Energy

DisCos frowns at planned implementation of N72bn distribution network financing initiative by TCN

Electricity Distribution Companies (DisCos) say government’s plan to implement the N72 billion distribution network financing initiative through the Transmission Company of Nigeria (TCN) will not be in the interest of electricity consumers.
A statement by the DisCos through the Association of Nigerian Electricity Distributors (ANED), in Abuja on Sunday said given the heavily regulated nature of the distribution sub-sector, the planned expenditure falls outside the legal and regulatory requirement.
The statement, signed by ANED’s Executive Director, Research and Advocacy, Mr Sunny Oduntan, indicated that the regulatory procedure stipulates that such capital investment must be recovered through the tariff.
He said the recovery should be based on DisCos cost submissions to the regulator, the Nigerian Electricity Regulatory Commission (NERC) after mandatory public consultations.
“Failure to adhere to this requirement will cause a problem of lack of recovery of the N72 billion.”
“To ensure that electricity customers do not unduly bear the cost of electricity inefficiencies, fundamentally, all related procurement is required to be implemented efficiently and on a “best-value” basis.
“The implementation of this N72 billion initiative by TCN, outside the regulated procurement requirements that the DisCos are subjected to, will leave the best-value requirement wanting.
“It is not likely that TCN, a legacy Power Holding Company of Nigeria (PHCN) entity, with its historical contracting and project management limitations will implement electricity distribution projects better than DisCos investors that have N427 billion of equity and debt invested in the sub-sector.
‘`The premise of the privatisation was the need to bring in private sector expertise, while removing from the government balance sheets the potential for outcomes of cost overruns, inefficiency and white elephant projects.
“This initiative creates the potential for a return to the old days of the government trying to implement projects that it is not suited for,” he said
According to him, it will be difficult for the DisCos to agree to TCN and Ministry of Power,Works and Housing to further add N72 billion of debt to the N1.3 trillion debt already on their financial books.
“This is because of the DisCos’ inability to access debt financing required to address massive capital expenditure requirements that far exceed the N72 billion initiative, that is required to inject the efficiency that electricity customers demand.
“Another reason is the DisCos’ regulatory constraints; and the uncertainty of projects built by an entity that is licensed only to transmit energy and not distribute energy.
“It should also not be forgotten that the DisCos are already carrying out of the total sum of N210.61 billion, 72.25 per cent or N152.16 billion of legacy gas and energy debt incurred by PHCN associated with the Nigeria’s Nigerian Electricity Market Stabilisation Facility (NEMSF).”
According to him, we believe that the N72 billion should be directed toward filling the tariff gap, providing the commercial framework that will ensure that Nigerian electricity customers receive the benefits of increased and stable power.“
According to him, what will help NESI achieve the privatisation objectives of efficiency; improved and increased power supply; national economic growth has been the attainment of an alignment of the gas-to-power, technical, commercial and risk frameworks.
He said without such an alignment, interventions such as the N72 billion investment in the distribution network would unfortunately continually come to naught.
“It is also our strong belief that until all the stakeholders, collaboratively and in partnership, begin a dialogue in good faith without pre-determined agendas, our ability to move the sector forward will continue to be limited.”

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