A Review of the Nigerian Energy Industry

Distribution companies’ energy debt mounts – NBET

Electricity distribution transformer.
Electricity distribution transformer.

*Debts may hamper commencement of Transitional Electricity Market

Oscarline Onwuemenyi

09 July 2015, Sweetcrude, Abuja – Electricity distribution companies across the country have failed to pay to the government the outstanding amount for capacity and energy invoiced against them since February this year.

The management of the Nigerian Bulk Electricity Trading Plc, it was gathered, on Tuesday issued payment demand notices to the Discos, requesting them to pay the outstanding amount for the three-month period from February to April.

Meanwhile, the local bank Letters of Credit (LC) submitted by electricity distribution companies (Discos) as guarantees may be activated for prompt payment of electricity sold to them, the NBET has said.

The NBET, also known as the bulk trader said it has given the Discos up till Friday this week to meet up with an outstanding three months debt for energy delivered to them or it would be forced to activate their credit guarantees.

It was learnt that although the invoices that were issued to the distribution companies were for the months of February, March and April, there had been no sign that they would pay up and that the invoices for the month of May were ready and made available to them.
Officials of the NBET explained that the bulk trader was concerned that after the commencement of the Transitional Electricity Market, the Discos had continued to fail in meeting their payment obligations.

While frowning at the rising indebtedness in a notice of payment demand it issued to the 11 Discos, the NBET requested for the immediate payment for capacity and energy invoiced for February to April 2015, noting that the Discos are not complying with the 100 per cent energy payment mandate expected in the Transitional Electricity Market (TEM) rules.

It said that the average payments by Discos for the corresponding months were 80 per cent in February, 70 per cent in March and lower than 54 per cent in April. Consequently, the NBET said it is taking the first step through the notice in seeking compliance by the Discos, noting that failure to arrest the trend will worsen the cash crunch in the power sector.

The bulk trader also said that failure to comply would mean it using the payment security, bank guarantee already issued by eight Discos in their vesting contracts (VC) to settle the outstanding invoices while the three other Discos without the guarantees would have their revenues escrowed if they default by Friday thereby completely crippling their distribution activities as directed by the TEM’s supplementary order.

Although the total amount that the firms owed the government was not disclosed, a statement made available to our correspondent by the management of the NBET stated, “The average payments by Discos for the corresponding months were 80 per cent in February, 70 per cent in March and 54 per cent in April.”

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