The failure of some Ministries, Departments and Agencies (MDAs) to pay outstanding electricity bills estimated at over N100 billion may have exacerbated the liquidity crisis in the power sector. According to reports, the amount has pushed the total indebtedness of the agencies to the electricity Distribution Companies (Discos) to N500 billion in the last few years. This has allegedly led to the transfer of the bills to private electricity consumers by the Discos through the contentious estimated billings.
The development came on the heels of recent concerns expressed by the Nigerian Electricity Regulatory Commission (NERC) over the failure of its international and special customers to settle their invoices for services rendered by the Market Operator (MO). This is contained in NERC Quarterly report for the Q2 2020. For instance, Togo Electricity Company owes Nigeria N1.5billion.
The failure of the government agencies to pay their outstanding bills is inimical to the growth of the power sector. Besides, it is against the Electricity Power Sector Reforms Act (EPSRA), which provides that electricity consumers should pay their tariffs when due. The Nigerian Electricity Regulatory Commission (NERC) also frowns at such attitude and recommends huge penalty. However, some of the MDAs have refuted the amount reported as the outstanding bills, saying that it was inflated by the Discos.
This calls for urgent reconciliation of the disputed figure. The best way to resolve the matter is to engage the services of reputable audit firms to reconcile the disputed figures. It is good that the government and the Discos have commenced the reconciliation of the amount. This is not the first time the indebtedness of MDAs to the power distribution companies has been made public. Some years ago, the former Minister in charge of Power Ministry, Babatunde Fashola, bitterly complained that the ministry did not achieve projected revenue target due to the failure of the MDAs to pay outstanding electricity bills put at N450billion.
The perennial failure of the government agencies to pay their bills and the transfer of such bills to private consumers will work against every effort to improve the power sector. It is sad that since the power sector was privatised in 2013, it has been in serious financial crisis, estimated at N4trillion. This has made it to depend so much on the Federal Government for bailouts. So far, the government has spent over N2trillion as interventions to keep the Discos afloat. The Central Bank of Nigeria (CBN) has also injected millions of naira into the power sector. But, it remains one of the problematic sectors of the economy.
Undoubtedly, the unpaid bills by the MDAs will deter the much-needed growth of the economy since the sector provides the catalyst for the development of formal and informal sectors of the economy. This has made the installation of prepaid meters to electricity consumers more urgent. Doing so will minimise the accumulation of unsettled bills and funding challenges. Last year, President Buhari gave the assurance that estimated billing in the country would soon be over, with the commencement of mass metering to electricity consumers across the country. The plan reportedly started in parts of Abuja, Kaduna and Lagos.
Not less than 6.5 million meters will be distributed to close the metering gap. This is expected to impact an estimated 30 million homes across the country. The government gave about N497 million to the power distribution companies through the Central Bank of Nigeria (CBN) for the deployment of the free electricity meters nationwide. Despite the effort, many electricity consumers still complain about the bureaucratic bottlenecks involved in processing the prepaid meters.
Metering of electricity consumers will enhance the ability of the Discos to deliver efficient services. Besides creating jobs, it will also improve the transparency in electricity transaction. The mass metering initiative will go a long way to reduce the challenges currently besetting the power supply value chain, and possibly eliminate the estimated billing system.
While we urge the agencies to quickly pay the outstanding debts, the DisCos can deploy strategies that will help them recover the debts. In the same vein, the MDAs should use energy efficiency tools that will help them manage their cost of power. Alternatively, they can explore the solar energy option.