Niger, Others’ Debts Worsening Illiquidity In Power Sector – NERC
The Nigerian Electricity Regulatory Commission (NERC) has expressed concern about the continuing inability of its international as well as special customers to settle their invoices for services rendered by the Market Operator (MO).
NERC, in its quarterly report for the second quarter of 2020, obtained by The Economic Confidental at the weekend, said the failure by Niger, Togo and Benin Republic and Ajaokuta Steel Company, which is a special customer, to meet their obligations were compounding the liquidity challenges in the Nigerian Electricity Supply Industry (NESI).
It, however, added that Compagnie Energie Electrique du Togo of Togo had offset N1.5 billion of the total debt owed.
It also stated that the refusal of the three tiers of government in the country to settle their electricity bills has become a burden on industry operators.
It said of the N222.51 billion invoice issued by the Nigerian Bulk Electricity Trading Plc (NBET) in the period under review, only 28.05 per cent or N62.41 was settled by the distribution companies (Discos).
According to it, while none of the 11 Discos met their expected remittances to NBET, Abuja Disco and Eko Disco fully fulfilled their financial obligations to the market operator.
It said the financial viability of the industry remained a major challenge threatening sustainability.
It attributed the liquidity constraint to the non-implementation of cost-reflective tariffs, high technical & commercial losses exacerbated by energy theft and consumers’ apathy to payments under the widely prevailing practise of estimated billing.
According to NERC, the new figures represent a 4.67 percentage points decline from the final settlement rate recorded in the first quarter of 2020 compared to the quarter which ran from April to June.
“The severity of the liquidity challenge in NESI was reflected in the settlement rates of the service charges and energy invoices issued by MO and NBET respectively for each of the Discos as highlighted, as well as the non and low payment by the special and international customers respectively for the services rendered by MO.
“During the quarter under review, the special customers (Ajaokuta Steel Co. Ltd and the host community) did not make any payment in respect of the N0.32billion and N0.05billion invoices issued by NBET and MO respectively.
“Of the N4.10billion ($13.39 million) invoice issued by MO to international customers (i.e., Societe Nigerienne d’electricite-NIGELEC, Societe Beninoise d’Energie Electrique-SBEE and Compagnie Energie Electrique du Togo-CEET) during the quarter, only CEET paid the sum of N1.51bilion (US$4.92million) in respect of services it received from MO,” NERC stated.
The average aggregate remittance performances to MO and NBET, NERC said, were 86.35 per cent and 18.94 per cent respectively, with performance level ranging from 9.63 per cent (Yola) to 106.23 per cent (Abuja) for MO and 1.54 per cent (Kaduna) to 34.22 per cent (Eko) for NBET.
It said the payment cycle for March to June 2020 fell within the period of the ‘lockdown’ introduced by the federal government as part of measures to curtail the spread of the COVID-19 pandemic, which affected Discos’ billing of post-paid customers.
NERC also blamed tariff shortfall, represented by the difference between actual end-user tariffs payable by consumers and the cost-reflective rates approved by NERC, for the liquidity challenges in the industry.
It stated that the settlement ratio to the expected Minimum Remittance Threshold (MRTs), having adjusted for tariff shortfall indicated that Discos need to improve on their performance.
It said whereas Discos were expected to make a market remittance of 44.87 per cent during 2020/Q2, only 28.05 per cent settlement rate was achieved within the timeframe provided for market settlement in the market rules.
According to NERC, Discos’ remittance level, regardless of the prevailing tariff shortfall, was still below the expected MRT.
It said without prejudice to the impact of COVID-19 lockdown on Discos’ operations during the quarter, they must continue to improve on reducing ATC&C losses to levels commensurate with their contractual obligations in their performance agreements.
NERC also appealed to the federal, state and local governments to settle their debts.
“As stated in the previous quarterly reports, one of the contributory factors to high ATC&C losses, and hence poor liquidity, is non-settlement of energy bills by MDAs across the three tiers of government (i.e. federal, state and LG).
“This issue must be urgently addressed as part of the ongoing federal government’s efforts towards ensuring financial sustainability of NESI,” it stated.
