Nigeria: Disco Franchising As Panacea To Distribution Challenges In The Power Sector (Article)

By: Adetayo Adegbemle

While many power sector experts and commentators were complaining that the Electricity Distribution Franchise Licensees franchise areas are just too big for these Licensees to manage, maybe with the exceptions of Ikeja Electric and Eko Disco, it has also become incontrovertible that these licensees cannot meet up with basic obligations, namely reducing the aggregated technical, commercial and collection losses in the power sector.

This inability to dent the ATC&C Losses, which is the base standard for which performance can be easily determined in the power sector, can also be traced mainly to the inability of the core investors to bring the necessary sanitation into the operations of the Electricity Distribution Companies.

Interestingly, the Nigeria Electricity Regulatory Commission, NERC, went round the country in 2016 town hall meetings preaching how the Distribution Company Sub-Franchising would be the next best thing after sliced bread, finally releasing the draft regulation in January 2018

In 2016, the promise of Disco Franchising was that “DISCO franchising operations, if well structured, should allow third party operators provide revenue collection and protection services, fault clearance, network operations and maintenance services, meter reading and inspection services and customer services to electricity customers on behalf of the DISCOs.”

Several models of Franchising were pitched to Nigerians, with the most interesting and attractive one giving the Sub-franchisee the ability to “generate power” or source for alternative power, or buy power directly from the national grid”. It was noted, though, that giving the Discos power and initiative to determine which areas or sub-franchise agreement to enter into has greatly limited the effectiveness of the Sub-franchise framework.

It was therefore a general belief that “Franchising Guidelines is laudable and the efficient and effective implementation of franchise arrangements should generally enable the Discos improve service delivery to end-user customers in franchised areas without compromising the obligations of the Discos to the market and the regulators.”

However, Six years later, with the Discos still faltering to meet up with demands of Nigerians, the implementation of the Disco Sub-Franchising, like the Meter Assets Regulation, has refused to bring the spark expected by Advocates and electricity supply industry watchers.

Reports has indicated that some Distribution companies have implemented what “suits their private agenda” in allowing third parties to collect revenues as sub-franchising, the rest of the Sub-franchise Framework has remain largely a tug of war between interested Nigerians, and the Distribution Companies.

Coincidentally, there are two unrelated events that has come together to ask for a shift in the way we do things, and demanded that this matter of Distribution sub-franchising be looked at again, this time seriously, that the initiative be taken away from the Distribution companies.

First event is the final financial meltdown of Core Investors and taking over of their shares by banks they are indebted to. Since December 2021 taking over of the 60percent shares of the Core Investors in Abuja Electricity Distribution Company by UBA, we have since seen similar capitulation of Benin, Kaduna, Kano Distribution Companies to Fidelity Bank, while the tussle for the life of Ibadan Electricity Distribution Company, IBEDC, between the core investors and Assets Management Company of Nigeria, AMCON is still ongoing. The Port Harcourt Electricity Distribution Company too has gone quietly into Administration.

The second interesting event was the announcement by the Nigeria Electricity Regulatory Commission has signed a commercial agreement with the Transmission Company of Nigeria (TCN), Generating Companies ((GENCOs) and the Distribution Companies (DISCOs) to rave-up electric power supply to 5000 MW starting from July 1st 2022.

While the Regulatory Commission has said the 5000MW target is in phases, and that the gas is yet to fully align with this objective, though they are working on, a major and critical aspect they should not overlook in this subtle and coded migration to proper market-based electricity market is the Distribution Sub-franchising.

The present structure for Distribution Franchise as we have it is not efficient and effective enough to move the market to a 50, 000MW in the next 10years.

This is the time to break the large unmanageable geometrical areas into better and efficiently managed areas.

The sub-franchising model is definitely the pathway to ensure that more Nigerians get involved and are able to bring their expertise unto the table, and definitely reduce the ATC&C Losses that has become an albatross for the electricity market.

The Regulatory Commission should also take a leaf from the performance scoresheets of the newly privatized Yola Electricity Distribution Company that has posted the Top 2 results in just six months of new management taking over.

Distribution Sub-Franchising is a sure bet way of introducing and injecting new bloods, funds, effectiveness into the electricity distribution channels. Less geographical coverage area also comes with the benefits of better and effective regulatory oversight, and the ease of “moving blocks” without having too much effect on the larger body.

Electricity Distribution Sub-franchising will definitely facilitate an improvement in the quality-of-service delivery to end-user customers and industries, and address the liquidity challenges in the NESI.

With this, we can finally enter a fully operational electricity market based on Contracts.

Adetayo Adegbemle is a public opinion commentator/analyst, researcher, and the convener of PowerUpNigeria, an Electric Power Consumer Right Advocacy Group, based in Lagos. (Twitter: @gbemle, @PowerUpNg)