The capital expenditure allowance approved by the Nigerian Electricity Regulatory Commission for electricity distributors is said to be too low and has been limiting the ability of the firms to efficiently expand their networks, as demanded by consumers and other operators in the value chain.
According to power distributors, it would be tough for Discos to follow the expansion plan of the Nigerian electricity supply industry and also implement their (Discos) performance improvement plans going by the regulation on capital expenditure allowance approved by NERC in the Multi-Year Tariff Order 2015.
It was gathered in Abuja on Wednesday that in the MYTO 2015, the approved average capital expenditure allowance to Discos was about N4bn ($12m) per Disco annually, which the power distributors described as insufficient to meet their various annual network expansion demands.
About three weeks ago, the Managing Director, Transmission Company of Nigeria, Usman Mohammed, told our correspondent that citizens across the country should not expect stable electricity until power distributors recapitalise in order to effectively expand their network.
“We cannot have a stable grid unless we have an adequate investment on the distribution side and that is why we have been calling, as a transmission company, that distribution has to be recapitalised. They (distribution companies) need to have a commensurate investment on the network,” Mohammed stated.
Industry data showed that over $1.5bn worth of investment was being invested in Nigeria’s power transmission network and unless a commensurate sum is invested in the distribution arm of the sector, the power supply may not improve as expected.
It was also gathered that a commensurate investment in distribution to distribute the quantum of power transmitted by TCN would be needed to provide injection substations, new feeders, among other facilities.
But senior officials of some Discos told our correspondent on Wednesday that calls for the recapitalisation of power distributors would not be necessary if the sector’s regulator had approved an appropriate capital expenditure allowance for Discos in MYTO 2015.
“The calls for recapitalisation would not have been necessary if NERC had approved for Discos a capital expenditure allowance that is appropriate. This has been our grouse against the regulator of this important sector since the MYTO 2015 was approved,” a senior manager of one of the Discos, who spoke to our correspondent in confidence, said.
The argument of the Discos was also confirmed by the French Agency for Development in its most recent report on the challenges in Nigeria’s power sector.
AFD specifically stated that there was inconsistency in the capital expenditure allowance provided for the Discos in the regulations of the NERC.
The agency noted that after assessing two projects for metering roll-out in two Discos, it was discovered that the average price for a single phase prepaid meter installed was between N32,700 and N55,000.