A Review of the Nigerian Energy Industry

Power firms to begin 100% remmittance September

Power transmission grid26 May 2014, News Wires – The power sector privatisation programme will move to the next stage by September when all electricity distribution companies (DISCOs) are expected to remit 100 per cent  of their collections from customers. That is when the Nigerian Electricity Regulatory Commission (NERC) will change from the Interim Market Rules (IMR) to the Transition Electricity Market (TEM).

When TEM takes off, the Market Operator (MO), which is the commercial counterpart of the generation companies (GENCOs) and DISCOs because it buys power from GENCOs and sells to DISCOs, will relinquish the role to the Nigerian Bulk Electricity Trading Plc (NBET).

At the moment, the DISCOs operate baseline remittance, where their remittances are determined by revenue generation and power received.

Based on these criteria, a DISCO has a minimum amount to pay. The baseline  has just been increased by 25 per cent, a step to preparing the utility firms for the full remittance.

Before the increase, some DISCOs, such as Yola DISCO, that were considered commercially unviable due to issues it had with supply, had zero baseline remittance. With the increase, its baseline remittance is 25 per cent.

But some juicy DISCOs, such as Ikeja, Eko, Ibadan, Abuja, Benin and Enugu have baseline remittances that range between 60 per cent to 98 per cent.

An operator explained: “We take energy from the grid and supply to the customers. At the end of the month, the market operator (MO) gives us a bill of all the energy we have taken from the transmission because MO is part of the transmission sector. They (MO) give us bill, which we are supposed to pay 100 per cent but in the interim, it is different percentages for different DISCOs depending on the DISCO’s past record.

“Once we pay that baseline remittance, whatever remains, the DISCO keeps for its operation but because we are not having the subsidy, which the government is supposed to reimburse for power consumers in R1 and R2 categories whose consumptions are subsidised, some DISCOs remit less than their stipulated baseline remittance.

“Initially, the baseline remittance was pegged in line with interim market rules (IMR) where some DISCOs had zero to 35 per cent baseline remittance but now that it has been increased by 25 per cent, the DISCOs that had zero per cent before, are supposed to pay 25 per cent while those that had 35 per cent are supposed to pay 60 per cent.”

It was learnt that the baseline remittance was increased to enable the MO pay for the power purchased from GENCOs and gas bought from suppliers and others that contribute in the supply value chain.

“However, all these disparities will stop after the interim arrangement because when we move to TEM, sometime in September, everyone will be making 100 per cent remittance,” the operator said.



– Emeka Ugwuanyi, The Nation

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