DISCOs Struggling To Cut Loss Levels, Report Shows

An analysis of the Average Technical Commercial and Collection (ATC&C) Loss Data obtained from the Nigerian Electricity Regulatory Commission (NERC), has shown that the 11 electricity distribution companies (Discos) are still finding it difficult to cut down losses.

The data from NERC in Abuja, disclosed that right from the end of 2018, and into the first two months of 2019 – January and February, none of the Discos have been able to meet the average ATC&C loss projections they made in the Multi Year Tariff Order (MYTO).

On the average, the 11 Discos proposed to reduce their ATC&C losses to 29.9 per cent, but have only been able to achieve a 53.9 per cent loss reduction, thus signifying a poor ATC&C levels.

For example, between December 2018 and February 2019, while the Abuja Disco which proposed an ATC&C reduction level of 33.54 per cent, was able to achieve only 33 per cent , 47 per cent and 41 per cent respectively for the period; Benin Disco had in its plan to reduce its loss levels to 38.62 per cent, but still recorded 53 per cent, 56 per cent and 58 per cent in December, January and February respectively.

Also, while Eko Disco with its 19.44 per cent reduction target, it had 29 per cent, 30 per cent and 31 per cent reduction levels respectively for the period; Enugu with 38.43 per cent target had 53 per cent, 54 per cent, and 57 per cent to show for its efforts; Ibadan had aimed at cutting its losses to 30.41 per cent but was still struggling with 49 per cent, 51 per cent and 52 per cent loss levels in December 2018, as well as January and February 2019 respectively.

The other Discos such as Ikeja with a plan to reduce its losses to 20.82 per cent, had them at 28 per cent, 30 per cent and 31 per cent respectively in the three months stated above; Jos Disco (20.82 per cent) – 69 per cent, 70 per cent and 71 per cent; Kaduna (31.93 per cent) – 75 per cent, 73 per cent and 77 per cent; Kano (38.20 per cent) – 49 per cent, 57 per cent and 47 per cent in the review months respectively; Port Harcourt (45 per cent) – 64 per cent, 65 per cent and 69 per cent; while Yola Disco which has remained under the management of the federal government since its handover by Integrated Energy Solutions, had plans to reduce its ATC&C losses to 32.8 per cent, but still recorded 70 per cent, 69 per cent and 68 per cent inAnne review period.

In perspective, the NERC in its third quarter 2018 report of activities in the country’s power sector, complained of the impact of the Discos’ loss levels on the market. The regulator equally noted it was working out modalities to address the development.

The report explained: “Pursuant to the strong commitment of the Commission to address Discos’ technical inefficiency (e.g., poor distribution network), a capital expenditure process is being considered whereby investments by Discos would be thoroughly reviewed and optimised for prudence and relevance to achieving goals of the licensee.

“A revenue adjustment mechanism is to be adopted in subsequent tariff reviews, to claw back any return allowed on previously proposed investments that were not eventually executed by the Discos. This action is expected to improve Discos’ commitment to their network upgrade and subsequently reduce technical losses.”

It equally added: “To address commercial losses (i.e., energy theft), the Commission has continued to monitor the Discos’ asset mapping and tagging under the framework of the ongoing customer enumeration in order to identify illegal consumers and bring same onto the billing platform.

“Moreover, the Commission is closely monitoring the Discos’ procurement of Meter Asset Providers for compliance with the requirements of the Meter Asset Providers (MAP) Regulations. Finally, the Commission is closely working with the National Assembly to ensure timely conclusion of the Energy Theft Bill.”

With regards to provision of meters to yet to electricity consumers, the NERC data also showed the Discos were slow in deployment within the period which was before the NERC signed off their respective third-party meter provision arrangements under the MAP regulation.

For the period, the data showed Abuja accomplished 49 per cent, 48 per cent, and 53 per cent meter deployment respectively and Benin did 60 per cent, 57 per cent and 57 per cent;

Azura Defers 270MW Expansion Plan over Uncertainty in Power Market

Azura-Edo Independent Power Plant (IPP) has shelved its plan to expand its 461 megawatts (MW) capacity power generation plant in Benin area of Edo state by an additional 270MW, due to lingering uncertainties in Nigeria’s electricity market.

Speaking in an exclusive interview , the Managing Director of the IPP, Mr. Edu Okeke, said the plan to expand the Genco’s capacity would have gone on save for indications that it could be uneconomical to go ahead with the project.

Okeke, said instead, the IPP’s parent company opted to invest in other energy jurisdiction with relative market stability. He explained the devaluation of Nigeria’s currency and uneconomical electricity price added to make the country’s electricity market tough for operators.

Azura, had a year ago achieved a remarkable feat with its completion of the 461MW IPP ahead of its planned delivery date. Electricity from the IPP has since been deployed to Nigeria’s national grid, however, the shelved 270MW would have added to Nigeria’s generation capacity.

“From our perspective, the biggest change in the market actually happened several years ago when the naira suffered a sharp devaluation at the same time as the government maintained the old price cap on electricity tariffs.

“As a result, the hard currency value of the Discos’ receipts fell precipitously and the sector as a whole became insolvent, pending future price deregulation and, or market restructuring. This market stagnation did not directly affect our existing plant – the 461MW Azura-Edo IPP, but it did have a serious impact on our capital allocation decisions vis-à-vis new investments,” said Okeke.

He added: “For example, our original plan was to keep the construction crew on site after the completion of the Azura-Edo IPP and commence work on the second phase of the plant, which would have added another 270MW to the grid.

“But, at the beginning of last year, as we began commissioning the Azura-Edo IPP, we decided that it would be more prudent to hold back on new investments in Nigerian power capacity until we could see a clear regulatory and political pathway back to sector-wide commercial viability.

“Our parent company, therefore, accelerated its investments in base load power generation capacity outside of Nigeria. But our first love was, and remains, Nigeria and in the medium to long term we believe the growth in Nigeria’s electricity sector will outstrip that of any country in the world, with the possible exception of China.”

Speaking further on the market’s challenges, Okeke stated: “The reality is that the current tariff for the sector is far too low to cover the costs of the whole value chain.

“This has necessitated the government stepping in through the CBN (Central Bank of Nigeria) to provide debt facilities to enable NBET (Nigerian Bulk Electricity Trading) to settle the invoices of the generating companies. But, this is not sustainable in the long run. Government should, as matter of urgency, work through the regulator, NERC, to bring the tariff to a level where the market is self-sustaining. That’s the only way we can have a functional market.”