Limit On Capex May Hinder Discos’ 1m Metering Target | Independent Newspapers Limited
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Limit On Capex May Hinder Discos’ 1m Metering Target

Power Discos
Posted: Apr 21, 2016 at 11:19 am   /   by   /   comments (0)

The distribution successor companies of the Power Holding Company of Nigeria (PHCN), otherwise known as Discos, may fall short of meeting the one million metering target handed to them by the Federal Government (BPE) due to the cap on their capital expenditure, Independent has gathered.

The Federal Government in approving the cost reflective tariff that saw electricity bills go up in February this year, mandated each Disco to meter at least one million customers within one year.
However, the electricity companies are saying that the cap on their capital expenditure would be a major hindrance in meeting the target since metering is a capital-incentive venture.
They say that metering one million customers within a year was not realistic.
Mr. John Donnachie, Managing Director of Ibadan Electricity Distribution Company (IBDEC), who spoke on behalf of other Disco chief executives during an interactive session with BPE, last week, said the target was a tall order since most of the electricity companies are restricted in their capital expenditure budgets by the regulatory authorities.
The IBDEC chief executive explained that metering was a capital-intensive venture and a key component for implementing the new tariff, which only massive investment in the sector would bring Nigeria closer to the Promised Land.
However, Independent learnt that the Discos’ respective CAPEX were of their own making.
“Capital Expenditure (CAPEX) in the tariff were the basis on which prospective investors posted their bids for the privatisation of the Discos,” said Dr Anthony Akah, acting CEO of Nigeria Electricity Regulatory Commission (NERC) in an email response to Independent enquiries on this issue last month, adding that “CAPEX were not calculated by NERC; rather it was what Discos submitted to BPE during the bidding process that they will required to operate the companies and achieve the target set in the performance agreement. The selection of the eleven Discos as preferred bidders was based on these conditions.”
The regulator equally said with the increased tariff there is no more room for excuses.
Donnachie, who acknowledged the Federal Government’s efforts at managing the issues militating against the sector, called for additional intervention through the BPE to secure more investment from the Federal Government by financing the 40% equity held in trust by BPE for the Federal Government.
He said that the Discos and Gencos had benefited from such efforts through the National Integrated Power Project (NIPP), Niger Delta Power Holding Company (NDPHC), Nigerian Bulk Electricity Trading Plc (NBET), and the Central Bank of Nigeria’s (CBN)’s N213 billion intervention fund.
On the implementation of a cost reflective tariff, the IBDEC MD said that it was a step in the right direction.
Dr. Vincent Onome Akpotaire, Acting Director General of (BPE), on his part maintained that continuous interactions coupled with the commitment of the power operators and the political will of the Federal Government were critical to resolving the emerging challenges in the sector.
Akpotaire, who noted the challenges in the power sector, opined that with concerted efforts by all critical stakeholders in the sector, these were surmountable.
He, therefore, called for an enhanced synergy between the successor-companies (SCs) of the defunct PHCN and BPE to boost efforts towards actualising the full objectives of the power sector privatisation.
He also enjoined the SCs to improve on their efforts to honour the performance agreement in the power privatisation, stressing, “I am optimistic that with the required synergy, periodic reviews with stakeholders and commitment to the performance agreement, the objectives for the nation’s power sector would be achieved.”
Akpotaire said that the lack of investment in the sector in the past 40 years had now come to the fore with the privatisation of the sector and that immediate solutions would not be achieved within two years of privatisation.
He, however, said with the steps taken by the Federal Government so far to address the prevailing challenges there was a hope of efficient and effective power supply in the country.
On the prayers sought by the Discos, the Acting DG informed them that the BPE was not an approving agency that the remit falls on the secretariat of the National Council on Privatisation (NCP). He said the essence of the interaction was to look at the contending issues with a view to escalating them to the NCP.
Mrs. Rahila Thomas, Country Director, Energy Market and Rates Consultants (EMRC), lauded the Federal Government’s efforts in the sector so far.
She recommended, among others, subsidy from the Federal Government and a resizing of the bond allocated to the sector to adequately accommodate the financial implication of the gap in power generation as ways to cushion the effects of the impending tariff increase. She urged the Bureau to consider the options in the post-privatisation minor review in June 2016.