Discos’ Revenues Shrink Amid Exit of High Networth Customers from National Grid

Emmanuel Addeh in Abuja 

The total revenue collected by electricity Distribution Companies (Discos) operating in Nigeria slumped by a whopping N76.8 billion in March this year, representing about 29 per cent of their total expected receipts for the month.

This development is coming amid the growing number of high networth customers, both individual consumers and companies, dumping the services of the power distributors for alternative sources due to epileptic power supply.

Data covering the commercial performance of the Discos made available by the Nigerian Electricity Regulatory Commission (NERC) for the month under consideration, showed that out of the N265.77 billion billed to customers for the month, only N188.89 billion was collected by the Discos, about 71 per cent of expected earnings.

In addition, while total energy received by the Discos for the month was 2,886.72Gwh, total energy billed was 2,318.12Gwh, representing about 80.3 per cent billing efficiency.

Generally, Nigeria’s electricity revenue collection problem stems from the persistent inability of distribution companies to recover the full value of the electricity they supply. A major factor is low collection efficiency, with companies often recovering only a fraction of what they bill. 

This has been worsened by widespread estimated billing, as many consumers remain unmetered and dispute charges they believe are inaccurate. Besides, electricity theft through illegal connections and meter bypassing further reduces revenue. 

Another issue is that of poor infrastructure,  leading to frequent outages and discouraging customers from paying for unreliable service. In addition, tariffs are often set below cost-reflective levels, meaning even full payments might not cover operating costs. 

There is also the problem of weak enforcement mechanisms, which make it difficult for companies to penalise non-paying customers as large unpaid debts from government agencies also contribute significantly to the collection gap.  The cumulative effect is a liquidity crisis that hampers investment, reduces service quality, and destabilises the entire electricity value chain. 

The NERC March data further indicated that the high-fliers versus the laggards trend continued in the sector during the period, with Eko and Ikeja Discos having a near tie of N41.24 billion and N41.18 billion bill respectively, but with a collection of N36.6 billion and N33.3 billion separately.

Besides, Abuja Disco came third in terms of total revenue, raking in N31.76 billion revenue out of a total amount billed of N35.67 billion for the month of March.

But in terms of collection efficiency, Abuja Disco came tops with 89.03 per cent, Eko was 88.76 per cent, while Enugu was 88.47 per cent, with a collection of N15.88 billion out of N17.95 billion billed to customers . Ikeja had a collection efficiency of 88.99 per cent during the period.

However, the least collectors were: Aba Disco, which got N3.47 billion out of N6.44 billion billed, representing a 53.9 per cent collection efficiency; Jos Disco, which collected N7 billion out of N12.56 billion billed, representing 55.7 per cent collection efficiency as well as Kano which got N7.83 billion out of N12.61 billion billed. This represented 62 per cent billing efficiency.

In general, NERC has attributed the persistent collection inefficiencies to factors such as inadequate metering, electricity theft, and customer dissatisfaction due to unreliable power supply.  These challenges, it said, contribute to revenue shortfalls, affecting the financial viability of the power sector. 

Aside from the aforementioned factors, another issue that is impacting the overall revenue of the Discos is the exit of several high paying consumers and companies, who have found other sources of power supply.

A significant number of Nigerian companies and institutions have disconnected from the national electricity grid due to persistent power supply issues and rising tariffs.  This shift towards self-generated power is increasingly reshaping the country’s energy landscape. 

Several hundreds of organisations, including even the seat of power, Aso Rock, have or are planning to transition to self-generation. Collectively, they are producing around 6,500 megawatts, surpassing the national grid’s current capacity.  

In the manufacturing sector, more than 60 per cent of companies have exited the national grid, opting for self-generation due to unreliable power supply, which has increased production costs and affected competitiveness.