DisCos, because we still own 40 per cent of the firms.

“But, we have left it for the private sector operators for too long, and they have messed it up. The government must return to take over its rights in the DisCos. We are also planning to franchise the un-served communities under the DisCos,” Adelabu said.

He said the decisions on the DisCos had become necessary because the Nigerian Electricity Supply industry fails when they refuse to perform.

Adelabu added that the ministry would prevail on the Nigerian Nigerian Electricity Regulatory Commission to revoke underperforming licences, and change the management board of the DisCos for non-performance.

“We will start seeing regulations about franchising. The fact that you are an Eko DisCo, for example, doesn’t mean that you cannot have smaller DisCos that are ready to invest in your un-served communities. So, we are looking at franchising.

“We are transforming the DisCos, and very soon, you’ll see that many tough decisions will be taken against these DisCos, because they are the last mile in the sector. If they don’t perform, then the entire industry is not performing,” he said.

Adelabu had said in December 2023 that the country got about 40,000 megawatts of electricity from generators powered by Premium Motor Spirit, popularly called petrol, and those run by Automotive Gas Oil, also known as diesel.

He disclosed this at the ministerial summit on the Integrated National Electricity Policy and Strategic Implementation Plan, while examining the key challenges to Nigeria’s electricity reliability through the prism of governance, adherence to rules/contracts, and finance.

Nigeria’s power generation and supply from its national grid revolves between 3,500MW and 4,500MW for an estimated population of 200 million people.

In his address at the summit, the minister pointed out that one of the main objectives of the Nigerian electricity sector reform programme initiated over 23 years ago was to make electricity available to consumers across the country with efficiency and consistency.

This, however, had yet to be achieved. Rather, according to the minister, Nigeria had continued to expend hundreds of billions of naira to generate electricity through diesel- and petrol-powered generators.

He stated that electricity consumption per capita in Nigeria was 140 kilowatt-hour in 2021, relatively low in comparison to neighbouring countries, and almost three times lower than the average for Sub-Saharan Africa.

Adelabu said, “Nigeria is a case study in deep electricity paradox. The country has grown to become the host of probably the world’s largest fleet of diesel- and petrol-powered generation capacity that is utilised for baseload supply.

“Various figures have been mentioned but it is safe to say that this fleet measures no less that 40,000MW of total capacity.

“At an average operating cost of no less than N250/kWh as opposed to an average economic tariff today of approximately N120/kWh (weighted between petrol and diesel generation), the daily cost of this extreme inefficiency in electricity supply in Nigeria is measurable in tens of billions of naira daily.”

Experts have noted that Nigeria has the potential to generate 12,522 MW of electricity from the existing infrastructure, but it can only manage about 4,000 MW.

Approximately 55 per cent of the population of over 200 million  does not have access to electricity, according to Statista.

For Nigeria’s population, this is grossly insufficient, according to statistics by PowerAfrica, a United States government-led partnership.

An official of the Nigeria Labour Congress who did want his name in print said there was nothing wrong in allowing state governments to be involved in the large-scale generation, transmission, and distribution of electricity.

He added that decentralisation of the sector would enable the supply of electricity to be efficiently handled and distributed by the federating units.

According to him, the monopoly of electricity distribution companies on the distribution of electricity would be adequately managed if the state governments invested in the sector, saying the benefit of such would accrued to the citizenry.

“We are asking that the power of the Federal Government be decentralized, and that is why we talk about restructuring. It is also part of it, so that most of these responsibilities and powers of the federal government can be handled efficiently by the federating units.

“That particular law is meant to decentralise the electricity sector just like state governments can be involved in railway. I don’t see anything wrong in letting the state get involved in large-scale electricity generation, transmission, and distribution.

“If we are saying that they should take over electricity, I think there is nothing wrong with that. When the state governments are involved in the generation and distribution of electricity, it will be more efficient, and will be cheaply available to the citizens.

He further noted that state governments should invest more in the sector to make electricity cheap for Nigerians.

“Anything that can be done to make it accessible and cheaper for average Nigerians is a welcome development. Anybody canvassing for that is actually on the right path. What the Trade Union Congress said is right, because they are saying the right thing. But, the NLC has not taken any universal position on that,” he said.

The House of Representatives Committee on Power has pledged to intervene in the recent hike in electricity tariffs to protect the interest of Nigerians.

