Licenses of 17 Discos, Gencos due for renewal, revocation Nov. 1- FG

By Biola Adebayo On Oct 31, 2023

Adebayo Adelabu, , unbundling , discos, AEDC, — Why FG is unbundling 11 discos, ordering sale of four-Minister

The Federal Government on Monday asked for more time to fix the nation’s electricity challenges as 17 generation and distribution licenses are due for revocation or renewal tomorrow, November 1.

Just like the previous administration had done without a meaningful solution since the power sector was privatized 10 years ago, President Bola Tinubu, Minister of Power, Adebayo Adelabu, Senate President, Godswill Akpabio and the Bureau of Public Works Enterprises repeated the blame games that have held the sector in disarray as they gathered at a conference in Abuja, on Monday.

On November 1, 2013, the Federal Government through the Bureau of Public Enterprises privatised the power sector for a whopping $2.5 billion. Since the privatization, everything has been going south as the nation’s electricity grid, which was projected to hit 40,000 megawatts in 2020 with an investment of $3.5 billion yearly, remained at an average of 4,000MW as of Monday.

It could be recalled that over $7.5 billion has been spent on transmission lines. Another N7 trillion was also spent to avert collapse of the generation and distribution end as the situation remained perpetually on crutches.

At the “NESI privatization & its 10-year milestone: The Journey So Far, Opportunities And Prospects”, organized by stakeholders in the sector, in Abuja, Tinubu said the national grid only serves about 15 percent of the country’s demand, lamenting that the development left households and factories to rely on expensive self-generation, which supplies a staggering 40 percent of the country’s demand.

“What is worse is that the total amount of electricity that can be wheeled through the national grid has remained relatively flat in the last 10 years. The grid capacity has increased from just over 3000MW to typically just over 4,000MW today. Versus a 40,000MW target by 2020 that the Federal Government had set pre-privatization,” Tinubu, who was represented by his special assistant in charge of Energy Infrastructure, Sodiq Wanka said.

He hinted at the need for a plan to rebase tariffs, adding that adequate cost recovery for investments is sacrosanct. Five months into his government and two months after appointing Adelabu to drive the sector, Tinubu said there has to be a clear path to extinguishing historic sector debts to various value chain stakeholders.

“We need to quickly develop and execute a clear roadmap for serving profitable pools of customers. This includes industrial and agricultural clusters and strengthened participation in the West African Power Pool in the immediate term,” he said.

Tinubu said DisCos require a capital injection of about N2 trillion, noting that gas challenges, data, a presidential task force on power, and other initiatives need to be in place.

Minister of Power, Adelabu asked for time to deal with the issues in the sector saying that taking decisions in haste would not solve the challenges in the sector.

According to him, all stakeholders would have to come together to decide on the future of the sector. Adelabu said many actions had been taken on the sector in the past with elusive results, adding new approaches needed to be taken with enough time for consultation.

“I wish to urge the private sector to ensure that the confidence reposed in them through the privatisation of the power sector is maintained by adhering to the terms and conditions of their license otherwise the Government will take a appropriate decision to make the sector perform the way it is suppose to work by invoking the necessary clauses in the terms and conditions in the licenses and the performance agreement signed with the Federal Government as well as the sections of the 2023 EPRS ACT,” Adelabu said.

Akpabio, at the event said the Electricity Act, 2023 would address the inconsistencies, resolve areas of lacunae, incorporate changes borne of the evolution of a privatized NESI, establish the grounds of a broader participation of the states in the electricity value chain, as well as put in place mechanisms or measures to dissuade those who would increase our challenges by stealing electricity or vandalizing related equipment.

“We remain committed to working with all the NESI operators and stakeholders in building an environment that will allow for the injection of the massive investment, expertise and creativity that is necessary to move NESI to our collective aspiration and goal of consistent and efficient power supply,” Akpabio, who was represented by Senator Enyinnaya Abaribe said.

