NERC’s Threat: Discos Warn of Job Losses, Poor Electricity Services

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James Momoh
Chairman of NERC, Prof. James Momoh

Chineme Okafor in Abuja

About 39 days to the expiration of the 60 days’ notice the Nigerian Electricity Regulatory Commission (NERC) gave to eight electricity distribution companies (Discos) to show reasons why it should not withdraw their operational licenses over alleged abuse of provisions of the Electric Power Sector Reform Act (EPSRA) 2005, the Discos have approached the National Assembly to intervene in the regulatory action against them.

The Discos in a statement issued wednesday by their umbrella trade association – the Association of Nigerian Electricity Distributors (ANED), also claimed it would cost them N8.7 billion to settle their debts to the electricity market for which the NERC intends to withdraw their licenses.

According to them, jobs would also be lost, while electricity supply to consumers in the country would be impaired if they have to settle the debt to the power market.

The Executive Director, Research and Advocacy of ANED, Mr. Sunday Oduntan, said in the statement that the Discos had appealed to the National Assembly to intervene in the current liquidity crisis in the power sector.

NERC had on October 8 notified the Abuja Electricity Distribution Company Plc (AEDC); Benin Electricity Distribution Company Plc (BEDC); Enugu Electricity Distribution Company Plc (EEDC); Ikeja Electric Plc (IE); Kaduna Electricity Distribution Company Plc (KAEDCO); Kano Electricity Distribution Company Plc (KEDCO); Port Harcourt Electricity Distribution Company Plc (PHEDC) and Yola Electricity Distribution Company Plc (YEDC) of its intent to withdraw their licenses for breaching certain terms in the EPSRA.

However, in yesterday’s statement, ANED said the Discos would require a monthly amount of N725 million to meet the threshold of 35 per cent remittance level set by the NERC. “To meet the new remittance expectations, Discos will have to finance an average gap of N725 million per month (estimated at N8.7 billion per year), until increased collections bridge the gap,” said ANED.

It added that while the Discos were expected to do a minimum remittance of N12.69 billion or 35 per cent for the July 2019 billing cycle from total N35.79 billion invoices from the Nigerian Bulk Electricity Trading Plc (NBET), they actually remitted N8.06 billion.

According to ANED, the inability of the Discos to meet the 35 per cent threshold specified by NERC was a direct result of the liquidity crisis in the power sector.

It stated the Average Technical Commercial and Collection (ATC&C) losses have remained high due to lack of liquidity, unattractive investment terrain and customer apathy to pay bills.

The association explained that the Discos’ poor financial situation was further complicated by three years of delayed review of electricity tariff and non-payment of electricity bills by the Ministries, Departments and Agencies (MDAs) of governments in the country.

“Additionally, with over five decades of significant neglect of the sector, the massive investment that is required for the injection of efficiency that Nigerians desire continues to be undermined by inconsistent and uncertain policy and regulatory changes and undelivered privatisation commitments, the aforementioned representing strong disincentives to investors.

“The establishment of remittance threshold is good for NESI. However, realistic levels and timelines for Discos to ramp up is key for sustainable compliance,” ANED noted.

Explaining the implication of injecting N725 million monthly to NERC’s expected remittance order, ANED stated that, with the Discos’ required revenue in terms of operational and capital expenses already significantly far short of what is required, the amount represented their average monthly salaries.

“Compliance with NERC order will impair this critical obligation to Discos staff, which will create labour unrest and reduce overall performance.”

The association added that potentially, the results would be a need for significant staff reduction and associated operational failure thus compromising the Discos’ ability to distribute electricity to their customers.

It noted that there was such protest at Kaduna Disco last week by its staff, for its inability to meet its salary and pension payment obligations, and then appealed to the National Assembly to intervene and ensure the fresh N600 billion federal government power sector intervention goes beyond year 2020 to cushion the effects of tariff hikes and allow investments into te sector.

ANED also requested that NERC amend the remittance order to ensure compliance and that electricity debts owed by MDAs which it said was in excess of N100 billion, be taken off or be discounted off the energy bills NBET provides to the Discos, to minimise the difference between current Discos’ remittances and the NERC specified threshold.