The Federal Government has said verified debts owed by ministries, department and agencies, MDAs for electricity consumed would not be paid directly to electricity distribution companies, DISCOs, but would be deducted from their outstanding debts to government.
The distribution companies claim the MDAs are owing them over N67.41 billion for electricity supplied to them over the last three years.
But, the Minister of Power, Works and Housing, Babatunde Fashola, said the DISCOs are also owing government over N500 billion being accumulated unremitted revenues collected for energy supplied from power plants, which were not fully paid for.
At the inception of the present administration, the minister said government was worried by reports of mounting debts owed the DISCOs by MDAs over the years.
Consequently, he said, the Federal Executive Council, FEC, had approved the settlement of the debt after the various claims by the DISCOs were authenticated.
So far, Mr. Fashola said, only 38.6 per cent (about N25.99 billion) of the total claims have been verified, while the remaining N41.42 billion, or 61.5 per cent yet to be verified did not belong to the federal government and its agencies.
"These are debts owed by some states and local governments as well as public international organisations erroneously classified as government institutions," the minister explained.
At the last meeting of the National Council on Power a month ago, the minister said the states and local governments were asked to verify the remaining N41.42 billion, to resolve the debt issue going forward.
"The decision to settle the debt owed the DISCOs by the MDAs was important as a demonstration of government support to the private sector, to encourage it play its role effectively in the economy. We had committed that those figures would be verified and government would pay," Mr. Fashola said.
With the completion of the verification, the minister said the authenticated debt was disclosed at the monthly power meeting, while the FEC has given the final approval for the debt to be net off against the amount owed government by the DISCOs.
"Payment of debt is only a part of the power sector recovery programme, which is the collective set of policies, programmes and actions to fill the gaps and omissions in the power privatisation processes, instead of cancelling it.
"The power sector recovery programme includes payment of debt, proper governance and regulation. This is one way the government thinks it can be re-engineered to bring the sector back to work," he explained.
In her reaction, the Executive Secretary, Association of Power Generating Companies, APGC, Joy Ogaji, told PREMIUM TIMES that FEC's approval of the payment of the debts to DISCos was a welcome development, as it would help in relieving the debt burden on the downstream sector of the industry.
Mrs. Ogaji was particularly excited about the decision to net off the verified amount from the outstanding debt owed the power generating companies, GENCOs, saying it showed government's sincerity to resolve the challenges in the whole power value chain.
She, however, asked government to compel the Nigerian Bulk Electricity Trader, NBET, set up to purchase and resell electricity and other services to independent power producers, to do more, by releasing part of its capitalisation to the GENCOs for their operations.
"Capitalisation was to make GENCOs perform better, and not for it to be housed in an interest yielding account. There should be clarity on how the outstanding debts would be paid," she said.
On his part, the Executive Secretary, Association of Nigerian Electricity Distributors, ANED, Sunday Oduntan, hailed government for approving the debt payment plan, although he reserved his comments on the decision to net off the liabilities of the DISCOs against government's till when he has full information.
"I find it curious the plan to use DISCOs' money to offset market debt. If government is owing the DISCOs, why does it want to pay their creditors?
"The decision is a welcome development, although it took three and a half years for this to be paid. This government has done well. But, that is not the whole money. There are others still in contention."
He said government should go a step further to implore the MDAs, particularly the military, police and prisons services, to ensure that going forward they pay their debts regularly.
"They should not allow their debts to accumulate for years. They have been given maximum demand prepared meters. They should pay their bills when they are due to avoid a repeat of this crisis in future," Mr. Oduntan said.