Power companies risk loss of licenses over breach of regulatory deadlines

The eleven electricity distribution companies (Discos) operating in Nigeria are now facing a possible withdrawal of their operational licenses for their failure to meter their maximum demand (MD) customers before the February 28 deadline which was stipulated by the Nigerian Electricity Regulatory Commission (NERC) on January 11, 2017.

The Discos would also pay over N345 million in fines that were previously imposed on them by the power sector regulator, as well as another N213.9 million as five percent cumulative penalty, if all the penalties imposed have not been paid from January 11 to date.

NERC imposes cumulative penalties in the form of five per cent daily interest, following the expiration of a two-week grace period that is normally granted by the commission when its deadlines for making payments for penalties elapse.

As at January 11, 2017, NERC said that cumulative penalties from the N345 million fine imposed on defaulting Discos had reached N62 million, but would now stand at N558.9 million at five percent daily growth rate.

When contacted on phone to ascertain the Discos’ level of compliance with NERC’s sanctions, a senior staff of the commission told BusinessDay that, “the reports received from each of the 11 Discos are being reviewed and it would be too early to pass any verdict, except that such a verdict was premeditated.”

On January 11, 2017, NERC announced that, beginning March 1, 2017, it would commence regulatory action against any defaulting Disco that has failed to comply with its directive to meter all its maximum demand customers, who are heavy users of electricity, usually with their own dedicated transformers.

NERC said the move was in line with its mandate to ensure that the rights of electricity customers are protected and that investors in the Nigerian energy sector are guaranteed fair returns on their investments.

Before then, the commission had earlier in June 2016 directed the 11 Discos in Nigeria to conclude metering of all maximum demand (MD) electricity customers in their networks, not later than November 30, 2016, but granted a three month moratorium for the Discos to comply at the expiration of that notice.

The moratorium, which expired on February 28, 2017, NERC said, was meant to enable all the Discos to effectively execute their metering deployment plans for MD customers.

“Sequel to the above directives and approach of the expiration date of the moratorium period, any electricity customer on MD category, who is yet to be metered as at February 28, 2017 should report to the Commission through any of our Forum Offices,” said NERC in a post on its website.

According to Adetunji Adeyeye, a regulatory specialist with the Association of Nigerian Electricity Distributors (ANED), “NERC has set a new tone and has been meting out sanctions to Discos in the last eight months, so definitely there would be new sanctions expected on the Discos from the regulator as the February 28 dateline has now lapsed.

“The new challenge being faced by Discos however, is that new entrants that are maximum demand customers may not be immediately metered and that could be seen as a lapse that is punishable by NERC, whereas the real factor would simply be that the recent entry of these companies in the market has made it impossible for them to be metered immediately,” he told BusinessDay in a telephone interview.

In the recent past, Discos have become subjects of frequent fines from the regulator, including Afam Power Plant and Eko Electricity Distribution Company (EKEDC), which was asked to pay the sum of N66.6 million for failing to submit audited financial reports for 2013 and 2014.

NERC said that already, the fines imposed on the firms have since attracted over N62 million, being the cumulative penalty in the form of five per cent interest daily by January 11, 2017.

Also, Afam Power, in breach of its licensing terms and other operating conditions, failed to file audited financial report for 2014, and subsequently was made liable to pay N18.510 million.

Similarly, Directive 163 found EKEDC in violation of its licensing terms and other operating condition over late submission of its 2013 and non-submission of 2014 audited financial reports, and the company is therefore liable to pay N48.09 million fine.

Furthermore, Ibadan, Ikeja, Port Harcourt and Enugu Discos, in August last year, were fined N24.56 million for various infractions under the Electric Power Reform Act 2005.
Furthermore, for failing to submit its audited financial report since 2013, NERC imposed another fine of N37.5 million on the PHED in November of the same year.

 

YANGE IKYAA, Abuja