7 December 2012

Nigeria: PHCN - NERC Faults National Assembly's Request for Budgetary Provisions

The Nigerian Electricity Regulatory Commission (NERC) has said requests for budgetary provisions for the privatised successor companies of the Power Holding Company of Nigeria (PHCN) in the 2013 financial year by the National Assembly was unfounded.

NERC stated yesterday in Abuja, that such budgetary demands and justification for the Federal Government to fund the privatised electricity distribution companies beyond 2012 were not necessary considering the existence of the new Multi Year Tariff Order (MYTO-2) methodology.

The commission said in a statement from its Assistant General Manager, Media, Maryam Abubakar, that the tariff methodology which was currently in use had provided for the distribution companies to be self-sustaining, stating that it could confirm that some distribution companies were actually meeting up with its financial obligations.

The House of Representatives had recently decried the lack of budgetary provisions for privatised PHCN successor companies in the 2013 budget.

The House argued that additional funding for these electricity companies should be made despite the ongoing privatisation process which would see new owners take over the companies by mid-2013.

They had explained that there was a need to fund these companies in order for them to meet their capital spending obligations.

But NERC noted that the MYTO-2 was computed in a manner to allow the distribution companies pay for the energy delivered to them, meet up with their operational expenditures (OPEX) as well as their capital expenditures (CAPEX).

The commission explained that statistics within its possession shows that since the introduction of the MYTO-2 in June this year, one of the companies, Eko Distribution Company was in November 2012, finally able to meet all its OPEX and CAPEX obligations, as well as settle its energy bill, all without subsidy intervention.

Chairman of NERC, Dr. Sam Amadi, had said in the statement that: "What this shows is that with more diligence on the side of the CEOs, these companies can meet up with their OPEX and CAPEX, as well as pay for the energy they receive. This will achieve NERC's objective of a financially viable electricity market."

Amadi stated that contrary to the impression created in certain quarters, the MYTO-2 appeared to have been crafted to enable these companies adequately settle all their financial obligations.

"The case of Eko Disco is a concrete proof of this. Hot on the heels of Eko Disco is Ikeja, with a 76 per cent ability to meet its financial obligations to the industry. The steady progress for Discos to meet their obligations is however not widespread as there has been dismal performance recorded by a considerable number of companies. More than 70 per cent stand at below 45 per cent ability to meet financial obligations," he stated.

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