The Minister of Power, Works and Housing, Mr. Babatunde Fashola, has said that the Nigerian Electricity Regulatory Commission (NERC) wants the accounts of and revenues generated by the 11 electricity distribution companies (Discos)to be centralised and escrowed to protect the power sector from collapsing.
Fashola explained at the last monthly meeting of operators in the sector in Jos, Plateau State that the decision was taken to protect the power sector from collapsing on the back of Discos’ reported dishonesty with their financial collections which legally belong to the market.
He also explained that the Discos were opposed to the move despite their prior agreements with the Central Bank of Nigeria (CBN) before they got loans from the apex bank to support their operations and capacity upgrades at very low interest rates.
He noted that the discos had similarly failed overtime to honour agreements reached with the Nigerian Bulk Electricity Trading Plc (NBET) to provide letters of guarantee for future payments for energy sold to them by the NBET.
According to him, while the Discos opposed the move, they also failed to state that, “the escrow condition was agreed by you (Discos) with Central Bank as a condition for offering you stabilisation funds by way of loans to fund the business you invested in because commercial banks were reluctant to do so.”
He further said that they agreed, “to establish letters of credit to guarantee future payments to NBET and TCN Market Operations,” and that the agreed commercial terms of the letters of credit authorises NBET and TCN Market Operations to draw on the letters of credit for any default in payment to them, but the Discos have frequently defaulted in that agreement.
Justifying the NERC’s plan, Fashola said: “Any right-thinking person will accept the principle that any person lending you money must have the right to know what you are doing with the money especially when under collection and under-payment has been a major feature of many Disco performances.”
“As far as the regulation on your procurement is concerned, what the public needs to know, which your statement was silent on, is that you are entitled to fully recover your costs and investment by law and this is the function of how tariffs calculated. Since government holds 40 per cent of the shares of Discos on behalf of states and local governments and the Nigerian people, it has a duty to ensure that you buy parts and other equipment at reasonable and competitive market prices and not through inflated contracts to relatives as we have seen in some Discos in respect of which NERC will take action in due course and sanction those who are involved,” he explained.
The minister equally alleged that the Discos have failed to open up their financial statements for proper review by the regulator, thus negating corporate governance practices as required of them by the law.
He thus asked: “If a company cannot produce all the records of its transactions and accounts does that not allude to gaps in its governance?”