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Published On: Thu, Oct 24th, 2019

Liquidity crisis: DisCos need N8.7bn to meet 35% remittance order -ANED

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…seeks NASS’s intervention

By Etuka Sunday

The Electricity Distribution Companies (DisCos) have beseeched the National Assembly to meddle in the current liquidity crisis in the power sector, saying they will need N8.7 billion to comply with the remittance order set by the Nigerian Electricity Regulatory Commission (NERC).
A statement issued by ANED’s Executive Director, Research and Advocacy, Barr. Sunday Oduntan in a breakdown of the required amount, said the DisCos will require a monthly amount of N725 million to meet the threshold of 35 percent remittance level set by NERC in the meantime.
“To meet the new remittance expectations, DisCos will have to finance an average gap of N725 million per month (estimated at N8.7 billion per year), until increased collections bridge the gap,” the DisCos noted.
ANED in the statement said while the DisCos were expected to do a minimum remittance of N12.69bn (about 35%) for the July 2019 billing cycle from a total N35.79bn invoice from the Nigerian Bulk Electricity Trading Plc (NBET), the DisCos actually remitted N8.06bn.
The outstanding was N4.63bn as the DisCos group said the eight DisCos performed up to 23% of the 35% required of them for the month. The inability of the DisCos to meet the 35% threshold specified by NERC is a direct result of the liquidity crisis in the power sector.
It said the Average Technical Commercial and Collection (ATC&C) losses have remained high due to lack of liquidity, unattractive investment terrain and customer apathy to pay bills – a product of suspicion based on estimated billing and electricity theft..
A situation further complicated by three (3) years of delayed Minor Reviews and non-payment of electricity bills by the Ministries, Departments and Agencies (MDAs)a
Additionally, with over five decades of significant neglect of the sector, the massive investment that is required for the injection of efficiency that Nigerians desire continues to be undermined by inconsistent and uncertain policy and regulatory changes and undelivered privatisation commitments, the aforementioned representing strong disincentives to investors.
“The establishment of remittance threshold is good for NESI. However, realistic levels and timelines for DisCos to ramp up is key for sustainable compliance.” While the DisCos said they await a cost reflective tariff from NERC, they however said it takes time increase collection level.
Explaining the implication of injecting N725m monthly to NERC’s expected remittance order, ANED stated that, with the DisCos’ required revenue, in terms of operational and capital expenses already significantly far short of what is required, that the amount represents DisCos’ average monthly salaries.
“Compliance with NERC Order will impair this critical obligation to DisCos staff, which will create labour unrest and reduce overall performance,” the statement said. Potentially, the results would be a need for significant staff reduction and associated operational failure, compromising the DisCos’ ability to distribute electricity to their customers.
The Association recalled that there was such protest at Kaduna DisCo last week, by its staff, for its inability to meet its salary and pension payment obligations.
ANED appealed to the Committee to intervene so that the current N600bn federal government power sector intervention goes beyond year 2020 – “to cushion the effects of tariff hikes, allow investments to be injected by both TCN and DisCos, and to mitigate shortfalls to the Generation Companies (GenCos) and gas suppliers.”
ANED also requested that NERC amend the Remittance Order to ensure compliance and that electricity debts owed by MDAs, currently, in excess of N100 billion, be taken off or be discounted off the energy bills NBET provides to the DisCos, to minimize the difference between current DisCo remittances and the NERC specified threshold. The MDA debts constitute a leakage from DisCo remittance.

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