Eligible customer: Electricity industry stakeholders condemn Force Majeure threat by Discos, CEO says ‘Fashola’s policy will revolutionise sector, move transitional market in right direction’

Stakeholders in Nigeria’s Electricity Industry have condemned the threat by the Electricity Distribution Companies across the country to declare force majeure in the industry following the declaration of Eligible Customers, saying the DisCos would benefit more if they worked hard to meet the competition that would arise from the declaration.
The Minister of Power Works and Housing, Mr Babatunde Fashola (SAN), had made the Eligible Customer declaration sometime this year as a means to open up the industry for those category of customers wishing to invest in power distribution in areas where the DisCos are unable to satisfy their energy needs.
This was followed up recently by the presentation of the Eligible Customer Regulation by the Nigerian Electricity Regulatory Commission (NERC).
Speaking on the issue at a Sunrise Daily programme on Channels TV in Abuja monitored by Freedom Online, the Founder and Chief Executive Officer of the ZKJ Energy Partners Limited, an Energy Advisory and Investment firm, Mr Rumundaka Wonodi, expressed shock at the threat, saying it was an unforeseen development from a purely legal provision made under the Power Sector Reform Act.
Wonodi, who is also a former CEO of the Nigerian Electricity Bulk Trading Company (NBET), said his shock came mainly from the fact that the declaration was something that took time to put in place by the Minister, who, according to him, made the pronouncement in consultation with and advice by the Nigerian Electricity Regulatory Commission (NERC) as provided by the Act.
He told the programme anchor, “Well, just like you, I am a little bit shocked at that because this is something that took time to be put in place and it is a provision under the law. So force majeure is something that you do not foresee. If you look at the Power Sector Reform Act it says that somewhere along the line, the Minister has the legal right, in consultation and when advised by the Commission, to declare eligibility for customers.
Explaining the concept of who qualifies as Eligible Customer, the Energy Expert added that although this was a category for the Minister to determine, an Eligible Customer was someone who could go out and contract to buy power directly from a generation company GenCo or a power marketer.
“So it presupposes that that person or that entity understands what it takes and is able to enter and negotiate a tariff or conditions of supply with a Generator”, he said adding that the other category of people that fell under the DisCo seemed not to be very sophisticated and did not have the buying power to negotiate and so had to buy power from a regulated tariff from the Commission.
He, however, explained that only Customers connected directly to a GenCo or a transmission line could bypass the DisCos and the Transmission Company of Nigeria (TCN) and buy power directly from the generation companies while on the other hand a Customer could stay where he is and contract with a generation company and have the power transmitted through a transmission line or through a distribution network.
Insisting that there was no basis for a force majeure by the DisCos, the former NBET boss, who explained that in the case of a Customer contracting with a generation company to have the power transmitted through a transmission line or through a distribution network, such customer had to pay the Genco or the DisCo, as the case may be, for wheeling the power, declared, “So, at the end of the day the DisCo still stands to gain from the declaration”.
On the perceived fears of the DisCos and the TCN about commensurate payment for wheeling the power to the Eligible Customer, the expert said the regulation that would take care of the payment system was already out there remaining to work out the details, adding, “One of the things that is required is there has to be an open access on the network. DisCos can no longer stop you from buying power by frustrating it”.
According to him, in order to settle the issue of payment, “the Commission has to come out with what we call Distribution Cost of Service Charges so that the DisCos and everybody knows exactly what the cost of wheeling power will be and what the revenue stream will be and you have to sign this agreement with either the DisCo for the Distribution use of Service Agreement or the TCN for wheeling the power on the transmission network”.
Wonodi, however, pointed out that the agitation by the DisCos may have to do with the competition that was likely to result from the Eligible Customer declaration adding that the companies would have preferred keeping the monopoly of supply by which they could carry on the operations at their own pace.
“Yes, they see the competition. One of the intents of the Eligible Customer is to bring competition and one of the things we have always thought is that some of the DisCos are laybacks and once you have a monopoly you tend to want to do things at your own pace”, the Chief Executive said.
He explained further that the other intent of the Eligible Customer declaration was also to improve the revenue in the system by giving the GenCos, who had not been paid in full, the opportunity to sell directly to customers who would pay them adding that another aim was also to “tap into bringing out unutilized capacities”.
He declared, “So, I think that it is that competition that worries the DisCos and the competition targets people who consume large quantities and might be easier to market to”, adding, however, that there is a provision for competition charge which, according to him, represent some form of payment that the Commission could work out that would be made by the Eligible Customers to the DisCos to take care of the charges or losses they might incur as a result of the competition.
“But at the end of the day, I think the DisCos need to wake up. They have held the industry to ransom in some instances like metering and one of the expectations is that we see metering within the industry being deregulated and opened up to other persons”, Wonodi said.
Noting that competition frightens those who are in a monopoly status, the energy expert added, “I think the DisCos are reacting very badly; because there is still a lot to be done within the market and the DisCos still have the primary advantage to still serve the Eligible Customers differently and at a higher tariff too”, pointing out that the Eligible Customer provision was one the DisCos could take advantage of.
On the fear of banks saying they could lose over N466Billion as a result of the provision and the DisCos as well saying they might not be able to pay the loans they got from their bankers, Wonodi said although there could be a threat on the loans in the sector but, according to him, “It is not because of the Eligible Customer provision. The DisCos just have to sit up and do some work and that is the truth”.
“The DisCos need to do some business development to help the industry move forward. There are no investments being made in network enhancement. So there is opportunity that with the eligible customers, the generation companies that seek to identify with them might actually help in putting some cables around the network and enhance the network”, he said adding that though the loans might be under threat but with a more viable market, the DisCos would be in a position to pay them back.
Lamenting that the industry is not moving forward, the Chief Executive added, “The industry continues to shed and lose revenue and the debts continue to pile up. So the way we have been going is not what the DisCos would say they want maintained. We need to change it and then make sure that people get better supply and with that a higher revenue for the industry”.
Also speaking on the same issue from Lagos, the Chief Executive Officer of Wavelength Integrated Power Services Limited, Mr. O’Neal Lajuwomi, also condemned the threat as uncalled for adding that the DisCos had held back the power value chain from moving forward by, for example, not fulfilling their primary obligation of providing power to their customers.
Citing the inability of the DisCos to provide meters for their customers, Lajuwomi wondered how the DisCos could recoup their investments with the absence of meters, which he described as “the only fair way the customer can pay for what he consumed” adding that the DisCos did not do enough due diligence before they took over the industry.
Lajuwomi, who expressed regrets that the DisCos were not ready to work, said Government was compelled to do what it is doing in the sector at the moment, including the Eligible Customer declaration, in order to move the industry forward adding, “What will happen with this scenario is that it is going to revolutionize the sector so that the transitional market will be able to move in the right direction”.