NERC Releases Minimum Remittance Payable By Discos
The Nigerian Electricity Regulatory Commission has released a new minimum market remittance threshold payable by the 11 power distribution companies operating across the country.
Power distributors are the revenue collection agents of the sector, as they collect electricity tariffs from their customers and make remittances to the market through the Nigerian Bulk Electricity Trading company and the Market Operator.
The MO is an arm of the Transmission Company of Nigeria.
In its latest minor review of the Multi Year Tariff Order, NERC mandated Discos to make 100 per cent remittances to the MO, repay loans to the Central Bank of Nigeria, and, depending on the Disco, remit a stipulated percentage of NBET’s monthly invoices.
“The minor review MYTO order has further prescribed minimum market remittance threshold payable by the 11 electricity distribution companies and the projected tariff path until 2021,” the commission’s spokesperson, Usman Arabi, stated, while explaining some details of the recent order.
The NERC explained that under the current framework, the minimum market remittance by each Disco was determined after deducting the revenue deficit arising from tariff shortfall from the aggregate NBET and MO market invoices.
It, however, stated the each Disco should be availed the opportunity to earn its revenue requirement only upon fully meeting certain obligations and subject to efficient operations.
The obligations include the repayment of the CBN’s Nigerian Electricity Market Stabilisation Facility and 100 per cent settlement of MO invoice based on tariffs applied by the MO in determining respective invoices prior to this order.
Others are the full settlement of the stipulated monthly invoices for each Disco to NBET being the minimum remittance threshold prescribed in the latest NERC order.
The commission further stressed that each power distributor wouldl be held liable for relevant penalties/sanctions where the Disco failed to meet the minimum remittance requirements in any payment cycle, in accordance with its obligations to the MO and NBET.
It added that the penalties would apply if any Disco failed to heed the provisions of the market rules and the supplementary Transitional Electricity Market order.
The regulator mandated the Discos to also provide and maintain an adequate, unconditional, unencumbered and irrevocable standby letter of credit covering three months invoice based on the minimum payment obligations to the MO and NBET.
Arabi also emphasised that the minor review order released by the commission on January 3, 2020 had no immediate impact on end-user tariffs payable by all classes of electricity customers across the country.
He said, “The order is to establish the impact of the exogenous macroeconomic parameters and costs outside the control of the utilities in the year 2019 and projections for 2020.
“The macroeconomic indices taken into consideration to conclude this exercise include rate of inflation, foreign exchange, gas price and volume of available electricity.”
The NERC spokesperson observed that where actual end-user tariffs were likely to be impacted by the review, the required public and stakeholder consultations would be implemented in line with requirements of the Electric Power Sector Reform Act and Business Rules of the commission.
