Private investors who acquired shares in the formerly state owned power distribution companies are threatening to declare a force majeure according to reports from the New Telegraph. A Force Majeure is a legal provision in most contracts signifying an intent to terminate due to circumstances beyond the control of either party or due to unavoidable occurrences or due to an act of God that means the business can no longer be executed.
In this case, the report claims that some Discos are seeking a refund of their money citing the following reasons.
Debt owed by Government Ministries and Agencies
Here is a quote from the article;
“They want the Federal Government to refund their money for the licenses, which they plan to return if nothing is done to address the problems which government’s inability to meet up its part of the contract has caused. “One of these is the backlog of debts of about N45 billion, which the police and military formations, ministries, departments and agencies (MDAs) of government owe them.”
Nairametrics spoke to some analysts who confirmed that discos were indeed being owed billions of naira from MDA’s who are used to not paying bills. Unfortunately, the discos cannot disconnect these agencies who refer to the essential nature of their activities as a reason to stay connected to the grid despite their non-payment.
Limit to how much investment discos can make
Another quote from the article
“One of the issues, which the DISCOs want the minister to address, is the embargo, which government allegedly placed on distribution companies in Nigeria from investing more than N50 billion on capital expenditures (capex) per year.
Another analysts explains that NERC had decided to freeze investment in capex as not doing that could further increase the tariffs that discos will charge their customers. Typically, in determining the tariff that their customers will pay distribution companies factor in various factors including capex, customer population, gas prices, operating cost etc. NERC is therefore in a catch 22 situation as it will have to decide whether to support allowing investment in the power sector which will mean a higher tariff on the short-term of curb investments in the sector leading to a lower tariff. The latter is thought to mean Nigerians will continue to pay more for less and wait much longer before constant power supply is in place.
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