FG orders revocation of licences of electricity distribution companies

President Bola Tinubu’s administration has directed the Nigerian Electricity Regulatory Commission (NERC) to withdraw licenses of non-performing electricity distribution companies (DISCOs).

This is as power generation dropped year-on-year (YoY) by 21 per cent to 3,475MW in March 2024, from 4,404MW in the corresponding period of 2023, due to many problems, especially low investment and inadequate gas supply.

The Minister of Power, Adebayo Adelabu, stated this during a meeting with the head of the agencies in Abuja on Monday.

Adelabu accused the DisCos of not doing enough to improve supply despite the availability of power on the national grid adding that distribution segment remains the weakest link in the electricity supply value chain.

Adelabu stressed that NERC must look for creative ways of getting the DISCOs to improve supply including the imposition of stiff sanctions on utilities which fail to pick their allocations and outright cancellation of lincences.

He insisted that the franchise areas covered by the DISCOs were too large, adding the government would pursue a restructuring that would create smaller DISCOs with companies restricted to one state each.

“Distribution is our weakest point and it is the closest to the consumers. If we don’t get distribution right, to Nigerians, we’re not doing anything. So, efforts need to be put on this. In fact, we must intensify our efforts in ensuring that we address all issues relating to distribution,” the minister said.

“It is true that the distribution companies are in the hands of the private sector. We don’t have direct control. But we need to compel them for performance. They must perform. If they do not perform, all our effort in generation, in transmission is zero. I’ve also had a meeting with the Chairman of NERC on how we’re going to address these performance issues of the electricity distribution companies across the nation.

“Why we have new policies in our power sector policy framework, which we’re going to finalize to address long-term issues in distribution, we must proffer short-term solutions to the lingering crisis.

“Before we get to that, we’re talking about the issue of the capitalization of the discourse, for them to inject funds, to improve infrastructure.”

“We are talking about issues of restructuring the DISCOs along state lines, to make them manageable in size. Also, issuing new franchises to smaller DisCos to take over areas not being served by the existing ones or that have been underserved by the existing ones.

“I’ve said it before now that non performance of DISCOs in terms of epileptic power supply qualifies as a basis for revocation of license. Any DISCO that is found-wanting will be severely dealt with because their actions or inactions directly affect the performance of the sector”.

The Minister pointed out that willful refusal by any DisCos to take up available power “is a qualified basis for the revocation of licenses too”, adding that the distribution companies must be ready to pick up 90-99 percent of load allocated to them.

He described the ongoing electricity rationing across the country as unacceptable, disclosing the government plans to improve power generation from the present 4,000MW to 6,000MW in the next six months.

This, he said, would be achieved by paying off substantial debts owed to power generation companies and gas suppliers.

“So what we are looking at is to have an agreement to ramp up to a minimum of 6,000 megawatts within the next three to six months. I know that the highest we ever generated was 5,700, about three years ago. That was specifically November, 2021.

“And this 5,700 was also distributed. If we could achieve 5,700 at that time, I believe we still have infrastructure to generate between 6,000 and 6,500. In terms of the generating companies, I have no doubt in my mind that the existing capacity can give us 6,500 once there is stability in supply of gas.

“I’ve been to a number of the generating companies and I confirmed that they have this installed capacity. And a large percentage of this installed capacity is operational, but they are not available because of low or shortage in gas supply. Once there is gas supply, we want to ramp up generation to a minimum 6,000MW”.

He noted that while the Federal Government would continue to pay electricity subsidies in the short-term, it plans to gradually phase it out in the next three years and return the sector to a commercially driven tariff.