NERC to Remove Tariff-related Liabilities from Discos

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The Nigeria Electricity Regulatory Commission (NERC) has commenced moves to remove historical tariff-related liabilities from the financial records of electricity distribution companies (Discos)

NERC in an order No NERC/196/2020 issued thursday, said would resolve the continued accumulation of future tariff- related shortfalls during the transition to cost-reflective tariffs and to prevent the accrual of new liabilities in the financial records of Discos.

To this end, it directed all the 11 Discos to fully settle all the invoices they receive from the Nigerian Bulk Electricity Trading Company (NBET) in line with the applicable tariff shortfall and the 2019 Minor Review of MYTO 2015 and Minimum Remittance Order for the year 2020.

According to the regulatory agency, the objective of the order is the removal of historical tariff-related liabilities from the financial records of the Discos.

In the order posted on its website thursday, NERC said “All DisCos shall settle invoices received from NBET in full as adjusted by the applicable tariff shortfall and the 2019 Minor Review of MYTO 2015 and Minimum Remittance Order for the year 2020.”

The order was entitled “Order on transitional accounting treatment on tariff related liabilities in the financial records of participants in the Nigerian Electricity Supply Industry.”

NERC also directed that all NBET invoices shall clearly indicate the amount due and payable by the Federal Government of Nigeria from multiple funding sources in the PSRP financing plan.

It directed that the unpaid tariff – related portion of the NBET invoice shall temporarily remain in the books of the DisCos as a liability until same is paid to GenCos from the Payment Assurance Facility (PAF) or other funding sources in the PSRP financing plan.

According to NERC, there shall be no interest on this liability pending the payment to GenCos by NBET.

NERC said the NBET shall apportion funds drawn under PAF or other funding sources in the PSRP financing plan to DisCos in accordance with the minimum remittance threshold approved by the regulator.

NBET will thereafter issue credit notes to the DisCos in the same amount confirming that the liability has been defrayed.

The commission added that the unpaid portion of the NBET invoice that is not directly attributable to the tariff deficit shall be recovered by NBET through the payment guarantee provided by the DisCo.

The commission insisted that the settlement of NBET’s liability to the Central Bank of Nigeria (CBN) by the Federal Ministry of Finance, Budget and National Planning for the principal and interest on PAF and its supplementary funding under PAF-X shall have a commensurate impact on the associated indebtedness of NBET.

NERC said the order shall take effect from the market settlement cycle of January 2020.

However, it shall cease to have effect on the issuance of an order of the NERC directing the Discos to settle their market invoices in full.