THE federal government has initiated the process of unbundling 11 electrical distribution businesses in order to increase efficiency.
This was revealed by the Minister of Power, Adebayo Adelabu, during his address before the Senate Committee on Power, chaired by Senator Eyinnaya Abaribe, yesterday in Abuja.
Adelabu declared that the enterprises’ privatisation would not be reversed, but that the Discos would be divided into more efficient organizations along state lines in order to carry out their responsibilities.
He also revealed that over 100 projects of the Transmission Company of Nigeria have not been completed since 2001, a space of about 23 years.
Adelabu said, “We are unbundling the Discos along state lines. Some of the Discos are too big for efficiency. They are too big for effectiveness. Ibadan Disco covers seven states. It is practically impossible for them to be efficient.
“So we are rearranging and restructuring the Discos along state lines so that each state government will know the responsible Disco for their states. Also, the federal and state governments should start exercising their rights in the operation and management of the Discos because we still own 40 per cent in the firms.
“But we have left it for the private sector operators for too long and they have messed it up. So the government must come back to take over its own right in the Discos. We are also planning to franchise the unserved communities under the Discos.”
This came as the Federal Government also ordered the sale of Discos that had been taken over by banks and the Assets Management Corporation from their original investors/owners.
Currently, four discos are managed by banks and Amcon.
The United Bank of Africa (UBA) handles the Abuja Electricity Distribution Company, while Fidelity Bank oversees the Benin Electricity Distribution Company, Kaduna Electricity Distribution Company, and Kano Electricity Distribution Company.
AMCON manages the Ibadan Electricity Distribution Company.
The four discos are now under new management due to their failure to repay their loans to banking institutions.
The government said that people who bought the Discos when they were officially privatized in November 2013 had the necessary skills and financial resources to run the businesses.
This happened as the Senate Committee on Power criticized the Discos for being so inefficient since taking over the privatized assets more than ten years ago, calling for an overhaul of the power companies.
The minister remarked, “We will begin to see regulations about franchising. The fact that you are an Eko Disco does not exclude you from having smaller Discos that are willing to invest in underserved neighbourhoods. So we’re looking into franchising.”
Adelabu also revealed that the Oyo State Government has written to the Federal Government, expressing its desire to exercise its rights in Ibadan Disco.
He stated that the Nigerian Electricity Regulatory Commission has been made aware that it must fine Discos that fail to deliver, as some of the power businesses’ licences may be revoked for non-performance.
“We are transforming the Discos and very soon you’ll see that a lot of tough decisions will be taken against these Discos because they are the last mile in the sector. If they don’t perform then the entire sector is not performing.
“So we have put pressure on NERC to make sure that it raises the bar on the activities of the Discos. If it has to withdraw licences for non-performance, why not? If it has to change the boards and management, why not?
“And all the Discos that are still under AMCON (Asset Management Corporation of Nigeria) and some lenders (banks), within the next three months they must be sold to a technical power operator with a good reputation in utility management.
“We can no longer afford AMCON to run our Discos. We can no longer afford the banks to run our Discos. This is a technical industry and it must be run by technical experts,” the power minister stated.
Also commenting on the non-performance of Discos, a member of the committee, Senator Danjuma Goje said, “The Discos have not added anything significant to the power sector, but are just going about collecting money.
“The Discos are complete failures and should be overhauled. They have failed to live up to expectations and we have so many complaints about their poor performances.”
The Senate committee also authorized an investigative hearing on the electricity pricing hike, which will be place on April 29, 2024, at the Senate.
The power minister informed his guests that people who bought the Discos when they were privatized lacked the necessary competence and financial resources.
Adelabu said, “Our problem started from the privatization era. Not that the privatization has a problem in itself, but its implementation and execution have robbed the process of its laudable objectives.
“We believe that people who bought the power companies do not have the required expertise to run the utility firms. Secondly, they were not buoyant enough in terms of financial buoyancy to pay for the power plants.
“All of them used bank loans to pay for the assets. And we all know that the power business is a long-term business. It is not something you recoup your capital and make profit in a short time. So they were all under pressure to repay the bank loans that they used to acquire the power companies.
“This is why today a number of them have been taken over by their lenders, either AMCON or the banks, both local and international banks. They also promised to invest and enhance the distribution network, but they did not do this.”
The minister stated that the investors had promised to reduce the losses in the Discos, but stressed that up till now the losses had remained at about 40 per cent across the power value chain.