- Operators to sign performance bond
Dissatisfied with the performance of Distribution Companies (DisCos) and Generation Companies (GenCos) Power Minister Adebayo Adelabu yesterday said they must sign performance bond with the government.
According to him, failure to live up to the agreement could lead to licence revocation,
Adelabu spoke yesterday in Abuja during an interactive session with reporters.
He added that an investigation will look into how the licences for DisCos and GenCos were renewed for another five years unilaterally by the Nigerian Electricity Regulatory Commission (NERC) shortly before the inception of the Tinubu administration.
The probe, according to him, will look into whether the extension was legally and contractually in order, insisting that the government has the power to revoke a licence on the ground of non-performance.
Adelabu said the Federal Government reserved the right to revoke and recover operational facilities from licencees after paying them off.
He said his ministry plans to enter into a practical and realistic performance bond with the licencees before end of the year.
The minister said: “The licenses I saw were for 10 years (2013 -to -2023). But along the line, it was the Vice Chairman of the Commission who told me that before their tenure, the Commission had extended the licenses for another five years.
“The correctness of that legally and contractually, we are trying to review it. We have also ordered an investigation into their extension of the licenses if they were actually in order.
“But the license is not as important as the performance bond that we signed with the private sector operators. Irrespective of the tenure of the license, a license can be revoked at any time.
“So, it is not very important whether the license has been extended for another decade or not, if you are not meeting the conditions in the performance bond, all I need is to pay you and get the licence back from you.
“We are in the process of doing that; the performance bond expired in 2017 and was due in 2019. It was reviewed for another two years. So, it expired in 2021.
“We want to sit down with power sector operators in the generation and distribution segments to agree on a new practical and realistic performance bond which they must meet. That is what actually matters to us here,” he said.
Adelabu told the power sector operators that the Federal Government had begun further investigation into the extension of the licenses “not by this administration, not by the current management of the current NERC, but by the previous one, so we have to investigate what actually happened, how legally correct was it, how contractually correct was the extension.”
Faulting the privatisation of the GenCos and DisCos, the minister stated that the government should have commercialised the entities instead.
He, however, foreclosed the possibility of reversing the privatisation policy.
Adelabu insisted that if the government evaluates its intervention in the DisCos, it will be obvious that it now has higher equity stake in excess of the private investors.
He said: “Today, government holds about 40 per cent of the DisCos, I am telling you that is enough chunk for government to take control.
“With the investments the government has even pumped into these distribution network, if we have been capitalising those investments, we will be having a higher portion of the equity ownership of the DisCos.”
To address the challenges facing the DisCos, Adelabu recommended the downsizing of their franchise areas to manageable geographical sizes.
He also sought the decentralisation of the DisCos territories for effective management.
The minister said: “If we had done commercialisation at that time, perhaps, it would have been more than what we have now.
“But, we are not going to reverse it, contracts have been signed, commitments have been made, loans have been taken, but we can still work around it.
“There are two things that should go together. I think about the territorial coverage of the DisCos. I feel some of their territories are too large for them to be effective and efficient, probably we can do a review around reducing the coverage with the agreement with the existing regional DisCos.”
Owing to the 2023 Electricity Act that now empowers states to generate, transmit and distribute electricity, Adelabu pledged to meet with governors and advise them to start from investing in the distribution subsector.
He revealed that the sector will encourage mini, micro grid, and off-grid solutions to relieve the national grid.
The minister also said that the Zungeru Hydro Power Plant is ready and can generate 700 megawatts, adding that in the interim, the plant can evacuate only 300 megawatts that is due for commissioning this month.
Confirming that the Federal Government has not restored power supply to Niger Republic, Adelabu also explained that fire engulfed the power substation that transmits electricity to the neighbour-country a few months ago.
According to him, the ministry will comply to restore supply to Niger once the directive comes from Mr. President.
He said: “Then when you talk about Niger Republic: yes, we are withholding supply. We have not started. We are just messengers and when they ask us to resume, we will resume.
“And you are also aware that the substation where power is transmitted was burnt a couple of months ago. It is being fixed now. When they ask us to restore power, we will do the same.”
He admitted that the sector was grappling with liquidity constraints and also sought the closure of the gap in the industry with meters built with technology for remote tracking.
The minister admitted transmission capacity constraint and that the prevailing electricity tariff was not cost- reflective
He said that a review can only be possible when affordable.
