14 December 2016, Sweetcrude, Abuja – The Nigerian Electricity Regulatory Commission (NERC) has responded to claims by the 11 Electricity Distribution companies (Discos) that its regulatory actions contributed to the current N809.8 billion revenue shortfall of the electricity market.
The Acting Chairman of NERC, Dr. Anthony Akah told journalists in Abuja that such claims by the Discos were false and unfair to the regulator.
Akah said more than any other operators in the country’s electricity market, the Discos have contributed to the poor showings of the market. He cited instances of the Discos’ withholding more than they were allowed of the market’s revenue, and at the same time backing it up with a court order.
According to him, a 22 per cent interest was sculptured into the 2015 tariff to allow the Discos borrow funds from financial institutions to finance their capital expenditures, hence the falsehood that they were not given the freedom to borrow funds for their capital expenditures.
“ANED is not one of our licensees, it is an association and the electricity distribution companies are licensees of NERC and should speak for themselves.
“Generally speaking the Discos have not performed to the desired expectations however, there are some of them that in spite of the constraints are doing far better than the others and therefore it is not logical for an association to be speaking for the whole distribution companies because the level of performance of each of them varies,” said Akah.
The Electricity distribution companies, through its umbrella body – Association of Nigerian Electricity Distributors (ANED) – had blamed NERC for contributing to the illiquidity challenges of the market from its regulatory decision flip-flops.
They also alleged that the tariff approved by the commission for them excluded them from undertaking far-reaching capital expenditures in their networks, stating that they were not allowed to spend more than N20 billion in their annual capital expenditures.
In response, Akah noted that, “The greatest problem we have today is that there is a high level of collection inefficiency by the Discos. Regrettably, while the report from the Discos show a certain level of collection inefficiency, the same report from the MO and NBET show that the Discos are unfairly withholding close to two-third of the total revenue collected from the electricity market.
“The ideal ratio that the Discos should withhold is in the neighbourhood of 24 per cent and by these unfair practices, the value chain which includes the transmission company and generating companies that lay the eggs that we all use in the form of power generation are being constrained of the fund,” he added.
Akah stressed that “The commission in line with its statutory responsibility had proactively based on all understanding by all players that upon the take-off of the MYTO 2015, all contracts and transactions in the market should have been predicated or guaranteed by contract and this means that everyone would be assured of revenue remittances.
“The Discos should have known that if they don’t pay for power given to them, their letters of credit would be called upon, regrettably, some of them went to court and got a restraining order that stops NBET or Gencos to call on their letters of credit and what they have done is that they are now hiding under that window to withhold revenue beyond what they should and thereby starving the whole sector.”
On the debts owed the Discos by government agencies, which the Discos claim was heavily impacting their operations, Akah said: “The significant impact of the MDA debt is more on about three Discos where you have more of government offices and the significance is not so much on the other Discos, yet the government is willing to solve this and has said the onus lies on the Discos to prove the debt owed them for the payments to be made.”
Speaking on the tariff and capital expenditures of the Discos, Akah explained: “The issue of shortfall in tariff was taken care of in the MYTO 2015 that took effect in February. There is already a 22 per cent interest that is inside the tariff, of which consumers are paying and which is based on the understanding that Discos would use to get a loan from the financial institutions to bridge whatever gap they have.”