Why we declared force majeure twice ― DisCos

THE 11 distribution companies, on Thursday, explained that they had declared force majeure twice, first during the Jonathan-led administration and second during the current administration due to failure of the Federal Government (FG) to honour its agreement with them during the transition to privatisation.

They said that the repeatedly floated contractual agreements have led to the inefficiency of the DisCos in terms of service delivery to electricity customers.

Executive Director, Association of Electricity Distributors (ANED), Mr Sunday Oduntan, made the disclosure to Tribune Online, on Thursday, in Abuja saying the FG repeatedly refused its force majeure.

According to him: “We have declared force majeure twice, first during Jonathan’s period and second during this current regime and the Federal Government refused.

“Force majeure is when you see an impossibility to run and you say take your license and give me my money and that is the fact. You sold us a DisCo which is not forthcoming and we say, have your license we are not interested anymore. It is $1.4billion with interest that is all.”

Oduntan who reacted to persistent reports on the revocation of DisCos’ licenses said the distributors were not desperate but sought to recover the cost of investment.

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“For us to have filed force majeure tells you that we are not a set of desperate people, their concern is to be able to recover their cost but if there is a need to change baton as long as there is no foul play, let the law take its course. Cost recovery is the primary purpose of doing business,” he said.

He argued that both previous and current administration had made the same mistakes in the aspect of the agreement saying: “I will say what the former and current government have done in terms of agreement which stated what they are supposed to do.

“I will mention four, they promised that as we are selling this thing to you, now that you have paid $1.4billion, we will ensure that we charge the appropriate tariff for people who will pay for electricity. We signed and came on board.

“I hear some people ask us if we did not do due diligence? We did but as soon as we came on board, they stopped and did not fulfil the agreement. Secondly, they said because of the mess we met on ground, they will give us N100billion subsidy for us to stabilise for the first two years, they did not till today. Thirdly, they promised to leave us a debt-free balance sheet so that the DisCos will not carry the debt of everyone in the value chain, there should be proper risk allocation. GenCos should carry the risk of gas suppliers, transmission the same thing. But what they did is that they left the book very toxic and that is why we are not creditworthy.

“Lastly, they said they will ensure that they pay their bills both at the Federal, State and local government levels up till today, they are very good at not paying bills. MDAs are owing to the DisCos and this is the same money they expect us to remit. FG promised at the point of privatisation that they were going to do concession of transmission to DisCos today, Transmission is just like NEPA.”

On different occasions, the FG had threatened to revoke licenses of underperforming DisCos.

In 2019, the Nigerian Electricity Regulatory Commission (NERC) threatened to withdraw the licences of eight power distribution companies (DisCos) over breaches of some provisions of the Electric Power Sector Reform Act.

The affected DisCos were; Abuja, Benin, Enugu, Ikeja, Kaduna, Kano, Port Harcourt and Yola Electricity Distribution Companies.

According to the Commission a notice posted on the Commission’s website, it said the DisCos licenses might be withdrawn for failure to meet their minimum remittances requirement in line with the provisions of its respective contracts with NBET, Market operator (MO) and provisions of the Market Rules.

It said that the remittances of the 8 DisCos to Nigerian Bulk Electricity Trading (NBET) in July 2019 billing cycle showed a failure to meet the expected minimum remittance thresholds.

The commission stated that failure of DisCos to comply with expected minimum remittance thresholds in the order exposed NESI to systemic risk that threatened the sustainability of other parts of the value chain, and the ability to improve service delivery to consumers.