Power regulator & DisCos: Regulation vs. Governance

By Dr Ini Abimbola, DBA

….𝘛𝘩𝘦 𝘧𝘪𝘨𝘩𝘵 𝘣𝘦𝘵𝘸𝘦𝘦𝘯 𝘵𝘩𝘦 𝘱𝘰𝘸𝘦𝘳 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘰𝘳 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘋𝘪𝘴𝘊𝘰𝘴 𝘪𝘴 𝘳𝘦𝘢𝘭𝘭𝘺 𝘢 𝘧𝘪𝘨𝘩𝘵 𝘢𝘣𝘰𝘶𝘵 𝘸𝘩𝘦𝘳𝘦 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘪𝘰𝘯 𝘦𝘯𝘥𝘴 𝘢𝘯𝘥 𝘨𝘰𝘷𝘦𝘳𝘯𝘢𝘯𝘤𝘦 𝘣𝘦𝘨𝘪𝘯𝘴.

The regulator has issued a directive reaching into how the distribution companies spend and administer their capital programmes. The DisCos have rejected it publicly, calling it an intrusion into the internal administration of privately owned companies and warning that it will scare investors. If we strip away the sector detail and look at what is actually being contested, a question arises – Who governs a private company that lives on public support?

Because that is the honest description of the arrangement. The DisCos were privatised in 2013 on the promise that private capital and discipline would fix distribution. More than a decade later, average collection and technical losses stood at 37% in the first quarter of this year against a regulatory target of 17%. The sector carries trillions of naira in accumulated debt and has survived on repeated public interventions, subsidies, bailout facilities, and payment guarantees, extended to companies that are, on paper, private.

Both sides of the current fight have a point, which is what makes it worth watching.

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The DisCos are right that a regulator directing the internal administration of a private company crosses a line, because if NERC effectively runs the capex programme, the board becomes decorative, and no serious investor commits capital to a company whose decisions are made elsewhere.

𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗶𝗼𝗻 𝗯𝘆 𝗱𝗶𝗿𝗲𝗰𝘁𝗶𝘃𝗲 𝗶𝘀 𝗻𝗼𝘁 𝗴𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲; it is management by another name, done by people who carry none of the commercial risk.

But the regulator also has a point that is rarely stated as plainly as it deserves, which is that: a company that depends on public money has already surrendered part of its claim to private autonomy, since you cannot take the subsidy and refuse the scrutiny. The boards of these companies have had a decade to close a 20-point performance gap, but the gap remains. Therefore, when private governance visibly fails at public expense, the space it vacates gets filled, and it is being filled now.

The real lesson sits above this sector. Privatisation transfers ownership, but it does not automatically transfer governance capability, and where the governance does not arrive, the state comes back in through the side door, one directive at a time.

So, as usual, my questions for anyone watching this fight: If a privatised company cannot survive without public support, who should govern it? The board that owns the failure, or the regulator that funds it? And is there a version of this arrangement where the answer is neither, because the performance finally speaks for itself?
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