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Government Moves to Check Power Supply Deficit with Franchise Arrangements

In what seems like encouraging a willing-buyer, willing-seller scenario as well as moves to check excesses of distribution companies (Discos), the Nigerian Electricity Regulatory Commission, (NERC), has released a consultation paper on the development of a regulatory framework for electricity distribution franchising in Nigeria.

Under the franchising arrangement, any unserved or underserved community have the option of exploring the provisions of NERC’s Regulation on Independent Electricity Distribution Network (IEDN) in finding solutions to their supply challenges as may be applicable.

Already, many housing and industrial estates in Lagos are exploring the option, even though certain percentage of revenue generated are remitted as royalties to the Discos under which they operate, due to the exclusive rights to the distribution area.

To drive the process, NERC is eliciting reactions from Discos, customers and other stakeholders, with a deadline of May 6, 2019.
According to NERC, “The overarching objective of the proposed regulation on distribution franchising is to facilitate the development of favourable business models that would attract third-party investments in the supply of adequate, safe, reliable and prudently priced electricity to customers of Discos.”

NERC explained that the Discos were licensed to connect customers for the purpose of provision of electricity supply, installation, maintenance and reading of meters, billing and collection, among others.“The provision of these services by Discos on a non-discriminatory basis is a fundamental requirement arising from the natural monopoly they enjoy as distribution network service providers.

“The sustainability of this traditional regulatory framework is increasingly becoming difficult due to continued technological improvements and advancement in the capabilities of Distributed Energy Resources.”NERC also explained that since the beginning of the power sector reform in 2005, the DISCOs have failed to meet the expectations of stakeholders in the provision of access to safe and reliable electricity services to all customers within their franchise territories, as well as those areas considered to be economically unviable.

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It stated, “Accordingly, introducing sub-franchising of Discos’ operations and coverage areas is expected to improve quality of supply of electricity to customers through investment in metering, billing, collection and network rehabilitation and expansion.

“Sub-franchising (referred to as distribution franchising for this purpose) means the business model applied by a Disco to authorise a third party to provide electric distribution utility services on its behalf in a particular area within the Disco’s area of supply. Proposals for the franchising arrangement can either be initiated by Discos or customer groups (community) within a specified geographical boundary.”

NERC also said, “Additionally, any unserved or underserved community has the option of exploring the provisions of NERC’s Regulation on Independent Electricity Distribution Network in finding solutions to their supply challenges as may be applicable.”

“Consequently, the commission has put forward a consultation paper to elicit comments from stakeholders in the Nigerian electricity supply industry.”

By Femi Adekoya

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