New Telegraph

Senate: DisCos, GenCos lack capacity to deliver electricity

…moves to review power sector pact

The Senate, yesterday, noted that the electricity distribution and generation companies lacked the requisite technical and financial capacities to successfully manage the power sector to the benefit of Nigerians. Overwhelmed by the apparent intractable problem in the power sector, the apex legislative chamber also suggested that the only option for the country was to cancel the privatisation agreements entered with the companies.

The Chamber also resolved to contract high level legal team to thoroughly review the privatisation agreement, to be in a better position to take final decision on how to navigate the country out of the present quagmire in the power sector.

It, however, stopped the initial move to call for cancellation of Azura and ACU Gas Power agreement the Federal Government had with the companies in December 2015 to avoid a fine of $1.2 billion if privatisation contract was revoked. The Federal Government had signed agreement with the companies to enable it secure a $237million loan to finance its 450MW project in Edo State and get gas supplied to Calabar power plant due to inability of Transmission Company of Nigeria (TCN) to provide the services.

But five years after, neither Azura nor ACU has been able to render full services contained in the agreement to Nigeria, but collecting between $30 million and $33 million on monthly basis from the Federal Government for services not fully rendered. Infuriated by the worrisome development revealed by the Committee on Power during plenary, the Senate moved for cancellation of the agreement, but quickly beat a retreat when reminded by the Chairman of the committee, Senator Gabriel Suswam, that a fine of about $1.2 billion would be slammed on the country.

Suswam, who explained this as part of presentations made on report from the Senate’s Summit on Power Sector held in January this year, said the fine as contained in the agreement, would be drawn directly from the country’s foreign reserves.

“The agreement is a take or pay model, which is highly disadvantageous to the country because, whether Azura generates the 450mw or not, Nigeria must pay the $30 million to it per month without defaulting in anyway. “The way out is for the Senate to liaise with the executive and the affected firms for way out of the injurious agreement and not going the way of breaching it to avoid the scary fine of about $1.2billion,” he said.

These positions were taken by the Senate during the consideration of the report of its Committee on Power on “Addressing Nigeria’s Power Problems.” Considering the report, the Upper Chamber also urged the ministries, departments and agencies (MDAs) of government to make provision in the 2021 appropriation bill to cover liabilities and debts owed DisCos. Senators, who contributed, expressed serious disappointments, describing the privatisation of the power sector as a huge fraud by the government of the time. According to the upper chamber, a new and more dynamic Electricity Act would, among others, “consolidate the roles of regulators and policy makers; bridge existing gaps in the legal and regulatory framework and cater to post-privatization operational issues in Nigeria’s power sector.”

Following these problems, the Senate had further resolved that the cost reflective tariffs principle be reviewed and revisited to ensure that the DisCos paid for the full amount of power they received from the Nigerian Bulk Electricity Trading Plc. (NBET). The Senate called for the immediate removal of the increased custom duties of 35 per cent to allow Meter Asset Providers (MAP) clear meters stucked at the port. According to the Red Chamber, rather than continue to pay for consumption, the Federal Government should consider an intervention that would see to the purchase of customer meters as way of fulfilling its 40 per cent shareholding in the DisCos.

On insulating NERC against political interference, the chamber resolved that the regulatory body be empowered and allowed to carry out its functions in a way that guarantees that it was not distorted. It also called on the Federal Government to consider recruiting 320 additional manpower for the Nigeria Electricity Management Services Agency (NEMSA) to carry out technical inspection, testing and certification of all categories of electrical installation in parts of the country, as well as provide nationwide me-tering inspection services.

Senator Sam Egwu, in his view, insisted that the only solution to the entanglement was to totally cancel the agreement and start on a fresh footing, stressing that the process was compromised ab initio. He pointed out that the DisCos and GenCos lacked both the technical and financial capacity to deliver on its mandate, saying that no amount of money put into the sector would salvage the situation. The former Ebonyi State governor described the privatization process that led to the sale of government assets as faulty and highly compromised.

The Senate Chief Whip, Dr. Orji Uzor Kalu, on his part, called for the outright discontinuation of subsidy payments on electricity by the Federal Government to distribution companies (DisCos). He expressed concerns that injecting more money into the power sector under the present privatisation agreement would amount to draining the nation’s treasury without fruitful result. Suswam (PDP – Benue North East), in his presentation, stressed the need for more consumers to be metered to avoid estimated billing.

He stated that the Federal Government’s intervention since the privatization of the power sector in 2012 till date – amounts to N1.5 trillion – a sum used to fund tariff shortfalls that ensured generating companies (GenCos) and their respective suppliers were paid for energy delivered and consumed.

In his remarks, the President of the Senate, Ahmad Lawan, said that the report by the committee was so important, stressing that improving the power sector was the way to industrialise the country. “The power sector is the way for Nigeria to industrialise; in fact, even to reduce the level of insecurity in the country by providing opportunities for wealth creation and jobs. “We will continue to insist that the power sector performs better than what it is and this privatisation definitely has not been working for Nigeria and we need to look into it again.” In his press briefing after plenary, Suswam said that the power sector had become contentious because despite the privatisation, government was still spending huge sums of money to generate and distribute power to Nigerians. He expressed worries that Nigeria Electricity Regulatory Commission (NERC) claimed that 10 million Nigerians were connected to the network, and out of which only 4,000 people were metered.

“On the agreement with Azura, it’s just that government ordinarily shouldn’t have signed those agreements because what it means is that, for instance, Azura is a power plant that is supposed to generate 450 megawatts. What we signed is that even if we are unable to take that 450 megawatts we still pay full price for 450 megawatts. You call those agreements take or pay.” Meanwhile, the Senate has adjourned plenary till August 15.

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