The NERC recently gave power distribution companies the liberty to increase tariffs, arguing that without sufficient investment in the sector, the nation could not be guaranteed a steady power supply.

Already suffocating from economic hardship made worse by the removal of subsidy from petrol by the Federal Government, Nigerians from all walks of life have described the recent hike as totally unacceptable.

At a recent power sector dialogue, which was held in Abuja, the Speaker of the House of Representatives, Abbas Tajudeen, pledged to sponsor a bill for mandatory consultation on power-related matters between the legislature and relevant stakeholders.

“I will sponsor a bill to provide administrative procedures that entrench proper consultation and legislative review of the process for tariff setting in Nigeria’s electricity sector and other public services,” Abbas said.

In an interview, the Chairman, House Committee on Power, Victor Nwokolo, said the parliament was on the side of Nigerians, noting that if at all there should be an increment in electricity tariff, there must be proportional improvement in power supply.

He said, “On May 2 or 3, the committee will meet with the Gencos and Discos, but we must make it clear that as lawmakers, we are on the side of Nigerians.

“There are a lot of issues to be discussed surrounding the delay in the categorisation of consumers into the various bands.

“Nigerians are willing to pay but the question is, how much should the increment be? Is there a guarantee that there would be an improvement in power supply, because even some consumers in Band A are complaining of poor supply?”

A member of the power committee, Sunday Umeha, in Abuja, said that as the people’s representatives, the lawmakers would not fold their hands and allow arbitrary increments in electricity tariff to go unchallenged.

Umeha, who represents Ezeagu/Udi Federal Constituency, Enugu State, noted that though the President Bola Tinubu-led administration might have its share of the blame, the parliament was in a hurry to intervene in the interest of Nigerians.

He said, “We are trying to have legislative intervention in the challenges affecting Nigeria’s migration to a multi-tier electricity market. We are coming out with resolutions on how to have a middle ground between the power stakeholders and Nigerians, who are not happy with the timing of the recent tariff increment.

“Today, we are battling with the economy. Nigerians are hungry and going through a lot of challenges. The increment of tariff in Band A will have a ripple effect on the rest of us.”

Umeha, who doubles as the Deputy Chairman, House Committee on Justice, also noted that though not all electricity consumers were affected by the hike in tariff; the burden, he said, would be passed on to them in no distant time.

“If you look at it carefully, you will see Band A consumers as a group making use of power for industrial purposes. If they pay higher, they will add this cost to their outputs, and push the same to the masses.

“So, we are looking at a framework on how best the interest of the masses can be protected,” he added.

On the interface between the committee and the regulator, Umeha said, “What NERC told us was that if this tariff increase is not allowed, the power sector will collapse. The government has its problem, because they are not subsidising as required.

“In March, they gave a bill of N2.6bn, and the government ought to pay N2.4bn, but they didn’t. The Discos paid their N20bn as expected. Yet, NERC is saying that over N2trn is being owned to the power sector.”

According to him, there was a revolution ongoing in the sector already, particularly with the Electricity Act 2023, which empowers states to generate and distribute their own electricity.

“We have passed the stage of just talking and doing conferences. Enugu and Ekiti states have got the go-ahead, and we can see the work that Geometric Power is doing in Abia State. This is an indication that we are in the right direction,” Umeha further said.

A professor of Economics, Cletus Agu, lamented that the monopoly of distribution companies was adding to the already existing hardships experienced by electricity consumers.

He added that the problem in the electricity sector was that the discos were not carrying out their responsibilities efficiently, noting that it would be difficult for the government ‘to go back and appoint another group to compete with Discos. It’s going to be difficult’.

A public policy enthusiast at Meristem Securities Limited, Femi Oladele, said the development landscape across Nigerian state capitals had come under scrutiny.

“By improving connectivity, more towns can flourish, and existing ones can upgrade their amenities. The goal is to disperse development across the entire state, reaching even the most remote corners,” he said.

However, an economist at Lotus Beta Analytics, Shadrach Israel, said, “The capital-intensive nature of power generation poses a formidable obstacle for state governments.

“While we don’t expect states to become major power generators overnight, proactive efforts from state governors are crucial.

“Rather than relying solely on government funds, states should actively court private investors.

“A notable example is Aba, where a private company partnered with the Abia State government, resulting in reliable power supply and economic growth,” he said.

 

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