12 December 2012

Nigeria: NERC Rejects Call to Bailout DISCOs

The Nigerian Electricity Regulatory Commission (NERC) has rejected calls to fund electricity distribution companies with federal government fund beyond 2012.

The Commission said there was no justification for such funding especially that the new "tariff methodology in use (Multi Year Tariff Order (MYTO 2) has provided for these companies to be self sustaining."

A statement issued by the commission's Assistant General Manager, Media, Maryam Yaya Abubakar, said since the introduction of the tariff in June 2012, the Eko DISCO was in November 2012, finally able to meet all its operation and capital expenses obligations, as well as settle its energy bill - all without subsidy intervention.

It said the tariff methodology, also referred to as MYTO2 was computed in a manner to allow the DISCOs pay for the energy delivered to them, meet their staff costs as well as fund capital expenditure.

Chairman and Chief Executive Officer of the commission, Dr. Sam Amadi, said "What this shows is that with more diligence on the side of the CEOs (of DISCOs), these companies can meet up with their operation and capital expenses as well as pay for the energy they receive. This will achieve NERC's objective of a financially viable electricity market."

According to the Commission, the Ikeja DISCO has achieved a 76 percent 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% stand at below 45% ability to meet financial obligations, it said.

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