The Transmission Company of Nigeria, TCN, has called on the 11 Electricity Distribution Companies, DISCOs in the country to invest more in their network to savage the economy of the nation.
The Federal Government had approved N72 billion to enable DISCOs step up electricity generation, aimed at meeting the need of consumers in the country.
According to the TCN’s General Manager, Public Affair, Mrs. Ndidi Mbah, “Investments in TCN’s grid expansion, will only impact positively on the social well-being of the benefiting communities if the Distribution Companies in the affected areas also make commensurate investment in their networks.
“Investment in the distribution network is essential because no matter how much TCN puts into expanding its capacity, the only way consumers can derive maximum benefit from the investment is when corresponding investment is made in the distribution networks.
“Several projects are currently on-going in its network nationwide and TCN re-affirms its resolve to continue to pursue and implement the incremental power policy of the Federal Government by consistently investing in capacity expansion initiatives through its Transmission Rehabilitation and Expansion Programme.”
But in their reaction, the DISCOs cautioned the Federal Government against unilaterally investing N72 billion to upgrade their distribution networks, stating that they may not be able to recover it from the current tariff they charge for distributing power to consumers.
Speaking through their umbrella association – the Association of Nigerian Electricity Distributors (ANED), in a statement, the DISCOs stated that the investment, if not evaluated and appropriated by the Nigerian Electricity Regulatory Commission (NERC), as part of the laws governing investments in their networks, would become a pitfall to their operations.
They also pointed out the heavy illiquidity crisis in the sector as another reason for their cold shoulders to the investment.
“Ordinarily, any attempt to improve any aspect of the Nigerian Electricity Supply Industry (NESI) value chain – a value chain that was mostly neglected and inefficiently operated for the 62 years prior to the November 1, 2013 handover to private investors – would be praise worthy.
“Particularly laudable is when such investment is coming from the government, as is the case now, establishing its determination to have “skin-in-the-game” and explicit acknowledgement of the urgency of turning around a sector that is a vital contributor to the national economy.
“Unfortunately, in this instance, the N72 billion initiative is one that, potentially, holds pitfalls that will undermine any expected positive outcomes that were the genesis of the government’s planning for it,” said the DISCOs.
In addition, the DISCOs stated, “Government funds, albeit, based on a stranded 2,000MW capacity that is constrained largely by factors other than distribution limitations, should not be invested in a sub-sector that has been privatised.
“It is the obligation and business of the investor to access debt financing for any such investments, freeing government funds for other more urgently needed social investments.
“Given the heavily regulated nature of the distribution sub-sector and that this planned expenditure falls outside of the legal/regulatory requirement that capital investment must be recovered through the tariff (based on DISCO cost submissions to the regulator, Nigerian Electricity Regulatory Commission (NERC) and after mandatory public consultations), failure to adhere to this requirement will cause a problem of lack of recovery of the N72 billion.”
The investors paid into the treasury of the Federal Government over $1.3 billion for 60 percent equity in each of the eleven DISCOs, while the remaining 40 percent remains with the government.