The Transmission Company of Nigeria (TCN) has decried defaults in payment of non-cost-reflective tariffs by market participants, stating that it has resulted in a funding deficit for the company.
According to Edmund Eje, market operator (MO) of TCN, the revenue of the company is not crafted on a cost-reflective tariff basis like the other participants in Nigeria’s Electricity Supply Industry, the reason being that the Federal Government uses TCN to subsidize the operations of the industry.
In a statement issued by the company, Eje explained that if TCN fails as a result of paucity of funds, no market participant would be functional and the NESI would crumble.
“The non-cost-reflective tariff which the Regulator allowed TCN to recover is not being paid in full by the Market Participants, leading to funding deficit for the TCN, supposedly, the fulcrum of the NESI.
“TCN operates on a self-sustaining basis, it depends mainly on its Internally Generated Revenue (IGR) even for its overheads and most of its major projects.
He explained that as at December 2016, the MO was on 15 percent collection and catering for overheads became a herculean task, adding that as of December 2019, the outstanding on MO’s services invoice stood at N443 billion with interest.
He further noted that from January 2020 to date, the MO invoice outstanding stands at N80 billion which has made it difficult for TCN and other service providers to function properly because of poor revenue receipt.
“The MO commenced revenue-drive since last year but the defaulters have been adamant about the various advances and notices for them to cure their defaults.
” Revenue drive procedure in NESI is well streamlined and no arbitrary process is adapted. The process is very well known to the participants except those who pretend to be ignorant of the Market Participation Agreement they voluntarily signed before entering the Market.
“The major default here is failure to put up a valid Bank Guarantee (BG) and also failing to clear their outstanding debts with MO.”
He further disclosed that all defaulters including APL Electric had been notified of the event of default, hearing and suspension which will be followed by complete disconnection or partial disconnection of the defaulter from the grid.
“On 16th of February, 2022, all defaulters, including APL Electric ( 23rd Nov. 2022) were notified to put up their BG or validate as the case may be.
“On 2nd March 2022, all defaulters, including APL Electric (7th Dec.2022) were served with ‘Notice of Event of Default’. On the 9th of May 2022, all defaulters, including APL Electric (14th of May,2022) were served with ‘Notice of Intent to issue Suspension Order’.
“Between May and October 2022, (8 defaulters applied for “Hearing” in line with the Market Rules, reconciling their accounts and offering various reasons for their inability to pay and asking for time.
“In all these, APL Electric never responded/replied to our letters, not even phone calls to offer reasons for their inability to pay their accumulating debt (N896M in only six months of operation).
“Finally, on the 21st of March, 2023, the Market Operator went to Press (on 3No Daily Newspapers) to notify all defaulters to fix their default within 14 business days or face suspension from the Market. The suspension goes with complete disconnection or partial disconnection of the defaulter from the grid.
“It is the prerogative of the MO to carry out this sanction in batches to give room for the defaulters to approach MO for remedy in line with the Market Rules. Many other defaulters have been scheduled for similar sanctions should they fail to fix their default.
“The MO did not demand anything outside the Market Agreement they voluntarily signed. Note that Distribution companies also embark on load disconnection during their revenue drive.
“Investors should not embark on using the trust fund they wreck in on behalf of the Market to settle their bank loans and render other operators in the value-chain ineffective due to poor remittance,” Eje said.