July 25, 2018

ANED accuses FG of truncating TEM, owing N100bn subsidy

By Udeme Akpan

ABUJA—ASSOCIATION of Electricity Distributors, ANED, has accused the Federal Government of truncating the execution of the nation’s Transitional Electricity Market, TEM, thus causing financial crisis in the power sector.

Mr. Babatunde Raji Fashola, Minister of Power, Works and Housing, had a few days ago, indicted the Electricity Distribtion Companies, DISCOs, for their inability to develop the sector.

Specifically, the minister had, among other things, accused the DISCOs of owing the  Nigerian Bulk Electricity Trading company, MBET, N859 billion, non provision of meters, generation and lack of capacity to distribute power to consumers.

But addressing the press, yesterday, in Lagos, Mr. Sunday Oduntan, Director of Research and Advocacy, ANED, said: “The privatisation of of the Power Holding Company of Nigeria, PHCN, successor companies was based on the government’s acknowledgment of a significant truth, among others, that the only way to attract investment and the resultant increase in power supply in the sector was to remove the commercial risk on non-payment of power invoices to the power developers, by guaranteeing payment for the delivery of energy by MBET, based on a tariff structure that covers the cost of all the stakeholders along the value chain.

“This arrangement was expected to serve as a catalyst that would drive both an increase in energy and create a commercial framework that allows the parties to recover their cost of doing business.

‘’After this first stage was stabilised, the result of this would have been an evolution of the market into a contract-driven market, in which the DISCOs are able to buy energy directly from power generating companies, GENCos, creating bilateral contracts, a phase alsom known as the Transitional Electricity Market, TEM.

“Unfortunately, the evolution into TEM was truncated by politically-induced regulatory restrictions and actions (removal of collection losses, freezing of the tariff for R2 residential class for 18 months, non-payment of N100 billion subsidy for 2013 and 2014, under-recovery of required revenue, non-implementation of Minor and MajorTariff Reviews, all manner of politically induced regulatory orders. etc

‘’These have resulted in the inability of the DISCOs to recover the cost of the energy that they supply, limiting their ability to enter into contracts to directly purchase energy from GENCOs.”

On metering, Mr. Oduntan said: “At the 18th monthly power sector and stakeholders (August 14th, 2017), the MoPHW stated that the supply of meters to electricity customers is not exclusive to the DISCOs, a contracdiction of his convineint assertion now that customers with no meters should turn to the DISCOs.

“The metering gap, a major concern for our customers and us, the DISCOs, unfortunately, has become a politicised issue. As a means of tracking and accounting for our revenues, there is no greater interested party in comprehensive metering than the DISCOs.

“Unfortunately, the currently identified approximately 4.1 million meter gap is a legacy of 62 years of government and PHCN inefficiency. This gap continues to grow, as DISCOs enumerate and identify their customers, convert illegal consumers into customers, replace non-functional and aged meters and make new connections.”

On the capacity to distribute power, Mr. Oduntan said: “It is puzzling where the data provided about the increase in DISCOs’ capacity to distribute electricity is derived from, as provided in the Minister’s press briefing.

‘’A stress study of the distribution network conducted by the Presidential Task Force on Power, PTFP, in 2012 indicated a DISCOs’ capacity of 4,561 MW. Another stress test conducted by the systems operator, a unit of TCN in 2015, indicated a distribution capacity utilisation of 6,288 MW.”

Oduntan added that it would be impossible for Nigeria to generate, transmit and distribute power, if the various issues were not addressed, meaning that economic growth projections would likely be affected.