DisCos stifling competition in Nigeria’s power sector despite poor performance

Electricity Distribution Companies (DisCos) are averse to any discussion around breaking their monopoly in the power sector despite poor electricity supply in different parts of the country.

DisCos have kicked against granting of licenses to companies or communities with interest in procuring the Independent Electricity Distribution Network (IEDN) and even resolved to sue whoever is involved in what they have described as network encroachment.

The Nigerian Electricity Regulatory Commission (NERC), on March 7, 2012, signed two regulations – IEDN and Embedded Generation 2012.

The regulations are to enable communities, local/state government as well as private investors to generate and distribute electricity without recourse to the national grid. The regulations also make it easier for companies to participate with various options available.

However, there have been disputes arising from the regulations. In a newspaper advertisement, Eko DisCo warned a private company, PIPP LVI Distribution Limited, to remove all the lines it laid on its network and cease from soliciting further business from its customers.

Also, Ikeja Electric accused Cummins Power Generation Nigeria Limited (CPGNL) of tampering with its distribution infrastructure.

Likewise, Benin Electricity Distribution Company (BEDC) has petitioned NERC against granting of an independence license to Asaba Distribution Limited (ADL).

BEDC approached the court for a reprieve, saying ADL is challenging its capacity to supply adequate electricity to customers in its area of jurisdiction.

The suit contained an order of perpetual injunction restraining ADL from distributing electric power in any guise or manner to the areas covered under BEDC’s distribution licence, including but not limited to core areas of Asaba, Delta State such as Summit Road, Anwai Road, Government House, Cabinet Road, New General Hospital Area, Okpanam Road and NTA Road.

BEDC averred in the suit that it has the capacity to and has in fact been supplying adequate and sufficient electricity that meets the demand of the Delta State Government for whom the IEDN license has been procured for.

Sometimes, it is the consumers themselves that kick against the territorial exclusivity of the Discos.

Stakeholders in the sector are of the opinion that NERC is stifling competition in the power sector and weak in its regulatory responsibility.

Moreso, founder of All Electricity Consumer’s Protection Forum, Adeola Samuel’s comment has contradicted BEDC’s claim. He said BEDC has not lived up to its expectation in service delivery to its customers.

He hinted that a town in Ondo State has been without power supply for several years even before the advent of BEDC, yet the company did not bother to leverage the situation for an expansion but embarked on extortionist billings.

He added that the distribution company has violated its performance agreement without consequences, adding that the review of the agreement was due after five years with the provision for one more year extension, which expired in 2019, but NERC still failed to act.

He added that by virtue of that agreement and clause, the acceptance of Asaba DisCo might be due to a review of the performance of BEDC, which is below par, hence the entry of another company.

He said it was not out of place if BEDC was singled out for such performance review, as the incidents in the area are louder in low delivery than any other DisCos.

In a statement by Afolabi Elebiju and Daniel Odupe, LeLaw Barristers and Solicitors, titled: “Nigeria: Embedded Power Generation And Distribution In Nigeria – Legal & Commercial Realities, they maintained that Private investors’ participation in any sector is usually influenced by the prospects of making a return on investment (ROI). A major driver of this is the sanctity of contracts, as investment decisions are usually predicated on certain assumptions, including the stability of contractual arrangements.

The duo noted that any perceived failure of the government to honour the sanctity of contracts impacts negatively on the confidence of potential investors, and oftentimes, is a critical consideration in declining to proceed with otherwise promising transactions.

“Since the government is a continuum, the sanctity of contracts must be guaranteed, regardless of the change in governments. Thus, it has been argued that what the Discos purchased when they acquired the license was not just territory but the electricity supply services that can be rendered to people living in those franchise areas and exciting part of that market is a violation of the contract.”

Another argument in favour of the DisCos is the doctrine of legitimate expectation. A legitimate expectation may arise from an express promise “given on behalf of a public authority”, and “some benefit or advantage which the applicant had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment.

“Investors in Discos clearly expect to enjoy complete rights of distribution in their licensed areas. However, the capacity to rely on legitimate expectation may cease once it is shown that they are given an opportunity to comment after being presented with rational grounds on the imperative of embedded generation in licensed areas or where the expectation of the investors is inconsistent with express statutory provisions.

“On the other hand, so much depends on the power supply to unlock/actualize Nigeria’s growth and development potential. The need for a steady power supply to boost economic activities particularly in strategic locations like the Ariaria Market (part of GPL coverage area excised from Enugu Disco territory) and the spillover effects on the economy of the success of the traders and manufacturers in such places cannot be overemphasised.”

They maintained that it was logical that a supplier who is unable to meet the demands of its license area should not stand in the way of anyone who can. EGs who have opted to construct Independent Electricity Distribution Network (IEDN) ought to be fully allowed to do so and the consumers must be allowed to freely choose the power provider they prefer. This is a fundamental principle of free enterprise.

The duo submitted that a policy of exclusivity over licensed areas will no doubt result in a monopoly. “Indeed, there have been cases where Discos were accused of holding States to ransom (allegedly frustrating State-sponsored IPPs) under the guise of exclusive rights over such States. Thus, for Nigeria to reap the dividends of the power sector privatization, the enabling laws, particularly EPSRA must be fully implemented. Policies entrenched in the Act such as the declaration of eligible customers as provided in section 27 EPSRA demonstrates the intendment of the law to avoid any form of exclusivity or monopoly. Again, competition, such as is witnessed in Nigeria’s telecommunications industry, has been known to engender growth and efficiency. Considering the crucial role of the power sector, nothing short of competition should be encouraged in the sector as envisaged by section 26 EPSRA.

“However, extremes of monopoly and excessive competition are bad as they create uncertainty for Discos who have assumed responsibility for infrastructure and have invested and are expected to invest more. NERC must seek to achieve a balance by managing and monitoring competition. The Commission must also ensure open access to the distribution networks by all EGs by supervising the activities of the Discos regarding applications for connections. EGs must also be encouraged to construct IEDNs to distribute its generated electricity upon the obtainment of the required license.”

Source: The Guardian

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