Electricity Market Recorded N187bn Income Loss in 2015

The resolution of the Nigerian Electricity Regulatory Commission, (NERC) mid-last year to freeze the tariff of electricity distribution companies (Discos) to customers in the residential-2 (R2) class; collection loss removal; and failure to honour the Discos’ performance agreement with the Bureau of Public Enterprises, BPE have been identified as some of the major factors responsible for the loss of about N187 billion revenue by the Nigeria’s privatized electricity sector.
According to an NERC report, the revenue crack in the Nigerian Electricity Supply Industry, (NESI) value chain amounted to the N187 billion for 2015 alone because of the failure of the authorities to take right steps in dealing with challenges facing the sector.
The report blamed the revenue shortfall on the fact that the Discos did not have a cost reflective tariff as mandated by the reform Act and as required by their sales and performance agreements, which it said militated against them carrying out necessary investment programmes to improve on their network services; reduce system losses and meter all their customers. It also stated that every player in the electricity value chain – the Transmission Company of Nigeria, (TCN), Discos; institutional services providers, electricity Generating Companies, (Gencos) and gas suppliers were affected by the gap.
The report stated that the TCN had been receiving only about 30 to 40 per cent of its required revenue from the market due to Discos inability to settle their invoices in full to facilitate generation and transmission of electricity in segments, saying that was also responsible for the reason why the TCN was unable to undertake required investments to remove grid constraints and improve transmission services to Discos and Gencos due to limited revenue base.
That gives backing to the recent declaration of force majeure on electricity supply across the country by the new owners of DISCOs in Nigeria. The investors, who took over power distribution assets from the Federal Government on Friday, November 1, 2013, also demanded a refund of their investments if nothing is done to address what they called “the havoc, which the non-cost-reflective tariff has wrecked on their businesses.
Reacting to the findings of the report in a media report with the acting Head of NERC, Anthony Akah, said the recently reviewed Multi Year Tariff Order, MYTO-2015 was a remedial regulatory action towards addressing these challenges. Hear him: “Attaining credible cost reflective tariffs by unfreezing R2 tariffs and recognising revenue shortfall that resulted from the freeze in the Discos’ tariffs going forward from year 2016. Reviewed ATC&C less Ministry, Department and Agencies (MDA) debts which are recognised in Discos’ tariff and relevant shortfalls accounted for in the tariff from 2016 would be pursued onwards.”

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