Ikeja Electric, Eko DisCo, GenCos, Others Edgy as FG Reviews License Renewal
- Ten years after receiving a license to operate, GenCos and DisCos will know their fate in the coming weeks
- The operators whose licenses will expire this month will be adjudged by their performances in the last decade
- According to industry sources, their performances will determine if their licenses will be renewed
Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.
As October nears its end, a sense of apprehension has overtaken the management and staff of Generation Companies (GenCos) and Distribution Companies (DisCos).
This is because of the imminent review of operational licenses granted to GenCos and DisCos a decade ago by the federal government.
Source: Getty Images
According to industry sources, there is a palpable feeling of unease, especially amongst operators who do not perform well, as they fear the federal government may not renew their licenses.
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Despite the epileptic power supply in Nigeria, the Central Bank of Nigeria (CBN) revealed during the 2022 Monetary Policy Meeting (MPC) in Abuja that it had allocated N1.3 trillion to the Nigerian power sector over the past five years.
DisCos, GenCos licensed to operate for ten years
The licenses issued to operators within the power sector as part of the privatisation effort were initially intended to remain valid for a decade, signifying a 10-year moratorium commencing from November 1, 2013, and concluding on October 31, 2023.
As the date approaches, operators are anxious about the federal government's intentions regarding the potential review of GenCos and DisCos' operational licenses.
This review may involve assessing Key Performance Indicators (KPIs), the Service Level Agreement (SLA), and the Vesting Contracts.
Measuring the performances of DisCos, GenCos
Amid the prevailing apprehension, stakeholders have urged for a measured approach, asserting that the entire privatisation initiative may not have been adequately designed to encourage private sector investment.
They also assessed the extent to which the privatisation of the electricity sector value chain has substantially impacted the overall health of the nation's electricity sector value chain.
According to Leadership, former Minister of Power, Professor Barth Nnaji, attributed some of the sector's imbalances to regulatory challenges and a lack of clear policy direction.
Nnaji pointed out that the Nigerian Electricity Regulatory Commission (NERC) has been hesitant in implementing a cost-reflective tariff system, which has had a substantial negative impact on the returns of Distribution Companies (DisCos).
Nnaji suggested that NERC's reluctance to address this issue might have political implications, given that bridging the gap in metering and ensuring accurate billing could burden citizens already grappling with rising living costs, especially following the removal of petrol subsidies.
Some of the underlying issues in the power sector has forced the FG to consider additional subsidy to mitigate the impacts of the recent increase in gas prices imposed by producers.
Also, speaking on the issues in the sector is Johnson Mokanwa, a Lagos-based Energy Marketer. He told Legit.ng that even though there have been a lot of improvements in the sector in the last ten years, the environment in Nigeria has not been favourable to the DisCos and GenCos.
He said:
I can tell you for free that the companies did not anticipate the kind of challenges that existed in the sector while they were bidding for these licenses. Infrastructures across Nigeria are continually being vandalised, and they also have a hard time getting consumers to pay for electricity. However, we can not deny there has been some improvement in the supply of electricity and other services.
FG Pays N135bn Electricity Subsidy to DisCos, Others to Stop Tariff Increase
In related news, Legit.ng reported that the NERC disclosed that in the second quarter of 2023, the federal government disbursed N135 billion as electricity subsidy.
This financial injection was aimed at bridging the revenue shortfall within the power sector during that quarter.
The N135.2 billion provided by the government reflects a substantial increase of N99.21 billion, marking a 275% surge compared to the N36 billion disbursed in the first quarter of 2023, as reported by NERC.
Source: Legit.ng
