Discos generate N3.95tn in five years

Nigeria’s electricity distribution companies collectively raked in about N3.95tn revenue between 2019 and the first quarter of 2024, data from the National Bureau of Statistics showed.

NBS data revealed an upward trajectory in revenue generation over the past five years, as the power distributors made N482.6bn in 2019, N526.8bn in 2020, N761.2bn in 2021, N828.1bn in 2022, N1.07bn in 2023, and N291.6bn in the first quarter of 2024.

Experts attribute this consistent growth in revenue to several factors, including ongoing tariff adjustments moving towards cost-reflective pricing, which has allowed the Discos to align revenue with the cost of providing electricity.

Additionally, the National Mass Metering Programme has increased the number of metered customers, reducing estimated billing and improving the accuracy of revenue collection.

The programme has also contributed to reducing Aggregate Technical, Commercial, and Collection losses that have previously plagued the sector.

Also, the enhanced regulatory oversight and the adoption of modern technology in billing and collection have streamlined processes, minimised revenue leakages, and improved collection efficiency.

However, despite this revenue growth, the Discos face significant challenges, including high unpaid bills, electricity theft, infrastructure deficits, and energy losses.

These issues have hindered the Discos’ ability to fully capitalise on the potential of Nigeria’s electricity market.

Reacting to this, the President of the Nigeria Consumer Protection Network, Kunle Olubiyo, questioned the efficiency of the Discos and called for urgent reforms.

He told our correspondent on Friday that despite the pre-privatisation commitments of the Discos to meter customers and the improved collection and billing efficiency, the power distributors had largely failed to meet their obligations.

“We cannot score the Discos more than five per cent. In terms of complaints resolution, they lack the software to track issues and have failed woefully in conflict resolution,” he said.

Olubiyo further highlighted the inadequacies of the Discos despite significant investments in the firms by the government and the Central Bank of Nigeria aimed at network improvements.

He raised concerns about the implementation of the Federal Government’s National Mass Metering Programme, accusing some meter vendors and Discos of conspiracy.

“Many of the customers listed as metered were not metered. The idea was to attach GPS coordinates to every metered point as a precondition for metering, but this was not done,” the NCPN president stated.

According to Olubiyo, the government’s ongoing intervention, which includes funding the importation and installation of two million meters annually using public funds, raises questions about the essence of privatisation.

He highlighted instances where governance or liquidity issues led to Discos being placed under receivership, with interim management teams appointed by the Bureau of Public Enterprises.

However, he noted that the effectiveness of these interventions was often undermined by internal politics and job insecurity among Disco management.

“We’ve seen board chairmen abruptly remove MDs in Abuja, Port Harcourt, and several other Discos,” Olubiyo added, emphasising the precariousness of the situation.

Olubiyo welcomed the recent empowerment of states to regulate electricity within their jurisdictions under the Electricity Act, describing it as a positive development.

“The migration of electricity from the exclusive to the concurrent list is a good omen,” he said. He urged the Federal Government to invest its 40 per cent equity in Discos and shift towards resource-driven energy solutions.

Reflecting on the power sector’s performance since privatisation, Olubiyo lamented the stagnation in electricity generation.

“In 2013, the peak generation on the grid was 5,800 megawatts. As we speak, from 2013 to now, we haven’t even been able to hit 6,000 megawatts of electricity evacuation on the grid,” he pointed out.

He described the situation as “a decline or backward growth, progressing in error.”

On a more positive note, Olubiyo praised the recent licensing of companies like MTN and Honeywell to engage in Nigeria’s bulk electricity trading or captive generation.

He argued that off-grid generation and independent power plants, etc, were steps in the right direction to stabilise power supply, particularly for industrial areas.

This came as the Transmission Company of Nigeria, a Federal Government-owned firm that transmits electricity from power generation companies to distribution firms, announced that it had been grappling with funding shortfalls.

It said this has stalled the completion of 129 critical projects. TCN’s Managing Director, Abdulaziz Sule, who revealed this recently in Abuja, said the company was facing a funding gap of N637.37bn, out of a total required amount of N1.79tn.

Sule appealed to the National Assembly for intervention to address these challenges and ensure the timely completion of the critical projects. The funding gap, he noted, is delaying project completion and hindering efficient service delivery.

He said the company is dealing with other challenges including inadequate modern tools, port clearance issues, lengthy procurement processes, lack of spinning reserve, delayed donor-funded projects due to unpaid counterpart funding, and recent VAT and levy charges on offshore equipment.

In related power sector developments, the Minister of Power, Adebayo Adelabu announced recently that the cost of generating one kilowatt-hour of electricity was N120.

During an oversight visit by members of the House of Representatives, Adelabu explained that this cost was a key factor in the Federal Government’s high expenditure on electricity subsidies.

He emphasised that this figure does not include additional charges borne by power utilities within the Nigerian Electricity Supply Industry.

“Those in Band A are paying N209 while Band B is paying N65. The average cost of producing one kilowatt per hour of electricity was not less than N120 before we had the evacuation, wheeling, and distribution charges.

“So anybody paying N65 or N58 is paying way below the cost, and that is what the Federal Government is still subsidising,” Adelabu stated.

The minister also noted that varied energy consumption, especially during off-peak hours, affects the efficiency of electricity production.

To address this, he said the Federal Government is considering the introduction of a differential tariff system during off-peak periods to stimulate electricity demand and enhance energy access across Nigeria.

This differential tariff system, as explained by Adelabu, involves applying different rates based on usage patterns, demand levels, or other criteria.

In the context of electricity, it means charging different rates for consumption during different times of the day or based on the level of consumption.

Adelabu emphasised the need for greater trust and confidence in the national grid as a reliable power source, highlighting that many bulk electricity consumers, particularly industries, have shifted to using their captive power plants due to past trust issues.

“The majority of bulk electricity users, such as industries, are off the grid due to a lack of trust and confidence in the past. They now have their captive power plants in their industries, which is more expensive,” Adelabu stated.

He pointed out that the costs associated with captive power generation are significantly higher compared to grid electricity.

“The average cost of producing captive power is about N350 to N400 for those connected to gas lines. For diesel, it’s about N950, while petrol is about N550,” he explained.

To address this, Adelabu revealed the government’s strategy to encourage these bulk users to return to the grid by restoring trust and improving grid stability.

“Once consumers and industries see the trust, the confidence, and the stability we are giving, they would be encouraged and reconnect to the grid for a cheaper source of power,” he stated.