The Nigerian Electricity Regulatory Commission (NERC) has served notice to eight Power Distribution companies (DisCos) of its intention to cancel their licenses for failure to meet their obligated remittance to the market.
“The Commission has reasonable cause to believe that the DisCos listed below 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 affected DisCos include the Abuja Electricity Distribution Company Plc, Benin Electricity Distribution Company Plc, Enugu Electricity Distribution Company Plc and Ikeja Electric Plc.
Others are Kaduna Electricity Distribution Company Plc, Kano Electricity Distribution Company Plc, Port Harcourt Electricity Distribution Company Plc and Yola Electricity Distribution Company Plc.
NERC had only two months ago published a minor review of electricity tariff which was meant to address shortfalls caused by lack of non-reflective tariff but provided a minimum remittance threshold DisCos must meet by July 2019.
The increased tariff which takes effect from January 1, 2020 prescribes at least 30 percent rise in tariff across the various customer classes. DisCos were required to meet their obligation to the market, improve collections by metering customers especially government ministries and departments and payback loans from the Central Bank.
However, the regulator believes that the DisCos, despite exacting a favourable tariff review from it, has failed to meet its own end of the bargain by remitting more of what it collected to other players across the value chain
“The Commission considers the actions of the aforementioned DisCos as manifest and flagrant breaches of EPSRA, terms and conditions of their respective distribution licenses and the Order, and therefore requires each of them show cause in writing within 60 days from the date of receipt of this Notice as to why their licenses should not be cancelled in accordance with section 74 of EPSRA” NERC said.
DisCos routinely remit far less than what they collected to other players across the value chain. This occurs even when they record improved remittances.
The regulator said the affected DisCos have failed to meet the expected minimum remittance thresholds for the July 2019 billing cycle. Of the eight DisCos, Ikeja Electric which controls the largest franchise area and collected the most of any DisCo recorded the poorest remittance failing by 49 percent.
According to NERC’s first quarter report for 2019, while Ikeja Electric recorded the best collection efficiency of all the DisCos at 84 percent in the first three months of 2019, it only remitted 39 percent of its collections back to the market. Eko DisCo on the other hand recorded 80 percent collection efficiency and remitted 43 percent back to the market.
“We have to first remove our own cost because we have to be in business and the remaining we pay to the market,” said Sunday Oduntan, executive secretary of Association of Nigerian Electricity Distribution Companies (ANED) speaking on a panel session at the BusinessDay Future of Energy Conference which held in Lagos on October 3.
NERC has been accused of failing to wield the hammer in the face of bad behaviour of operators especially the DisCos, with this order, the regulator may be serving notice to the DisCos that it is no longer going to tolerate market indiscipline which is largely responsible for the inability of GenCos to pay their gas suppliers as remittances to them from the DisCos is a paltry 15 percent of their market invoice.
However some analysts say the action of the regulator was the equivalent of using a bayonet to check the menace of houseflies.
“Revocation of licence is not an everyday power you wield as a regulator,” says Chuks Nwani, an energy lawyer, based in Lagos. “The regulator ought to exercise restraint regarding threatening to revoke licences.”
Nigeria suffers the biggest consequences when DisCos withhold more than they should because the generation company cannot buy gas to power their turbines. Currently, GenCos can only generate 7,000MW of power even they have a capacity for about 13,000MW.
ISAAC ANYAOGU
