Berkeley Legal | DisCos: What is next?
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23 Jan DisCos: What is next?

Streaming from the reformation of the Nigeria Power Sector in 2005, the National Electric Power Authority (NEPA) was unbundled into autonomous companies, Generation Companies (GenCos), Transmission Companies (TransCo), and Distribution Companies (DisCos).

The DisCos, which are now fully privatized and overseen by the private sector, were established to market and sale electricity to customers as well as ensure that the rural parts of the country are provided with electricity. There are currently eleven (11) DisCos in Nigeria.

Challenges

Some of the challenges DisCos currently face include but are not limited to the following:

  1. Operational Challenges

The private sector investors who initially acquired the DisCos were not conversant with technicalities of power distribution and as such operational challenges continue to subsist stemming from a blatant lack of knowledge as to how such DisCos are to be operated, managed and maintained. In addition the aforementioned, it can be argued that the initial investors were not aware of the “actual” state of the DisCos prior to acquiring same.

  1. Funding/Investment Constraints

Flowing from the operational challenges mentioned above, there is a prevailing deficit in revenue being generated by the DisCos. Consequently, DisCos are being forced to raise debt for its operations at very high rates and short tenures. As with any business, substantial capital is required to improve operations and capital injection in the DisCos has not transpired.

Conversely, there have been proposed plans by the Federal Government to subsidise the industry but same has not materialized.

  1. Metering gulf

One of the multiple tasks of the DisCos is to invest in metering equipment.  Due to its lack of funds, the DisCos have not been able to provide meters to all its customers pursuant to the Federal Government’s directive through the National Electricity Regulatory Commission (NERC) hence there is a lingering metering gap issue in Nigeria. This has led to an uproar by customers who are of the view that the DisCos are charging excessive fees and are “fleecing” its customers. Customers believe they are being short changed as electricity supply continues to be scarce and bills continually to be unbridled as a result of estimate billing being implemented by the DisCos.

DisCos also face further predicaments such as infrastructural deficiencies, derelict equipment, tariffs, theft/vandalism of equipment and lack of quality workforce/customer service delivery.

What Next?

Power distribution is a fundamental part of the power chain supply. Inappropriate supervision of the distribution of power and mismanagement of equipment can lead to a breakdown of the chain.

The solution to the underlining issues within the DisCos is inter alia the  provision of funds, access to long term debt financing, adequate investors and addressing the tariff/estimated billing issues. The Nigeria power sector is a vast industry with limitless opportunities. These opportunities can be capitalised on by local and foreign investors. It is an area, if properly governed, can improve the Nigerian power sector immensely. The Federal Government in addition must play a key role in providing support to this key area in the power sector.


The content of this document is solely for information purposes only and should not in any way be construed as a legal opinion. If you require specific legal advice on any of the matters covered in this article please contact info@berkeleylegal.com.ng