N30.1bn debt: FG to cancel Abuja, Kaduna,Kano,Ikeja, four discos’ licenses

The Nigerian Electricity Regulatory Commission (NERC) has notified eight power Distribution Companies (DisCos) on its intent to cancel their licences in 60 days after they accumulated N30.1 billion energy invoice debts for July 2019.

In a notice signed by Dafe Akpeneye, the Commissioner for Legal, Licencing and Compliance, published today, NERC directed Abuja, Benin, Enugu, Ikeja, Kano, Kaduna, P/Harcourt, and Yola DisCos to prove why their licences should not be withdrawn in two months.

The Commission said the DisCos are non-compliant over remittances. “The remittances to the Nigerian Bulk Electricity Trading Plc (NBET) shows that the DisCos have failed to meet the expected minimum remittance thresholds for the July 2019 billing cycle,” it said.
eureka reports that this is the first time NERC is implementing the Transitional Electricity Market (TEM) Rule that mandates DisCos to pay 100% for energy and ancillary services. NERC is now wielding its hammer on DisCos with threat of canceling their licence, first time after the power sector privatization of 2013.

By November 1, 2019, the privatization would have clocked six years but energy payment by DisCos according to NBET records had dropped to paltry 30% average for over three years with more defaults as they ought to have a three months guarantee or Letter of Credit (LC) with NBET anytime.

Due to what the Transmission Company of Nigeria (TCN) described as electricity market indiscipline by the DisCos which worsened in the same July 2019, TCN – Market Operator (MO) suspended six DisCos including Kano, Ikeja, P/Harcourt and Enugu DisCos from the market in August.

They were only reinstated after they had increased their bank guarantee or LCs to guarantee 100% payment for the ancillary services provided by TCN’s MO and System Operator (SO); NBET and NERC for at least three months. However, the bulk payment for the energy wheeled to them which is payable to NBET has continually suffered. NERC had issued the minimum remittance benchmark for each DisCo, considering their liquidity crisis.

However the eight fell off this for July 2019 billing cycle. The analysis of the July 2019 NBET energy invoice shows that Enugu DisCo has the highest failure rate. NERC said the minimum it could remit was 42% from its N4.112bn invoice, but the DisCo remitted only N400 million, representing just 10%.

Abuja DisCo was to remit 45% of the N7.2bn invoice but it remitted 30% which was N2.152bn. Benin DisCo failed to remit 30% of N4.37bn bill but did N771.7m (18%); Port Harcourt DisCo was next in the failure rate. It did not remit its 21% minimum for N3.647bn invoice but paid N383m to NBET which was 10%.

Kano DisCo did N800m (24%) instead of 33% of the N3.33bn bill; Kaduna DisCo had N3.834bn bill but paid N407.78m which was 11% instead of NERC’s required 18%.
Ikeja DisCo was to pay 49% of N7.4bn but paid 49% which is N2.95bn; Yola DisCo was to pay 13% of N1.95bn energy bill but only did N194.6m (10%).

The Commission notes that the failure of the DisCos to comply with the minimum remittance exposes the Nigerian Electricity Supply Industry (NESI) to risks that threatens sustenance of other parts of the value chain, and the ability to improve service delivery to electricity consumers.

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