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N93bn debt: DISCOs Embark On Mass Disconnection

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Monday, May 16th, 2016
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The nation’s power sector crisis deepened, weekend, following the mass disconnection of historic debtors by all the electricity distribution companies, DISCOs, to protest the huge unpaid electricity bills by this class of consumers. For now, all historic debtors, including residential, commercial, industrial and govern-ment establishments across the three tiers of government, would have to find alternative means of electricity supply until this debt issue is resolved.

As at last calculation, government establishments, including the military and security agencies alone, were owing the DISCOs some N93 billion. The figure comprises N39.1 billion pre-privatisation of electricity assets and N39.5 billion post-privatisation.

Also thrown into the debt calculation was the outstanding interest of N15 billion, which the bulk trader charges DISCOs for late payment of their electricity bills, a situation that occurred as a result of non-settlement of electricity bills as at when due.

Two weeks ago, all the DISCOs took pages in national newspapers, where all historic debtors were given deadlines within which to pay their debts or have their electricity supply disconnected. Mr. Sunday Oduntan, Executive Director, Association of Nigeria Electricity Distributors, ANED, said weekend that his member-companies had to carry out its threat when it became obvious that there was nothing on the table.

He said: “Although we appreciate the efforts of the Vice President, Professor Yemi Osinbajo and the Minister of Power, Works and Housing, Mr. Babatunde Fashola, the stark reality is that there is nothing concrete to hold on to.

‘Nothing for us in budget’

“No allowance for MDAs debt to DISCOs in the budget, even though we started discussion before the budget was passed. “The indebtedness has become so huge that we are truly troubled about how the government would resolve this without a budgetary allocation. “ Oduntan, however, made it clear that the current mass disconnec-tion protest embarked upon by DISCOs was not an exercise targeted at MDAs, “but all historic debtors.”

The creditors

He said: “This indebtedness is killing us; it is seriously impacting negatively on the entire value chain in the power sector equation. Do not forget that only 25 percent of this debt actually belongs to DISCOs. “The rest are for other companies in the value chain— generating com-panies, bulk trader, gas suppliers, among others.

“So if you do not pay and you accumulate debt, what you are looking at is a possible total collapse of the entire power sector. “That is what we seek to avert by this action. We need this fund to energise the power sector; to ensure electricity supply and to grow the sector.”

Oduntan stated that the operations of all distribution companies were hampered by huge indebtedness of these historic debtors.

Debt profile

He said government establishments, comprising ministries, departments, military formations, security agencies, owed each distribution company as follows: Abuja DISCO, N18.6 billion; Eko DISCO, N8.6 billion; Kaduna, N8.2 billion; Enugu, N7.2 billion; Ibadan, N6.8 billion; Ikeja, N5.9 billion; Port Harcourt, N6.8 billion; Benin, N5.8 billion; Jos, N6.5 billion; Yola, N2.4 billion and Kano, N1.2 billion.

While electricity consumers across the country expect the Distribution companies to provide modern facilities such as transformers, Pre-paid meters etc. and render world class services, their ability to deliver on these expectations has been seriously constrained by fund shortage occasioned by huge indebtedness and government’s inability to implement the power tariff structure which would have made funds available to them.

Energy analysts contend that unless this funding crisis is resolved through prompt payment of the huge indebtedness and the implementation of the new power sector tariff structure, the nation’s hope of improving power supply may remain a mirage.

Realising the enormity of the financial challenges the DISCOs are facing, the Minister of Power, Babatunde Fashola, weeks back, called on them to divest 60 per cent shares in the utilities in order to access more liquidity.

This suggestion has however been roundly rejected by energy experts most of who contend that the Privatization agreement the DISCOs entered into with the Bureau of Public Enterprises, BPE, was emphatic that no investor will be allowed to sell beyond 5% of their shares in the first 5 years.

What the government should do, according to these analysts, is to promptly pay the huge indebtedness of the MDAs so that the DISCOs could access fund for their operations. These experts also urged the Federal Government to pursue its plan to secure ¦ 309 billion Bond to finance the shortfall in the Nigerian Electricity market.

Oduntan agreed with these experts: “One indisputable fact is that the power sector need to be well-funded. In other Climes, governments don’t compromise making such a sector have access the needed fundings. In addition to immediately ensuring that the MDA’s indebtedness to the sector are settled forthwith, the Federal government should also pursue this bond which is targeted at financing the shortfall in the Nigerian electricity market. It is a major way out of our electricity crisis. It is the shortest route to Industrial growth as there can’t be Industrial growth without stable power supply.”

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