Discos default in obligations to Nig Bulk Electricity

NI G E R I A N ELECTRICITY DISTRIBU TION companies (DisCos) might be getting better at collecting revenue from customers, but this change is yet to be felt throughout the entire electricity value chain as the DisCos failed to remit a total of N108.4 billion to the Nigerian Bulk Electricity Trading Plc for the energy received by them, according to a newly released report by the Nigerian Electricity Regulatory Commission (NERC).

The report reflected that remittances by DisCos to NBET fell to 27.5 percent in the third quarter of 2018 from 31.5 percent in the preceding quarter.

The government-owned NBET acts as a middleman between the electricity generating companies (GenCos) and DisCos by buying electricity in bulk from the GenCos through Power Purchase Agreements (PPA) and sells to the DisCos, who then supply to the consumers.

“During the third quarter of 2018, the 11 DisCos were issued a total invoice of N162.5 billion for energy received from NBET and for service charge by the Market Operator, but only a sum of N54.1 billion (33.3 percent) settled by the DisCos, creating a significant deficit of N108.4 billion in the market.”

NERC said only two of the DisCos recorded an increase in remittance performance in the third quarter, adding that none of them remitted up to 50 per cent of their market invoices. Ikeja Electric recorded the highest remittance efficiency (43 percent), closely followed by Eko DisCo with 42 percent. On the other hand, Kaduna DisCo recorded the worst remittance performance of 10 percent, followed by Jos DisCo (11 percent).

The regulator said that “of particular concern is the significant drop in Kaduna DisCo’s remittance rate from 21 percent in the second quarter to just 10 percent in the third quarter. The commission is currently reviewing the viability of the DisCos (Kaduna and Jos) as a going concern.”

NERC said it scheduled a meeting with Kaduna DisCo to discuss, as a prelude to asking them to submit their comprehensive strategy towards addressing their operational challenges.

“A similar meeting has been held with Jos Disco to review their performances,” it added.

The report also revealed that the collection efficiency of the DisCos increased from 64.2 percent in the second quarter to 65.5 percent in the third quarter.

According to the report, the challenge of poor remittance has remained a serious concern to the commission as it is one of the main causes of the liquidity crisis facing the Nigerian electricity supply industry.

It lamented that “low remittance adversely affects the ability of NBET to honour its obligations to Gencos while service providers (Transmission Service Provider, MO and NERC) struggle with the paucity of funds impacting their capacity to perform their statutory obligations.”

The commission also added that it would address the poor remittance by DisCos, through enforcement actions against DisCos that are found to have engaged in unacceptably low remittances to NBET and the MO.