NERC: Discos Owed N1.15tn in Power Supply Tariff Shortfalls

  • Approves disconnection of indebted government MDAs, others

Chineme Okafor in Abuja

The Nigerian Electricity Regulatory Commission (NERC) has disclosed that the 11 electricity Distribution Companies (Discos) in Nigeria are owed a total of N1.153.47 trillion by electricity consumers over the last four years. NERC told the Discos to henceforth cut off electricity supply to Ministries, Departments And Agencies (MDAs) of governments that failed to pay for the service, although, only after they had provided the MDAs with meters.

NERC stated this in the “2016 – 2018 minor review of Multi-Year Tariff Order (MYTO) 2015 and minimum remittance order for the year 2019”, which it released recently. THISDAY obtained the document Saturday from the commission’s website.

NERC explained in the document that the debt soared between 2015 and 2018 due to lack of a cost-reflective electricity tariff, or its failure to review and approve the right tariffs for the Discos.

NERC had, reportedly on the orders of the federal government, failed to conduct statutory periodic tariff reviews for the Discos.
According to the MYTO, the reviews are usually done in two phases of minor and major reviews wherein extant economic factors, such as inflation and exchange rates, price of gas, which are relevant to power production and supply, are reviewed and considered.
Its failure to do this over a four-year period meant that the Discos supplied electricity to Nigerians on terms that were not economically viable.

The Discos, however, compiled their revenue shortfalls – monies they could not gain from the non-tariff review, and NERC in the document stated that it reviewed and acknowledged that the shortfall was N1.153.47 billion.

According to the commission, in 2015 Enugu Disco had a shortfall of N14.42 billion, in 2016 it rose to N25.86 billion, in 2017, it was N25.09 billion and then N32.25 billion in 2018, all of which resulted in N97.64 billion shortfall for the Enugu Disco over the period.

It added that between 2015 and 2018, Benin Disco had a shortfall of N115.3 billion; Ibadan Disco had N161.9 billion within same period; Ikeja had N124.2 billion; while Eko had N95.6 billion shortfalls in the period.

For Port Harcourt Disco, it was N104.3 billion deficits over the period; Yola Disco, which had reverted to the federal government following its return by its initial investor, incurred N51.6 billion; while Kano Disco had a shortfall of N97.8 billion.
Kaduna, Jos and Abuja Discos, respectively, incurred deficits of N114.5 billion, N88.4 billion, and N102.2 billion, to bring the regulator’s verified shortfalls for the 11 Discos to N1.153.47 trillion.

In an annotation on how the revenue shortfalls would be managed, the commission stated that it “has computed and recognised the sum of N104.3 billion as the tariff shortfall for PHED (Port Harcourt Disco) for the years 2015 – 2018.

Under the Power Sector Recovery Plan (PSRP) approved by the federal government, all accrued liabilities in Discos’ financial records arising from tariff shortfalls “shall be transferred off the balance sheet and fully settled under the financing plan of the PSRP initiative.”

It adds, “All funds retained by the Discos as represented by excess of market (remittance) shortfalls over tariff shortfall are to be recovered as a full liability of the Discos, including applicable interest thereon, in line with the provisions of the Supplementary TEM Order, the Market Rules and respective industry contracts with NBET and the MO.

“All Discos with excess of tariff shortfall over market shortfall shall be compensated accordingly for the difference. All interest payable by Discos on unpaid invoices issued by NBET and the MO and attributable to tariff shortfall shall be transferred off the balance sheet of the utilities.”

On debts owed the Discos by MDAs across the country, NERC said, “This Order reiterates that the responsibility and initiative for revenue collections from all customers, including Ministries, Departments and Agencies (MDAs) of states and federal government, rests with the Discos.

“Accordingly, this Order makes it mandatory for all Discos to meter all MDAs with appropriate meters of their choice within 60 days from the effective date of this Order. All Discos reserve the right to disconnect any MDAs defaulting in the payment for electricity in line with the Regulation on Connection and Disconnection Procedures for Electricity Services.”