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DisCos’ Poor Remittances: Electricity Market Lost N103bn In Q3 2017 – NERC

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The Nigeria Electricity Supply Industry (NESI) recorded a shortfall of ₦103 billion in the third quarter (Q3) of 2017 due to inability of electricity distribution companies (DisCos) to make payments of energy supplied by the Nigerian Bulk Electricity Trader (NBET) and the Market Operator (MO). This is contained in the Nigerian Electricity Regulatory Commission (NERC) Quarterly Reports for Q3, 2017 released recently. During the period under review, DisCos were issued an invoice totalling a sum of ₦147billion for energy received from NBET and for the service charge by the Market Operator (MO) but only ₦44 billion was settled, creating a shortfall of ₦103 billion, the report stated. Also, according to the report, although there was 5 per cent rise in total (combined) remittance to NBET and MO in the third quarter relative to the preceding period, only 30 per cent of the third quarter’s market invoice was settled by DisCos. Analysis of the proportion of market invoice settled by DisCo for the quarter under review shows that Benin DisCo had the highest remittance at 43 per cent, followed by Ikeja DisCo which remitted 42 per cent of its market invoice. On the other hand, Jos had the lowest payment performance at 14 per cent. According to NERC, the poor remittances by the DisCos alongside on factors like tariff deficits, high technical and commercial losses exacerbated by customer apathy arising from estimated billing and poor quality of supply in most load centres as major contributors to the financial liquidity currently facing the sector. The report noted that financial liquidity of the electricity industry remains as the most significant challenge affecting the sustainability of the power sector.

According to the report, the 11 DisCos operating in Nigeria collectively billed a total sum of ₦151.75 billion during the third quarter of 2017 but only ₦90.30 billion was recovered through collections. This translates an average collection efficiency rate of 55 per cent which implies that of every ₦10 worth of electricity sold during the quarter, ₦4.50 remains uncollected from customers. Although the N90.30billion collected in Q3 represents a 2.8 per cent decrease when compared with ₦92.8 billion collection in the second quarter of the same year, the report attributed the decrease in revenue collection in the third quarter to decline in power generation rather than a reflection of collection efficiency. “The data showed that the collection efficiency of DisCos was poor as just a little above the half of the revenue billed was recovered as at when due. The implication of this DisCos’ poor collection efficiency is inadequate liquidity which is currently affecting the industry,” the report stated. Analysis of performances of the Discos, shows that Ikeja DisCo had the highest collection efficiency of 81 per cent followed by Eko DisCo 78 per cent while Jos DisCo recorded the lowest collection efficiency of 35 per cent. On quarter-on-quarter basis, Eko DisCo recorded the highest improvement in collection efficiency moving from 74 per cent in the second quarter to 78 per cent in the third quarter. Other DisCos that recorded marginal improvement in their colection efficiency between the two quarters are Ikeja, Jos, and Kaduna. Similarly, Abuja DisCo had the highest billing efficiency of 83 per cent while Kaduna DisCo recorded the lowest billing efficiency of 66 per cent. On quarter-on-quarter basis, Ikeja DisCo recorded a significant improvement in its billing efficiency moving from 70 per cent in the second quarter to 81 per cent in the third quarter. Other DisCos that recorded improvement in their billing efficiency include Abuja, Benin, Enugu, Ibadan, and Yola.

DisCos Cheating Others The report noted that DisCos operators are cheating on the system saying, “Although part of the outstanding invoiced amount not paid to the upstream by DisCos is due to tariff deficit, the Commission has noted that some (if not all) DisCos are not incentivized to improve on their revenue collection because they are currently opportune to appropriate market funds and sometimes keep more than their fair share.” To address the situation, the NERC said it is currently developing a framework to ensure fair and equitable distribution of market revenue under a structured regime. This framework, it added, aims at ensuring fairness and transparency in the utilisation of market funds, thereby improves the liquidity in the industry. Metering of End Use Customers Expressing dismay at the altitude of DisCos towards ensuring efficiency in the market, the r noted that despite the importance of metering in revenue assurance and accurate billing of customers, the pace of metering rollout remains poor. Describing the situation as a priority concern of the Commission, the report said only four DisCos have metered up to 50 per cent of the customers on their billing platform. According to the report, the total registered customer population as at the end of the third quarter of 2017, was 7,476,856, only only 3,451,611 or 46 per cent have been leaving a metering gap of 54 per cent. Further review of the performance shows that only 25,504 customers were metered by the 11 DisCos. NERC described the situation as grossly lower than the quarterly average of 410,103 meters expected of DisCos as stated in their Performance Agreement with the Bureau of Public Enterprises (BPE).

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