DisCos’ collections hit N56.1bn in December, highest ever

After a troubling performance in the first nine months of 2020, where remittance averaged N45 billion monthly, electricity distribution companies (DisCos) improved collections in December, hitting an all-time high of N56.1 billion, a development that suggests they may be turning the corner.

Ahmed Zakaria, special adviser to the President on Infrastructure, confirmed the figures in an interview with BusinessDay where he assured that government reforms were beginning to have an impact in the sector.

Collections rose in the first full month of the implementation of the Service Reflective Tariff (SRT) for electricity consumers in Bands A – D. Total collections by the DisCos rose more than 15 percent in December, more than N47.7 billion collected in November, significantly easing the cash flow problem in the sector.

“This is an indication that the reforms in the sector are having an impact and we hope to sustain it,” Zakaria said.

The Nigerian Electricity Regulatory Commission (NERC) introduced the SRT in July but could not take effect until December due to the challenges with COVID-19 and labour protests over the tariff hike.

As a compromise, the government, among other things, agreed to provide Nigerians 1 million free meters under the National Mass Metering Programme (NMMP) to reduce agitations against estimated billing.

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Under the SRT, customers are grouped in different tariff bands according to the number of hours of power supplied daily with the highest receiving 20 hours or more, paying between N45kwh and N55kwh, and the poorest people getting less than four hours of supply daily and seeing no increase in their tariff.

This development is significant because improved collections by DisCos will improve settlement of their market invoices to other players including power generating companies (GenCos) and the Transmission Company of Nigeria (TCN).

Some analysts say the development bodes well for the sector as it would inspire confidence to invest in the sector.

“The reviewed tariff is having an impact and it is on that basis that some new investments are coming into the sector,” said Chuks Nwani, an energy lawyer based in Lagos.

Between January and August 2020, Nigeria’s 11 DisCos settled barely 25 percent of their market invoice for the power they received from GenCos, a development that threatens the survival of other market participants.

In Nigeria’s power sector, gas companies supply the critical feedstock – gas – for thermal plants operated by generation companies, as gas accounts for at least 75 percent of Nigeria’s energy generation.

The TCN wheels this power to customers across the country and DisCos distribute them to households and businesses. DisCos also accept payments from customers and remits back to the other players after deducting cost.

The trouble with the sector is that this remittance never tallies with the value of the power received. For example, between January and September 2020, the DisCos received electricity valued at N513.2 billion but were only able to pay back N121.3 billion of the market invoice, which is just 22 percent of the invoice, according to data from the Nigerian Bulk Electricity Trading Company (NBET).

Meanwhile, the regulator (NERC) prescribed a minimum remittance obligation of between 36 percent and 40 percent. The worst performing DisCos were Yola and Jos, while Enugu DisCo on average performed far better than others.

To sustain this development, the government is ramping efforts to ensure DisCos meter Nigerians. Data published by NERC on Friday indicate that about 16,300 meters have been distributed since the programme was launched on October 30, 2020.

However, Zakaria said the figures were yet to be updated and more meters than were reported might have been distributed.