Following the financial crunch being experienced across the electricity value chain as well as other pressing challenges, the Managing Director/Chief Executive Officer of Eko Electricity Distribution Plc, EKEDC, Mr. Oladele Amoda has called on the Federal Government to devise strategies to reduce the revenue gaps.
Amoda, who stated this when the energy team of Vanguard Newspaper, visited EKEDC, said that electricity distribution companies, DISCOs, are constrained due to the inability of government to fulfill its own part of the agreement reached with investors at the beginning of the power privatisation exercise. “Government needs to come up with strategies to reduce the shortfalls. We are not asking for direct money from the government. We are not asking for bailout.
We are asking that the shortfall that was created by the government for their inability to provide what they promise, they should fulfill it,” he said. Indicating difficulties in keeping the agreement Amoda stated: “The basic thing, although they are so many, during the first five years is to first reduce ATC& C loss trajectory, then to meter all customers, to improve services to customers, to ensure that all our networks are in good shape within the five years, that’s on our side.
“On the government side, there are promises like level of power availability, which was 7000 Megawatt but was reduced to around 5500 MW close to 6000 MW at inception. Then off course cost reflective tariff, cost that will cover your cost amongst other things,” he said.
Level of decay in the power sector The EKEDC boss, who complained about the level of decay in the power sector before the privatisation of Power Holding Company of Nigeria, PHCN, said that the coming into being of the legacy companies has changed the story for the better. According to him, “When we came in, the level of power generated went down. We were getting less than 3000MW, out of the 5500MW promised.
You can see the volume of power that we are getting, was not enough. Business is based on volume, the volume of energy. It was calculated that when you have this level of power, you will be able to break in, but when you are having something less, then it affects your revenue, and ability to break even, that led to the our shortfall. “Secondly, there was no cost reflective tariff. Because of political reason the federal government didn’t allow cost reflective tariff at the inception.
We struggled until 2016 that they allowed some that look like a little bit of increase, but then we couldn’t cover the whole thing. “They said we should sculpt it (Sculpting means to charge but not the full amount, you charge low amount and recover it over a long period of time). We had a 10 -year charging plan.
Before then they removed the collection factor (ATC&C) the collection part of it, the risk in the collection, they removed it from the tariff, and then put R2, they didn’t allow us to charge the normal rate of R2. In those days government promised subsidy for the R2 customers but those subsidies were never paid. Third, inflation was one digit maybe about 8 percent then. Now it is about 17 percent. “When the last tariff was conceptualised and approved, the exchange rate was N197, and that is what we are still operating on till now. Where we get the power, the bills come in a way that it fluctuates with the exchange rate, because gas pricing is denominated in dollars, that affects us again. It means we are getting higher bills and selling at the old rate.
That compounded the short fall and placed us where we are now. We are below water, as all my books are in red,” he added.