Power generation and distribution companies in Nigeria are not poorly funded, the Nigerian Electricity Regulatory Commission has said.
According to NERC, the funds generated from electricity fixed charges are enough to cover the operations of the distribution and generation companies before the firms are finally taken over by their respective private investors.
The Chairman of the commission, Dr. Sam Amadi, who stated this, refuted claims that power firms in Nigeria were suffering from paucity of funds.
He challenged the firms to state their demands rather than complain about financial problems.
He said, “There are two things here: one is that NERC has provided the tariff; the other is about what is recovered and what is reported. So if discos have problem with financing their operations or gencos, it is a question of saying this is what we are supposed to get and this is what we get.
“I wouldn’t like to talk about whether they should be given budgetary support, but from the market point of view, we believe that the tariff was designed and is sufficient to cover all the operations of the entities in the market, if they follow through the MYTO requirements.”
Stakeholders at several occasions have said that power firms in the country lack funds to ensure smooth operations. According to them, one of the major causes of epileptic power supply in Nigeria is inadequate funding for gencos and discos.
For instance, the Chairman of a 13-member Technical Investigative Panel on System Collapse, Mr. Fatai Olapade, said power firms in Nigeria did not get sufficient funding.
He observed that inadequate funding was also a reason for system collapse in the country, and urged the government to do something about it.
He said, “Power generation, distribution and transmission companies are under-funded and this, as well as a few others could be factors causing the problems in the sector. These are some of the areas we will look into before the man-made problems.”
But Amadi blamed the electricity distribution companies for their inability to get all the funds they needed.
He said some of the companies had failed to improve on capacity to get money meant for their business operations.
He maintained that the fixed charges collected from electricity consumers were enough to offset the financial demands of the power firms, adding that the affected companies should develop their revenue collection strategy.
Amadi said, “The only issue is that discos are not able to collect as much as they ought to collect because of many reasons, including lack of innovation and commitment to go out and recover the money.
“However, we are working hard to ensure that the settlement process is much more transparent so that we know exactly that the money recovered is in the system and more importantly used for the services that they were budgeted for.”
The NERC boss argued that it would not be right to state that there was not enough financing for power generation and distribution companies from the revenue generated from electricity fixed charges.
He added, “The money comes from the consumers to the discos and it is important to note that the money comes bottom-up. If, for example, we are not paying for the cost of gas or we are not paying for the energy delivered to discos, it might not be right to assume that there is no sufficient financing from the MYTO.
“Essentially, what I will like to say is that we have no evidence to say that the shortfall or the lack of revenue for the companies has anything to do with the MYTO process.”
The House of Representatives had also early this year faulted the non-allocation of sufficient funds to the Power Holding Company of Nigeria and its successor generation and distribution firms.
The Chairman, House Committee on Power, Mr. Patrick Ikhariale, stated that though the privatisation of the power generation and distribution companies had reached an advanced stage, there was need for the Federal Government to put in place a back-up plan to ensure that the nation was not thrown into darkness.
This, he said, was in the event of any delay or failure of the new investors to meet up with the payment procedures.
Ikhariale had argued that there should be provision for the gencos and discos in such a way that the privatisation would glide smoothly to an expected end.
But NERC maintained that the tariff on power was a good back-up plan, as it would not only boost the confidence of investors in the sector, but help to drive the operations of the power firms successfully.
Amadi, who defended the Federal Government’s position on the recent increase on electricity fixed charges, said the MYTO, which had an approved tariff from 2012 to 2016, would also attract investment to Nigeria’s power space.
He said most of the shortcomings in the sector were structural and insisted that the commission would not reverse itself on the approved tariff otherwise there might not be enough funds to run the power companies.
He said, “We regret that the distribution companies have not been very committed to meeting their obligations in the MYTO. NERC recognises that the quality of service has not seen significant improvement, especially in the area of metering and accurate billing of customers.
“Our expectation for significant and sustained improvements in electricity supply and quality service lies in the expected take-over by the privatisation preferred bidders who have better incentives and commitment and have made enforceable promises to invest continuously in providing better services to consumers.”
Amadi added, “These investments and commensurate improvements will not all be made in one day but over the coming months, years and decades following the entry of new investors and managers of our distribution companies.”