The Nigerian Electricity Regulatory Commission’s directive in a newly released minimum market remittance threshold payable by the 11 power distribution companies operating across the country could offer the enabling lifeline for the Generation Companies of Nigeria, industry analysts said.
READ ALSO: With electricity tariff increase imminent, NERC toughens DisCos obligations
In its latest minor review of the Multi-Year Tariff Order, NERC mandated Discos to make 100 per cent remittances to the MO, repay loans to the Central Bank of Nigeria, and, depending on the Disco, remit a stipulated percentage of NBET’s monthly invoices.
Industry analysts said the development could usher in a new era of addressing liquidity concerns already bedevilling the sector which has prompted the Generation companies to greater shutdown operations on several occasions.
“This initiative of NERC is a major lifeline booster to generation companies and other value chain players in the sector and could gradually win investors’ confidence back to the sector. There is still the metering g concerns of the Meter Asset Providers which I suggest the Central Bank of Nigeria could offer interest-free loan to them to guarantee mopping of liquidity on the sector by revenue collection” Chuks Nwani, an Energy Lawyer told BusinessDay.
Sam Amadi, former Chairman of the Nigeria Electricity Regulatory Commission told BusinessDay that the initiative is a welcomed development but suggests financial viability requires more radical regulatory stance
“This move is a palliative and a right one to hold the Discos to account for power supplied to them.But financial viability requires more radical regulatory intervention.It starts with thorough implementation of Transitional Electricity Market (TEM) and movement for complete contract-based market.”Amadi said.
It would be noted that Power distributors are the revenue collection agents of the sector, as they collect electricity tariffs from their customers and make remittances to the market through the Nigerian Bulk Electricity Trading company and the Market Operator.
The MO is an arm of the Transmission Company of Nigeria.
“The minor review MYTO order has further prescribed minimum market remittance threshold payable by the 11 electricity distribution companies and the projected tariff path until 2021,” the commission’s spokesperson, Usman Arabi, stated, in a clarification statement on the recent upward review order of the commission.
He explained that under the current framework, the minimum market remittance by each Disco was determined after deducting the revenue deficit arising from tariff shortfall from the aggregate NBET and MO market invoices.
It, however, stated the each Disco should be availed the opportunity to earn its revenue requirement only upon fully meeting certain obligations and subject to efficient operations.
The obligations include the repayment of the CBN’s Nigerian Electricity Market Stabilisation Facility and 100 per cent settlement of MO invoice based on tariffs applied by the MO in determining respective invoices prior to this order.
Others are the full settlement of the stipulated monthly invoices for each Disco to NBET being the minimum remittance threshold prescribed in the latest NERC order.
The commission further stressed that each power distributor would be held liable for relevant penalties/sanctions where the Disco failed to meet the minimum remittance requirements in any payment cycle, in accordance with its obligations to the MO and NBET.
It added that the penalties would apply if any Disco failed to heed the provisions of the market rules and the supplementary Transitional Electricity Market order.
The regulator mandated the Discos to also provide and maintain an adequate, unconditional, unencumbered and irrevocable standby letter of credit covering three months invoice based on the minimum payment obligations to the MO and NBET.
