|  By Anayo Ezugwu  |  May 29, 2017 @ 01:00 GMT  |

THE Ministry of Power, Works and Housing is going ahead with its plan to centralise the accounts of electricity distributing companies, DISCOs, despite the later’s protest. Eleven electricity distribution companies, are against the plan.  Babatunde Fashola, minister of power, works and housing, said the Nigerian Electricity Regulatory Commission, NERC, wants the accounts of and revenues generated by the Discos to be centralised and escrowed to protect the power sector from collapsing.

Fashola explained at the last monthly meeting of operators in the sector in Jos, Plateau State, that the decision was taken to protect the power sector from collapsing on the back of Discos’ reported dishonesty with their financial collections which legally belong to the market. He also explained that the Discos were opposed to the move despite their prior agreements with the Central Bank of Nigeria, CBN, before they got loans from the apex bank to support their operations and capacity upgrades at very low interest rates.

He noted that the discos had similarly failed overtime to honour agreements reached with the Nigerian Bulk Electricity Trading Plc, NBET, to provide letters of guarantee for future payments for energy sold to them by the NBET. According to him, while the Discos opposed the move, they also failed to state that, “the escrow condition was agreed by you (Discos) with Central Bank as a condition for offering you stabilisation funds by way of loans to fund the business you invested in because commercial banks were reluctant to do so.”

He further said that they agreed, “to establish letters of credit to guarantee future payments to NBET and TCN Market Operations,” and that the agreed commercial terms of the letters of credit authorises NBET and TCN Market Operations to draw on the letters of credit for any default in payment to them, but the Discos have frequently defaulted in that agreement.

Justifying the NERC’s plan, Fashola said: “Any right-thinking person will accept the principle that any person lending you money must have the right to know what you are doing with the money especially when under collection and under-payment has been a major feature of many Disco performances.

“As far as the regulation on your procurement is concerned, what the public needs to know, which your statement was silent on, is that you are entitled to fully recover your costs and investment by law and this is the function of how tariffs calculated. Since government holds 40 percent of the shares of Discos on behalf of states and local governments and the Nigerian people, it has a duty to ensure that you buy parts and other equipment at reasonable and competitive market prices and not through inflated contracts to relatives as we have seen in some Discos in respect of which NERC will take action in due course and sanction those who are involved,” he explained.

The minister equally alleged that the Discos have failed to open up their financial statements for proper review by the regulator, thus negating corporate governance practices as required of them by the law. He thus asked: “If a company cannot produce all the records of its transactions and accounts does that not allude to gaps in its governance?”

But the Discos had condemned the plan by the federal government, saying that such move would be a nationalisation of the Discos. Sunday Oduntan, director, research and advocacy, Association of Nigerian Electricity Distributors, ANED, in a statement issued on Monday, April 17, said any attempt to centralise or escrow the Discos’ revenue accounts would be tantamount to nationalisation or expropriation of the Discos.

He said such action runs counter to the objectives of the National Electricity Power Policy, 2001, NEPP, and the Electric Power Sector Reform Act, 2005, EPSRA, of a private sector-owned and managed electricity sector. “It would also send very wrong signals to domestic and international investors that Nigeria is not fully open for private sector investment and that we are still partial to the old habits of nationalisation, preventing the injection of the cheap and sorely needed capital injection that is critical to the rehabilitation and improvement of electricity infrastructure,” he said.

According to Oduntan, it will be improper to have a, supposedly, private sector-owned and managed business in which the government now seizes control of its revenues. The ANED advised the federal government to avoid any consideration of regulations or action that intrudes on the corporate responsibilities of procurement, financial management or personnel management.

“Relative to procurement, we are not aware that Nigerian Communications Commission, NCC, issues regulations to guide the internal procurement of the telecommunication companies; Central Bank of Nigeria, CBN, that of the banks; or the Department of Petroleum Resources, DPR, that of the oil companies,” he said.