24 March 2019

Nigeria: With No Tariff Hike in Three Years, Electricity Firms 'Lose N1.4 Trillion'

Electricity distribution companies (DISCOs) on Friday accused the Nigerian Electricity Regulatory Commission (NERC) of causing about N1.4 trillion revenue shortfall in the power sector by refusing to review the current tariff since 2016.

The Association of Nigerian Electricity Distributors (ANED) said under the multi-year tariff order (MYTO) introduced in 2015, provision was made for a minor review of the prevailing electricity tariff every six months based on certain indices, including inflation, foreign exchange rate, domestic lending rate and power generation level.

The MYTO is a tariff model for incentive-based regulation to reward performance above certain benchmarks, reduction of technical and non-technical/commercial losses, resulting in cost recovery and improved performance standards by operators in the Nigerian Electricity Supply Industry (NESI).

But, the director of Advocacy and Research at ANED, Sunday Oduntan, said in Abuja on Friday since the current tariff regime took effect on the February 4, 2016, NERC is yet to carry out any review more than three years later.

A major tariff review should be conducted after five years under the MYTO.

"There has not been a single minor review by NERC. As a result of the high cost of the technical and other inputs in the electricity supply value chain, DISCOs have not been having cost recovery, as they are not allowed to charge cost reflective tariff.

"Due to this, our (ANED) records show a market shortfall in excess of N1.4 trillion on the electricity supply value chain," Mr Oduntan said.

"In the current tariff regime, the assumption was that by 2017 we would have generated 7,000 megawatts (MW) of electricity, and by 2018, we would have done 9,000MW. Are we on that now?

"TCN (Transmission Company of Nigeria) has never wheeled power up to 6,000MW for a period of one week since 1960. Quote me," he said.

Regardless, Mr Oduntan said the DISCOs have continued to perform since the privatization of the power sector five years ago.

Apart from meeting about 88 percent of their metering obligations to their customers, Mr Oduntan said despite the non-review of electricity retail tariff since 2016, the revenue collection by the DISCOs has continued to soar.

Records showed that against about N30.3 billion in 2016, the revenue collection increased to an average N36.5 billion per month in 2018.

Mr Oduntan said the improved performance was as a result of the growing level of energy received; revenue efficiency; improved aggregate technical, commercial and collection (ATC&C) losses over the period.

Energy improvement

A document on the DISCOs Performance Reporting obtained by PREMIUM TIMES on Friday for 2017 and 2018 operations showed a 7 percent improvement in energy received, from about 24,616 gigawatts Hour (GHh) in 2017 to 26,385 GWh in 2018.

Similarly, while ATC & C losses dropped from 23 percent in 2017 to 21 percent in 2018, energy billed grew by 10 percent, from about 18,882GWh to about 20,852 GWh in 2018.

The document showed that out of about N597.3 billion revenue that should have been collected in 2017, about N363 billion was actually collected, against about N437.9 billion actual collection from about N661.6 billion that was due in 2018.

Oduntan attributed the increased revenue collection to the DISCOs increased collection efficiency, from 61 per cent in 2017 to about 66 per cent in 2018, and reduction in ATC&C losses from 53 percent in 2017 to about 48 percent in 2018.

In the fourth quarter of 2017, the report showed energy received by the DISCos rose by 0.3 percent, from about 6,453 GWh to about 6,469 GWh.

Also, energy billed increased by 5 percent, from 4,975 GWh to 5,227 GWh for the corresponding period, while about N99billion was collected in the fourth quarter of 2017 out of about N156.6 billion.

Compared to the corresponding quarter in 2018, revenue collection by the DISCOs showed a 16 percent increase at about N114.4 billion, out of about N168 billion.

The increase in revenue collection was attributed to the DISCos increased collection efficiency from 63 percent in 2017 to about 68 percent in 2018, and reduction in the ATC&C losses from 51.2 percent in 2017 to 45 percent in 2018.

Although he said consumers who owned prepaid meters give the DISCOs revenue collection assurance, Mr Oduntan said the DISCOs no longer have the obligation of metering customers, with NERC transferring that responsibility to the Meter Assets Providers (MAP) companies.

"Going forward, DISCOs are no longer in charge of metering customers. MAPs appointed by the regulator are the one in charge of metering," he said.


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