Lawmakers have waded into the on-going rift between the Nigerian Electricity Regulatory Commission (NERC) and the electricity distribution companies (DisCos), directing both parties to reach a negotiated settlement while urging NERC to stay action on its order to revoke the licences of eight DisCos.

BusinessDay gathered that the Senate Committee on Power met with the managing directors of DisCos, NERC chairman and representatives of the Bureau of Public Enterprise (BPE) on Tuesday, October 22, in Abuja. The meeting was heated and saw fierce outbursts and pent-up frustrations, according to a source with knowledge of the proceedings.

NERC on October 8 served notice to eight DisCos of its intention to cancel their licences for failure to meet their obligated remittance to the market.

The affected DisCos are Abuja Electricity Distribution Company plc, Benin Electricity Distribution Company plc, Enugu Electricity Distribution Company plc, Ikeja Electric plc, Kaduna Electricity Distribution Company plc, Kano Electricity Distribution Company plc, Port Harcourt Electricity Distribution Company plc and Yola Electricity Distribution Company plc.

In response, the DisCos threatened to declare force majeure.

The regulator has consistently said the DisCos have failed to meet their remittance obligations to the market.
“During the first quarter of 2019, the eleven (11) DisCos were issued a total invoice of N190.1 billion for energy received from NBET and for service charge by the MO, but only a sum of N52.8 billion or around 28 percent of the total invoice was settled, indicating a significant deficit of N137.3 billion,” NERC said in its first quarter report for 2019.

DisCos say they can only meet the remittance order if they receive financing to the tune of N8.7 billion every year.

The DisCos through the Association of Nigerian Electricity Distributions (ANED) said in a statement that while they were expected to do a minimum remittance of N12.69 billion (about 35 percent) for July 2019 billing cycle from a total of N35.79 billion invoice from the Nigerian Bulk Electricity Trading Company, they were only able to remit N8.06 billion. Only eight of them could pay up 23 percent of the market invoice leaving a balance of N4.6 billion.

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The DisCos are agonising over the fact that they are now being compelled to fork over the entire market invoice when they are barely able to meet minimum remittance threshold.

“The inability of the DisCos to meet the 35 percent threshold specified by NERC is a direct result of the liquidity crisis in the power sector. The Average Technical Commercial and Collection (ATC&C) losses have remained high due to lack of liquidity, unattractive investment terrain and customer apathy to pay bills – a product of suspicion based on estimated billing and electricity theft,” said Sunday Oduntan, ANED executive secretary.

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Usman Arabi, NERC’s spokesperson, was contacted for comments but was yet to provide a response as at the time of publication.

NERC’s order to cancel DisCos licences has further impacted on the already battered image of the power companies. BusinessDay understands that the International Finance Corporation (IFC) which had hitherto been in talks with Benin DisCo to provide it financing pulled out of the deal following the order.

The substance of the argument of the DisCos is that the regulator has by failing to raise tariff when prices were no longer sustainable created the conditions that led to their inability to fulfil some of their obligations. So, complying with NERC’s order would impair their ability to pay salaries and run their offices.

The DisCos are urging the lawmakers to intervene so that the N600bn intervention funding from the government would be extended beyond 2020 and for the regulator to amend the Order to ensure compliance with payments of debts owed by government ministries and departments, which they said are in excess of N100bn. The DisCos did not outline any plan on how they would improve remittance.

In the contentious order issues by NERC, the Commission said it considers the actions of “the aforementioned DisCos as manifest and flagrant breaches of EPSRA, terms and conditions of their respective distribution licences and the Order, and therefore requires each of them to show cause in writing within 60 days from the date of receipt of this Notice as to why their licences should not be cancelled in accordance with section 74 of EPSRA”.

The regulator further said that it has reasonable cause to believe that the DisCos have breached the provisions of the Electric Power Sector Reform Act, terms and conditions of their respective distribution licences and the 2016-2018 Minor Review of the Multi-Year Tariff Order (MYTO) and Minor Remittance Order for the year 2019” the regulator said.

The 60-day notice expires in the first week of December and analysts have called on the regulator to tread carefully so it does not regulate the market out of existence.

This intervention by the lawmakers further impugns the independence of the regulator, analysts say.

 

ISAAC ANYAOGU

Isaac Anyaogu is an Assistant editor and head of the energy and environment desk. He is an award-winning journalist who has written hundreds of reports on Nigeria’s oil and gas industry, energy and environmental policies, regulation and climate change impacts in Africa. He was part of a journalist team that investigated lead acid pollution by an Indian recycler in Nigeria and won the international prize - Fetisov Journalism award in 2020. Mr Anyaogu joined BusinessDay in January 2016 as a multimedia content producer on the energy desk and rose to head the desk in October 2020 after several ground breaking stories and multiple award wining stories. His reporting covers start-ups, companies and markets, financing and regulatory policies in the power sector, oil and gas, renewable energy and environmental sectors He has covered the Niger Delta crises, and corruption in NIgeria’s petroleum product imports. He left the Audit and Consulting firm, OR&C Consultants in 2015 after three years to write for BusinessDay and his background working with financial statements, audit reports and tax consulting assignments significantly benefited his reporting. Mr Anyaogu studied mass communications and Media Studies and has attended several training programmes in Ghana, South Africa and the United States

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