Chairman of the House of Representatives, Abbas Tajudeen admitted that there is still much work to be done in the power sector, adding that the epileptic electricity supply and lack of some other basic infrastructure have hindered the growth of the sector.

“The current estimation of energy delivery of 4,000 Megawatts to a population of over two hundred million (200,000,000) Nigerians is grossly inadequate and falls short of efficient service and limits business opportunities, hinders investments and raises the cost of production and goods for consumers,” he noted.

Represented by Victor Nwokolo, Tajudeen said there was a need to identify the mistakes made in the sector in order to determine what actions need to be taken by the government to ensure the success of this sector.

“The 10th House of Representatives has prioritized the power sector in its Legislative Agenda. The aim is to address issues such as insufficient generation and transmission capacity, energy theft, inefficient distribution, tariffs, and corruption, among others.

“The House will equally prioritize investments in the transmission and distribution infrastructure to reduce technical and non-technical losses; decentralize energy productions by promoting off-grid solutions, especially in rural areas where grid connectivity is challenging: strengthen legislation to increase penalties for energy theft, meter tampering and vandalism of energy infrastructure; adopt legislative measures to promote renewable energy through tax incentives, grants for investments in renewable energy sources such as solar, wind and hydro and mandate regular and transparent audits of all entities in the energy sector to curb corruption in the industry,” he said.

Director General of BPE, Alex Okoh admitted that the sector is not where it should be going by the original intention and vision of the reforms.

He said there were years of mutual non-performance by both the private sector and public entities, huge market and tariff shortfalls, creating a huge liquidity problem and an imposing debt profile in the market, and other issues such as a severe lack of investments, invariably creating a complex web of challenges which now face the sector.

The Federal Government had offered generation companies for $1.269 billion and the 10 DisCos excluding Kaduna Electric were sold at $1.256 billion. The government sold 60 percent shares and retained 40 percent.

In addition to the fund, DisCos paid N1 million for a license application fee to the Nigerian Electricity Regulatory Commission. They equally paid $75,000 for a 10-year license fee.

The license would hit the 10-year period tomorrow but the Federal Government had not come clean on the next step as some stakeholders had expressed fear that the Tinubu government had been lobbied to look away from the total review of the sector.

Energy stakeholders, Dan Kunle said it is not clear if Tinubu is prepared to solve the problem of the power sector. Kunle said going by Tinubu’s utterances and statements, it looks like that the administration would address the issues in the sector but that he has not seen anything put together that could show that the power challenges would be addressed.

President, Nigeria Consumer Protection Network & Member National Technical Investigative Panel on Power System Collapses, Kunle Olubiyo said the privatization exercise, instead of creating a competitive electricity market, has succeeded in entrenching private sector-driven market monopoly.

He said while the power companies were supposed to be publicly quoted, none of the companies have been duly quoted or formally listed on the floor of the Nigerian Capital Market in the last 10 years.

Olubiyo said the sector is crippled by metering challenges, monopoly, lack of data, and regulatory weaknesses as the players fail to live up to expectations.

The Managing Director of Mainstream Energy, which oversees the operations of Jebba, Kainji and Zungeru Dams, Lamu Audu said the primary issue plaguing Nigeria’s power sector is liquidity, stressing at the issue permeates all aspects of the industry, including generation, transmission, and distribution.

Audu said: “Given the financial constraints of the government, I recommend that the new administration considers the liberalisation of the power sector. While this transition may be painful, akin to the removal of subsidies, it is necessary to attract private investment and enable companies to charge tariffs that would allow them to recoup their investments.” He disclosed that prevailing economic challenges in the sector, especially the foreign exchange issue, would deter foreign investment.

According to him, the unchanged tariff for power generation does not align with the devaluation of the currency. Audu said the challenge is putting significant strain on the sector’s ability to carry out necessary tasks. Chairman, Conference Organizing Committee, Prof. Stephen Ogaji said there is an urgent need for a concerted effort by all the players and stakeholders to tackle the issues of the sector.