Power Minister Demands Performance Bond from DisCos and GenCos, Threatens Licence Revocation

The Minister of Power, Adebayo Adelabu, has expressed his dissatisfaction with the performance of the Distribution Companies (DisCos) and Generation Companies (GenCos) in the power sector. He said they must sign a performance bond with the government or risk losing their licences.

He made this statement yesterday in Abuja during an interactive session with reporters. He also revealed that an investigation has been launched into how the Nigerian Electricity Regulatory Commission (NERC) unilaterally renewed the licences for DisCos and GenCos for another five years shortly before the Tinubu administration came into power.

He said the probe will determine the legality and validity of the extension, adding that the government has the power to revoke a licence on the ground of non-performance. He said the Federal Government can also recover the operational facilities from the licencees after paying them off.

He said his ministry plans to enter into a practical and realistic performance bond with the licencees before the end of the year. He said: “The licences 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 licences 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 licences if they were actually in order.

“But the licence is not as important as the performance bond that we signed with the private sector operators. Irrespective of the tenure of the licence, a licence can be revoked at any time.

“So, it is not very important whether the licence 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 also faulted the privatisation of the GenCos and DisCos, saying that the government should have commercialised them instead. He, however, ruled out the possibility of reversing the privatisation policy.

He 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.

He 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.

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