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DisCos say minimum remittance order, capping of estimated bills worsen losses

Power distribution companies (DisCos) in Nigeria have said there is a need for the current minimum remittance order by the Nigerian Electricity Regulatory Commission (NERC) to be relaxed to ensure the gains of power sector reforms are sustained.

Speaking on behalf of the DisCos during a public hearing by the House of Representatives Committee on Power on Thursday, Ernest Mupwaya, managing director of Abuja Electricity Distribution Company (AEDC), said the overall Aggregate Technical, Collection and Commercial (ATC& C) losses moving average (m.a.) keeps decreasing and has reached a new record of 43.3 percent and six DisCos have losses below 50 percent.

“However, contrary to the tendency of the other DisCos, Yola DisCo deteriorated or increased its Aggregate Technical, Collection and Commercial (ATC&C) losses trajectory, with a loss level of 67.6 percent by the end of September 2019.

“In effect, for the last three years the private DisCos were able to reduce their ATC&C losses by almost 10 points; however, Yola DisCo increased it by 12 points. Perpetuating the ‘squeezing’ regulations of the Minimum Remittance and Capping of Estimated Billing will extend the challenges of YEDC to the rest of the DisCos and it will cost as twice (in time and money) to get back to where DisCos are today,” Mupwaya explained.

The DisCos said these are among the issues that need to be resolved before the implementation of a service-reflective tariff can yield the desired effects in the Nigerian Electricity Supply Industry (NESI).

The DisCos also pointed out that considering the fact that remittance levels are already low, capping of estimated bills will exacerbate liquidity situation.

“Capping of estimated bills when the metering level is at 40 percent is suicidal for the entire sector. Instead, we recommend that implementation of the new service-reflective tariff Order that was scheduled to go into existence by July 1st, 2020, should have a one-year transition period, from its effective date. During this period the minimum remittance thresholds would be graduated every quarter,” the DisCos’ representative said.

Other recommendations advocated for the DisCos in the interest of resolving some of the sector’s pressing issues are creation of specialised electricity courts and fast-tracking of court processes for energy theft and related offences such as vandalism, Alignment of MYTO ATC&C losses with DisCos’ reality, re-introduction of Fixed Charge to align with the capacity charge as presently, Nigeria is the only country without fixed charge as well as proper risk alignment along the value chain.

The DisCos further advocated for credit-free balance sheets to make them credit-worthy. “Historical tariff shortfalls and MDA debts as at December 2019 (N1.7 trillion as noted by government and N2.3 trillion as recalculated by DisCos), should be taken off DisCo books. The practical impact of the shortfall is that DisCos have a negative balance sheet of -80 billion to -250 billion. The clean-up of the DisCos’ balance sheet is necessary to make them creditworthy.

“Also, NBET and MO should be mandated to assume the tariff shortfall and MDA debt and then issue credit notes to DisCos and, henceforth, the liability should not be associated with the DisCos,” Mupwaya added.

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