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Discos forfeit N3 from every N10 worth of energy – NERC

Experts eyes improved supply as states’ electricity market grows

Out of every N10 worth of energy sold during the fourth quarter of 2020, as much as N3.47 remained uncollected from customers as at when due, an analysis from the latest report from the Nigerian Electricity Regulatory Commission (NERC) has shown.

During the quarter under review, the total billing to the registered electricity consumers by all the eleven DisCos stood at N259.90billion of which only N169.81 billion was settled leaving a total outstanding balance of N90.09billion, according to the electricity market regulator.

These denote 75.70percent and 65.34percent billing and collection efficiencies and indicate 0.92 percentage-point increase in billing efficiency and 1.38percentage points decrease in collection efficiency when compared with the corresponding period in Q3 2020.

“The financial viability and commercial performance of the industry continued to be a major challenge with a decline in Collection efficiency in 2020/Q4,” NERC said

During the fourth quarter of 2020, a total invoice of N245.91 billion was issued to the eleven DisCos for energy received from the Nigerian Bulk Electricity Trading Plc (NBET) and for service charge by the Market Operators, out of which a sum of N146.66 billion was settled indicating remittance performance of 59.64percent.

The combined average remittance performances to market operators and NBET increased respectively from 94.25percent and 26.81percent in the third quarter of 2020 to 99.99percent and 48.46percent in the fourth quarter 2020.

According to NERC, the recent improvement in DisCos remittances is partly linked to the operational expenditure loan facility offered by NESI Stabilisation Strategy Limited, NESI-SSL to DisCos to part-finance solely the DisCos payment obligations to NBET and MO, and DisCos operations arising from low collection under the Service-Based Tariff, SBT regime.

“It is expected that DisCos will ramp up their collections to meet up subsequent required remittance obligations to NBET and MO, and their OPEX requirement within the tenor of the facility”, NERC said.

Read also: NGO faults NERC’s proposed electricity tariff hike

Similar to the observed improvement in DisCos remittances, there was a noticeable improvement in the settlement rate of service charges issued by MO for the services it rendered to the international customers.

During the quarter under review, the international customers (i.e., Société Nigerienne d’electricite –NIGELEC, Societe Beninoise d’Energie Electrique – SBEE and Compagnie Energie Electrique du Togo–CEET) received a total invoice of N4.12billion ($13.73million) from MO and paid the sum of N7.39billion ($24.12million) for the current and outstanding invoices for the services received from MO.

In contrast, the special customers (Ajaokuta Steel Co. Ltd and the host community) did not make any payment in respect of the N0.18billion and N0.02billion energy invoices and service charges issued by NBET and market operators respectively.

Tariff shortfall (represented by the difference between the cost-reflective rates approved by NERC and actual end-user tariffs payable by consumers) has partly contributed to liquidity challenges being experienced in the industry.

“Further to this, the non-settlement of energy bills by MDAs across the three tiers of government (i.e., Federal, State and Local Government), which is one of the major contributory factors to high ATC&C losses, and hence poor liquidity, must be urgently addressed as part of the ongoing Federal Government’s efforts towards ensuring financial sustainability of NESI”, NERC said.

DisCos actual remittance of 59.64 percent was just 1.83 percent less than their expected market remittance of 61.47 percent.

“Notwithstanding the recent progress, the financial viability of NESI has remained a major challenge threatening its sustainability. The liquidity challenge is partly due to the non-implementation of cost-reflective tariffs, high technical and commercial losses exacerbated by energy theft and consumers’ apathy to payments under the widely prevailing practice of estimated billing. DisCos must continue to improve on effort towards reducing ATC&C losses to levels commensurate with their contractual obligations in the performance agreement to improve sector liquidity and ensure business continuity.

“Further to this, the non-settlement of energy bills by MDAs across the three tiers of government (i.e., Federal, State and Local Government), which is one of the major contributory factors to high ATC&C losses, and hence poor liquidity, must be urgently addressed as part of the ongoing Federal Government’s efforts towards ensuring financial sustainability of NESI”, NERC said.