Discos Declare Force Majeure On Electricity | Independent Newspapers Limited
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Discos Declare Force Majeure On Electricity

Posted: Jan 11, 2016 at 10:02 am   /   by   /   comments (0)

*Mull return of licenses

*Fashola summons CEOs for meeting today

New owners of distribution companies (DISCOs) in Nigeria have declared force majeure on electricity supply across the country. The investors, who took over power distribution assets from the Federal Government on Friday, November 1, 2013, also demanded a refund of their investments if nothing is done to address what they called “the havoc, which the non-cost-reflective tariff has wrecked on their businesses.”

Force majeure is a contractual and legal announcement, which is used to declare the inabil-ity of a party to meet up with a contractual obligation with another party in business. This force majeure, New Telegraph gathered, was contained in a letter sent to the minister in charge of power, Mr. Babatunde Fashola, who has summoned a meeting with the chief executives of the DISCOs in Abuja today. Although the Nigerian Electricity Regulating Agency (NERC) has slated February 1 for the implementation of a tariff hike, the DISCOs prayed government to adhere strictly to the pact it signed with them before the takeover.

“They want the Federal Government to refund their money for the licenses, which they plan to return if nothing is done to address the problems which government’s inability to meet up its part of the contract has caused. “One of these is the backlog of debts of about N45 billion, which the police and military formations, ministries, departments and agencies (MDAs) of government owe them. The tariff, which is not cost-reflective, the hold back of N216 billion intervention funds from the Central Bank of Nigeria (CBN), among others, are some of the issues the DISCOs want addressed.

“As we speak, a letter has been sent to government in which the DISCOs declared that henceforth, they may not be able to meet their contractual agreement with government on power distribution,” the source said. It was, however, not clear if today’s meeting with Fashola, the first of its kind since he became minister, is to iron out all these gray areas. One of the issues, which the DISCOs want the minister to address, is the embargo, which government allegedly placed on distribution companies in Nigeria from investing more than N50 billion on capital expenditures (capex) per year.

The investors in the 11 distribution companies have persistently stated that the capex benchmark was an impediment to growth of the power sector. Rising under the auspices of the Association of Nigeria Electricity Distributors (ANED), the investors said that for a country like Nigeria, which is still battling with dearth of infrastructure in its power sector, the capital expenditure approved for them was “grossly inadequate.”

The Chief Executive Officer of ANED, Mr. Azu Obiaya and the Executive Director of the group, Otunba Sunday Oduntan, recently told newsmen in Lagos that the DISCOs, which have invested over N26 billion in the assets and improvements of power since takeover, could have invested more.

Obiaya had said that the approved capex is grossly inadequate to meet expected improvements in the sector. “In other words, what we are allowed to invest is grossly inadequate for the improvements we need,” he had stressed. His view was corroborated by Oduntan, who stated that despite the benchmark, the debt owed the 11 power distribution companies by the three tiers of government has risen to N45 billion. The debt, which he said, rose from N32 billion some months ago to the present N45 billion, was accumulated by the MDAs of state and central governments since November 1, 2013 when the power firms were officially handed over to private investors. The development had hampered developments in the power sector, he said.

Nigeria, according to Oduntan, would find it difficult to record significant improvement in power supply if the agencies of government failed to pay their bills. He said: “I went public months ago to state that the MDAs and governments’ debt to the DISCOs was N32 billion, but right now, as we speak, it has increased to N45 billion. It may interest you to know that before the coming of the present administration, the military used to beat up our workers whenever they attempted to collect electricity bills. “But we are in talks with the new Minister of Power, Works and Housing, the Ministry of Defence and other key ministries, to iron out these issues.

All arms of government, federal, state and local councils, as well as MDAs, owe us, including the National Assembly. “We kept compiling the figures and these are debts owed since November 1, 2013.” Oduntan urged government to intervene in the matter, stressing that it would not speak well of the country if the DISCOs should embark on a massive disconnection of federal and state MDAs from the power grid. Meanwhile, the new tariffs, payable by electricity consumers indicate increases in charges for different categories of consumers across the country.

Consumers under the Abuja Electricity Distribution Company, who are paying N19.96 as energy charge currently, will now pay N29.56, representing an increase of 48.1 per cent. Those under the Eko DISCO will now pay N28.75 instead of N18.75, representing 53.3 per cent increase.

Those under Ikeja, Kaduna and Benin DISCOs, who used to pay N14.96, N20.66 and N18.46 for a unit of electricity, will now pay N22.96, N31.71 and N27.72, respectively. These represent 53.5 per cent, 53.5 per cent and 49.62 per cent rise for the three DISCOs respectively.

According to the document released by NERC, commercial consumers (C2) under the Ibadan and Enugu DISCOs, who used to pay N26.79 and N29.05 for a unit of energy, will now pay N38.87 and N42.4. This represents a 45.1 per cent and 45.9 per cent increase in the respective rates.