NERC Probes Discos’ Utilisation of FG’s Intervention Funds

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  • Sets up committee on distribution companies’ appeal against licence withdrawal

Chineme Okafor 

The Nigerian Electricity Regulatory Commission (NERC) has set up a four-man committee headed by its Vice Chairman, Mr. Sanusi Garba, to review how the electricity distribution companies utilised the various intervention funds they received from the federal government, as well as efforts the Discos have put in so far to address customer complaints and improvement of overall willingness to pay for services, THISDAY’s investigation has revealed.

 According to the Central Bank of Nigeria (CBN)’s annual report for 2018, the apex bank had as at the end of 2018, granted total credit of N1.095 trillion to the power sector under three different schemes it set up.

The schemes were Nigerian Electricity Market Stabilisation Facility (NEMSF) worth N213.417 billion meant to settle outstanding payment obligations due to market participants during the interim rules of the market as well as legacy debts owed by the Power Holding Company of Nigeria (PHCN) to gas suppliers; the N300 billion Power and Airline Intervention Fund (PAIF); and the N701 billion Payment Assurance Facility (PAF) extended to the Nigerian Bulk Electricity Trading Plc (NBET) to settle invoices of generation companies (Gencos) to a minimum level of 80 per cent.

The CBN is equally expected to provide additional N600 billion as proposed by the NBET in its report of the implementation of the N701 billion PAF to the power sector soon.

But according to a document obtained by THISDAY, which was signed by the Commissioner in charge of Legal, Licensing and Compliance Division of the NERC, Mr. Dafe Akpeneye, the regulatory agency set up the committee to review how the Discos spent these funds and also adjudicate on petitions filed by eight electricity distribution companies (Discos) against its recent tariff review and minimum remittance order to them.

The document disclosed that the Discos are also expected to equally make profound explanation to the NERC on how they have spent their revenues since they took over their networks.

It added that at the hearing which is expected to be opened to the Nigerian public, the Discos would be demanded by NERC to explain how well they have done with customer enumeration, general procurement practices, related party transactions, directors’ fees and expenses, technical partners and material and contingent liabilities.

Eight Discos had been notified of the regulator’s intention to revoke their operational licences within 60 days from October 8, 2019, for allegedly abusing sections of the Electric Power Sector Reform Act 2005 (EPRA).

NERC said by their failure to comply with the terms of the law, it would revoke their operational licenses.

To forestall the licence revocation, the Discos therefore filed a petition against the tariff review and minimum remittance order which opened the way for the regulatory action against them.

NERC has stated that Abuja, Benin, Eko, Enugu, Ibadan, Kaduna, Kano, and Port Harcourt Discos, which filed the petitions would have to within a four-day period, that is, between November 6 to 8, and 11, to defend their reservations against the tariff review and potential license revocation.

With the setting up of the committee to look into their petition, the Discos would at the public hearing show to the commission “their analysis of capital and recurrent expenditure, metering and billing of maximum demand customers, metering and billing of government ministries, departments and agencies (MDAs), payments for technical and management fees, purchase and utilisation of foreign exchange, and remittances on market obligations from date of takeover to date.”

The document stated that while Yola Discos did not file a petition against the tariff and its related issues, Ikeja Disco voluntarily withdrew the petition it had earlier lodged and instead wrote to the NERC to seek audience on the licence revocation notice with the hope that a sustainable solution would be found.

NERC said that in their petitions, the Abuja, Benin, Eko, Enugu, Ibadan, Kaduna, Kano, and Port Harcourt Discos, noted that they wanted the regulatory agency to recognise the 2015 and 2016 operational years as force majeure years and make adequate provision for capital expenditure to reduce their Aggregate Technical Commercial and Collection (ATC&C) loss levels.

The Discos also demanded that the NERC compels NBET to comply with the generation cost assumptions in the minor review order, allow MDA debts to be deductible from NBET invoices to them, reflect the inter-bank exchange rates in the tariff assumptions, and suspend the minimum remittance order for which the license revocation order was made, pending the implementation of cost reflective tariffs.