Discos Warn of Imminent Collapse of Power Supply Due to FX Scarcity
Label NERC as inconsistent, inexperienced regulator
Chineme Okafor
The 11 electricity distribution companies (Discos) in Nigeria’s electricity industry have warned that the sector was under threat and could collapse anytime on account of various operational challenges, but mostly on the exorbitant and unstable naira to dollar exchange rate which they said was cripplingly their operations.
Speaking yesterday in Abuja,through the Executive Director, Advocacy of their association – the Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, the Discos also labelled the industry’s regulator, the Nigerian Electricity Regulatory Commission (NERC), as being inconsistent and inexperienced at its job.
They alleged that the NERC contributed significantly to the current business difficulties of operators in the industry, especially the overall revenue shortfall of the market which they said was now N809.8 billion.
ANED’s warning of an imminent operational collapse and allegations against NERC came at a time the regulator fined the federal governmentrun Transmission Company of Nigeria (TCN) N47.6 million for various regulatory breaches including TCN’s failure to submit its 2013 and 2014 audited financial statements to it.
“The crisis is getting worse and not getting better. The major part of the issue is the forex value in doing the business, as at December 2015, the naira to dollar value was N197/$, by June 2016, it became N293/$, as at now we are talking about N360/$.
“If you look at the difference as regards tariff, the same quantum of energy which may sell for N10 had by June increased to N18 from December 2015 to June 2016. What that means is that the invoices to us for quantities supplied have increased, and that is why publications by NBET without explanation can be factual but misleading as they have not told Nigerians that costs have increased while the Discos have not increased tariff,” said Oduntan.
He noted that the Discos were not asking for any special considerations or making excuses for their inabilities to provide optimal services to their customers, but that the sector urgently needs help to stay afloat.
“We are not clamouring for an increase in tariff but government needs to come in and do something because the shortfall is now N809.8 billion. If the Discos die, the sector will die as well.
“We are all in this together, and we are all in a desperate situation and need help. We will either swim or sink together. We are allowed to sell electricity based on N197/$ which is what is in the tariff. This cannot work,” added Oduntan.
Taking a swipe on the NERC, he said: “The NERC is very inconsistent and perhaps inexperienced. We have a set of regulator who fixed the tariff in December 2015 and in their wisdom decided that it will be effective in February 2016, leaving us a shortfall of N12.8 billion for the month of January that it was not allowed to operate and nobody is talking about it. What about the tariff they once froze?”
On poor gas supply which ANED also linked to the failures of the sector, Oduntan said: “The appropriate authorities should also be talking about how to help the gas supply situation. There should be assurances of gas supply and then selling the gas for power in naira, if that will be the area the government will subsidise, then so be it because they will always say that the IOCs (International Oil Companies) cannot take that.”
Meanwhile, the NERC in a statement from its Head of Public Affairs, Dr. Usman Arabi, has disclosed that the TCN was given up to two weeks from December 2, 2016 when the disciplinary order was signed by its Acting Chairman, Dr. Tiny Akah, and its General Manager, Legal, Licensing and Enforcement, Mrs. Olufunke Dinneh, to pay up the fine.
It also said the fine would attract a five per cent interest every day after the due date.
The commission provided a defence for the regulatory action against TCN, saying the TCN failed to submit its audited financial report, thus violating Section 63 (1) of the Electric Power Sector Reform Act, 2005 which stipulated that ‘a licensee shall comply with the provisions of its licence, regulations, codes and other requirements issued by NERC from time to time.’
It said that other infractions by the TCN were contained in its ‘Directive 160’ which had to do with the conditions of TCN’s transmission licence.
“Consequently, TCN is liable to N10, 000. 00 fine daily on each of the three grounds of infractions beginning from April 1, 2014 for failure to submit 2013 audited financial report and April 1, 2015 for 2014 audited financial report being the dates those reports were due for submission till December 2, 2016 when Directive 160 was signed.
“This gives a total fine of N47, 670,000 which shall be paid by TCN within two weeks from the date of this directive. Failure to pay the fines within stipulated time shall attract additional interest of five per cent per day until the total fine is paid,” said NERC.
NERC alleged that it reminded TCN several times of its obligations to submit audited financial accounting statements for year 2013 and 2014, but it persistently refused or neglected to comply with the requests.
“The commission, thereafter, issued a notice of Intention to Commence Enforcement (NICE) dated November 17, 2016 requesting TCN to explain why it should not be sanctioned.
“In its response, TCN said that the audit exercise has ‘since commenced and is reaching its final stage’ and that the documents would be submitted once the exercise was concluded. It however, failed to provide detailed breakdown of activities and time schedule for the completion of the audit exercise so as to guide the commission to decide on its request for extension of time,” it added.